Date: 	Sun, 23 Nov 1997 14:10:15 -0800
From: bhandari-AT-phoenix.princeton.edu (Rakesh Bhandari)
Subject: Re: M-TH: surplus value


Doug writes

>there's no doubt that the
>wage share of value added in manufacturing (using bourgeois measures, of
>course; Confetior Deo) is down markedly.

Is this to agree with Moseley that the rate of exploitation has increased?
Which of course then raises the question of why growth then remains anemic.
What did you think of FM's explanation--upward pressure on the OCC, coupled
with an incline in the ratio of unproductive to productive labor?

>I think you're right that scrappin of marginal plants had a lot to do with
>improved productivity/profitability. According to Margaret Blair of
>Brookings, there's no evidence of significant improvement at existing
>plants.

Jerry Levy mentioned at one point a new book by Michael Webber and David
Rigby The Golden Age Illusion: Rethinking Postwar Capitalism, which seems
to have taken the analysis of the different forms of productivity change to
a new level. At one point, I think they suggest that productivity
improvements in the US have indeed resulted more from scrapping than from
high levels of investment in new more efficient plants.

I think the question of scrapping raises the means by which it is to be
accomplished: high wages as inducement to scrap marginal plants or
recessions as the means by which to do so (James Galbraith)?  And in the
absence of both mechanisms in the US, this would seem to compound the
problem of excess fixed capital, as Makoto Itoh terms it in The World
Economic Crisis and Japanese Capitalism (NY: St Martin's Press).


>The only problem with this is that profitability has picked up. And,
>according to the Fed's capacity utilization/industrial production series,
>U.S. manufacturing capacity is growing at the fastest rate in nearly 30
>years.

But if there is high utilisation of marginal plants only then to use the
surplus value produced for investments in low wage, labor intensive
"services"  or simply for blowing up those big speculative bubbles (the
percentage of GDP in fixed investment remains low), then this high capacity
utilization may only be a sign of weakness of the US economy, evidence of
an absence of modernisation.

Again, what do you think of Moseley's explanation of why profitability and
growth rates remain low, despite higher levels of exploitation?

>Japan has been in protracted recession for 6 years.

Yes.

>And in my role as resident Pangloss, let me offer a bullish (from the U.S.
>point of view) take on the Asian crisis - though this will take big money
>and major political maneuvering to accomplish. Under IMF conditionality,
>Washington will now have the opportunity to restructure Asia along pleasing
>lines, forcing the dismantling of industrial policies, and prying open
>closed financial sectors.

Well, yes, "the crisis does not however reflect the real situation. Just as
the upwswing exaggerates profit expectations, so the crisis exaggerates
declining profitability. To speak in Keynes' subjective terms, the
unrealistic "optimisim" of prosperity leads to the unrealistic "pessissism"
of depression. In either direction, the competitive process tends towards
extremes: it hastens the overproduction of capital and the reorganisation
of the capital structure. A depression may 'sneak' into existence by a
gradual slowing down of economic activity, or it may be initiated by a
dramatic 'crash' with sudden bank failures and the collapse of the stock
market. The crisis itself is merely the point at which the reversal of
business conditions is publically recognized.

"Whatever the circumstances surrounding the reversal of the economic trend,
it is accompanied by an overproduction of commodities. Even the last phases
of the boom preceding the crisis are, viewed in retrospect, already
unprofitable; but recognition of this had to await the verdict of the
market. Commitments made of the the assumption of a continuous upward trend
cannot be met. The conversion of capital from commodity to money form
becomes increasingly difficult. The crisis of production is at the same
time a financial crisis. Competition becomes cutthroat, and for some
businesses prices are forced down to the point of ruin. Capital values are
rapidly depreciated, fortunes are lost, incomes are wiped out. Social
demand declines further as the number of unemployed grows: the commodity
glut is checked only by the still faster decline of production. The crisis
extends into all spheres and branches of production. Its general form
revelas the social interdependence of the capitalist mode of production
despite the private property relations which control it.  After a period of
panic however the capitalist economy reorients itself towards a new
stability under changed conditions. The ensuing stagnation or depression,
while destroying many businesses, improves the profitability of the
survivors by presenting them with larger markets. A more concentrated
capital now commands a larger sphere of business operations. It defends and
consolidates its newly won position, cutting labor costs by invested anew
in technological innovations. To a greater or lesser degress ecompetition
forces all surviving capitals to do the same, a new wave of investments,
altering the reltioatnship between profit and wages,, initiates a new
period of capital production. The problems of capitalism coming to the fore
on the market, find their solution in the sphere of production, though the
solution is not complete until it also affected market relations."

I am just finishing typing out this passage from Mattick's Marx and Keynes,
p. 84 as I receive yet another stimulating post from  Jurriaan. In terms of
his recent criticism of Mattick's fundamentalist aversion to empirical
confirmation of value theory, I would like to note immediately that for
Mattick the *observable* confirmation of the law value--a sort of hidden
causal mechanism in Bhaskarian terms-- remained the persistence of the
trade cycle. Remember Mattick had worked out Marx and Keynes years before
it was published in 1969--that is, when there was supreme confidence that
the trade cycle had been conquered. On the basis of value theory, he made a
defiant prediction, so defiant that it seems that he could not find a
publisher.

rb





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