Date: Fri, 4 Nov 1994 01:16:53 -0500 (EST) From: Justin Schwartz <jschwart-AT-freenet.columbus.oh.us> Subject: Re: Dispersion of profit rates (overproduction) On Thu, 3 Nov 1994, jones-bhandari wrote: > Justin posted the following: > It's also true that capitalists > >with large investments in relatively unprofitable industries may find it > >difficult or even irrational to get out to where the grass is greener, a > >fact which contributes to overproduction tendencies, as Robert Brenner has > >argued. But that does not mean that they will not try! As US Steel told > >the United Steel Workers, we don't make steel, we make money. And shortly > >afterwards they changed their name to USX and got out of steel. J-B proceeds to beat up on my attempt to concede half a point to Paul. If you want the low-down on this story you have to ask Bob Brenner (UCLA Dept. of History), from whom I have only heard it in a couple of presentations. Maybe someone out that way can corral him onto the list and make him explain himself. I'm not sure I agree with him anyway. > > 1) Capital switching > > If the grass is green enough elsewhere,why wouldn't exiting from the old, > unprofitable investment for those greener branches elsewhere be rational? > Why is it irrational to switch capital, instead of continuing to purchase > the "circulating capital" necessary to write off the (heavy) investment in > fixed capital? Anyways, if unit values have crashed beyond the reach of a > firm, how could it possibly be rational for it to stay in business? > I think the idea is that you have a large fixed investment and it can be rational for you to try to make it back by using it even if your techniques and sunk costs are above those introduced later. It's not necesasrily rational to walk away and wrote off billions as a bad investment as long as there is a hope of getting anything from it. > > 2) Overproduction > > Is Brenner's argument here that firms don't cutback supply in the face of > inadquate demand because (a)they cannot switch their capital (for whatever > reason) or (b) because they must first amortize past investments ( > rendered however difficult by the continual decline in unit values > characteristic of this mode of production) I think this is his claim. or... (c)because they innovate, > thereby bringing social values closer down to the innovator's individual > value, simultaneously capturing more of and expanding demand (with the help > adverstising) and thus actually increasing supply in the struggle to save > themselves at the expense of other firms. Note 2c does not assume a static > equilibrium: that in the face of declining demand, firms will respond by > switiching capital so as to balance supply and demand. This has nothing to > do with capitalist reality. Firms often respond to declining demand with > increased supplies through technically-achieved revolutions in value. Why > US Steel did not take this classic path needs to be explained. > > 3)From US Steel to USX (or as Robt Reich put it, from high volume to high value) > > so why did US Steel get out of the mass production of steel (assuming that > it did)? Is the argument here because of glutted markets? Or was was there > an insufficiency of surplus value to modernize plants, which could have > sufficiently revolutionized value to create adequate demand? Or was US > Steel governed by the Law of Maximum Value and saw only an average rate of > profit in the mass production of steel? I wasn't actually explaining why USS quit the biz. I was noting that pace Brenner sometimes the bastards really do walk. This is supposed to support the idea that the rate of profit will tend to equalize because capital is liquid enough. > > If it is (2a), as Brenner argument seems to be, then this peculiar > disproportionality crisis could be solved by more efficient capital > markets, no? > I think USX's decisions are best understood in the terms of both an > insufficiency of surplus value and the search for an above the average rate > of profit. I read The Wolf Finally Cam,e when it was published, but I don't recall a thing from it except the quote about making money not steel. So I couldn't say. > > In explaining the devastation of US steel decision's Robert Reich called it > an example of the movement of the US economy from High Volume to High > Value. What does this mean? Look, I', supposed to read Brenner's mind and now I'm supposed to read Reich's? My name isn't even Robert. --Justin ------------------
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