[OPE-L:7283] Re: Re: Re: NYTimes.com Article: Where's the Boom?

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Thu May 30 2002 - 00:44:51 EDT

On Wed, 29 May 2002, Rakesh Bhandari wrote:

> But Fred, here is where I am a bit confused by both your recent 
> Monthly Review piece and your post here:
> You seem to emphasize the negative underconsumption effects from 
> rationalization and intensified exploitation over the positive 
> stimulus effects on the rate of profit and therewith capital 
> accumulation?
> rb

Rakesh, this is a good question.  My answer has to do with the distinction
between the short-run and the long-run.  In the long-run, what is
necessary for a return to more prosperous conditions is a revival of
capital accumulation, which in turn requires a significant increase in the
rate of profit.  One way to increase the rate of profit is to cut
wages.  However, in the short-run, wage cuts will reduce consumer
spending, which will worsen the current recession.  

Therein lies the capitalist dilemma: what is necessary to increase the
rate of profit in the long-run will make things worse in the short-run.

The same thing is true of the other main way to increase the rate of
profit - the devaluation of capital as a result of bankruptcies of
capitalist firms.  In the short-run, bankruptcies (like wage cuts) will
make things worse.  But in the long-run, that is what is necessary to
increase the rate of profit, which in turn should lead to a revival of
capital investment and a return to more prosperous conditions.  

The fundamental problem is not underconsumption.  But attempts to solve
the fundamental, long-run problem of insufficient profitability will cause
a short-run problem of underconsumption.

Rakesh, do you see what I mean?  What do you think?


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