[OPE-L] If a six turned out to be nine

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Thu Sep 28 2006 - 14:16:43 EDT


>Jerry Levy pointed us to Tony Smith's piece. You could start there if
you think HG anachronistic.

Are you referring to http://www.public.iastate.edu/~tonys/worldmarket.html ?
Personally, I usually prefer not to start out with a theoretical object,
concepts, or a Weberian typology, but with a real object to explain, i.e
empirical facts - theory being a guide. Mind you, I have a fulltime job and
study parttime, and I cannot devote all my time to this.

>as for example the analysis of the struggle for control of raw materials?
>or how about Cyrus Bina's strict application of Marx's rent theory to
of OPEC and global oil pricing in general?

Well, I don't really believe in pomo Marxism except as a joke. You're
entitled to your heroes Grossman and Bina and your own metaphors of course.
As regards the oil industry, I have only investigated it very sporadically
and infrequently so far, so cannot comment further. Anwar Shaikh points out
that in real terms, as an historic trend, oil prices have fallen for a long
time, which "we tend to forget".
The movement of oil prices seems to have little to do with scarcity factors.

>semantic games.

I don't think so. I have already noted the different modalities of capital
accumulation in previous posts, and we went over the meaning of valorization
already. I've also indicated how economic growth created a large stock of
non-productive assets, which can be traded, and thus becomes a source of
accumulation for the social classes who own those assets.

Suppose that "expanded reproduction of capital" was not just a bit of
Marxist rhetoric tossed about, and that we actually empirically investigated
this. What would we find?

Briefly, I think around 1973 or so there probably was something like an
"overaccumulation crisis" in Grossman's sense, leading to a long recession,
and featuring an intensive restructuring process of capital assets, which
continues to this day. Point is, the system did not break down at all,
except in a few relatively "marginal" countries. Instead what happened was a
marked shift in the distribution of total capital assets, from productive
assets to non-productive assets (real estate and financial assets), with as
its corollary, (1) that a much greater proportion of business income takes
the form of property income, interest, rents and speculative profit, (2)
that asset ownership is concentrated more with the financial institutions,
(3) an increasing disparity between GDP and total national income receipts.
The late Seymour Melman wrote a book on the subject once, tellingly titled
"Profits without production".

The overall real growth rate of fixed investment in the OECD productive
sector mostly stagnated, with a few exceptions such as construction and
computer equipment, while the property market boomed. Low interest rates
caused a massive increase in home ownership. Foreign trade in goods and
services as well as in capital assets grew enormously, with as a corrollary
that the intermediation between producers and consumers strongly increased,
giving rise to a new class of middle-men. The rate of labor-exploitation
(for which the term "productivity" is a euphemism) increased significantly
upon political defeats of the working classes (who were also scared of
unemployment), and as a corrollary, real wages stagnated. Physical
productivity in the sector producing material goods increased greatly, but
the amount of capital directly tied up in it, as a proportion of total
capital assets, declined. World unemployment increased.

In what sense then is there a "valorisation crisis" or ""profitability
crisis"? Basically, there isn't one, except that, in the final analysis,
gross product (and therefore productivity) has to grow at a sufficient rate
to meet all the financial claims staked on it. Investment activity is
sensitive to even small increases in the interest rate, for example. But
this gross product of course also increasingly - at least in the
OECD -consists of traded services. So the system depends more and more on
the serviceability (servility?) of people, and their ability to buy

What is the overall economic effect of all this? Basically, a lot of surplus
capital sloshing around the world economy, in search of acceptable returns -
not so much overproduction, as excess capacity and rising longterm real
unemployment. And there's a continual bidding down of the price of
services - the long term trend is not for labour-power to be revalued, but

The world economy is a bit like a bunch of cars that are being driven with
the brakes depressed, the drivers gripping the steering wheel ever more
tightly, hoping thereby that the cars will move faster. You could for
example plot the average growth rate of real GDP in OECD countries for
1947-1973 (about 4% or so), extrapolate that average growth rate to 2006,
and then compare it with the actual growth rate. The gap between the two
lines, which becomes very large (given that the long recession halved real
growth rates), reflects the difference between actual and potential economic
growth in capitalism. The gap becomes more dramatic, if we just take the
material goods-producing sector. We can repeat the same exercise for net
capital formation, it shows a similar pattern. Of course, as I've also
pointed out, a growing proportion of GDP consists of a fictitious net
output, i.e. the imputed rental value of owner-occupied housing, which has
nothing to do with production.

Technically, there is no world economic crisis, insofar as there is enough
produced to give everybody on earth a decent, sustainable life. The only
real crisis there is, is that you have all these very poor people, many
eking out a life you'd barely call human. And that gets talked about a fair
bit - they might get out of hand and do extreme things, wonder why?

Deregulation has certainly increased risk and market uncertainty, but it
also gives rise to a whole new financial industry specialising in protecting
the owners of capital against significant risk in a sluggishly growing
economy. It's an economy in which, economically, real production (people
making things that add to the stock of material wealth) has become less and
less important in the overall capital accumulation process, while asset
acquisition has become much more important. So much so that it prompted a
revision of international accounting standards.

I don't think Grossman's theory explains that development adequately. In
Grossman's theory, you have overaccumulation in constant capital, a
valorization crisis, and then a good solid breakdown of capitalism. That
hasn't happened, and really the more "modifying influences" we introduce,
the lower the predictive power of the theory.

My hunch is that the real problem will turn out to be, not an
overaccumulation of constant capital in production, but an overaccumulation
of financial assets.
But what is important there, is the quantitative effects of a financial
crash - so far, the system has shown that it can absorb stock crashes and
credit crashes of quite a large magnitude.

The main thing about a modern economy increasingly based on credit money is
that it requires social stability and social trust to function, it is very
sensitive to that. Any large class conflicts or social explosions in the
countries which are the major players can have big financial effects. Thus
modern politics is more concerned than ever with taking the sting out of all
manner of conflicts, mediating and minimising them, keeping social
competition within acceptable bounds, ensuring social peace and encouraging
"constructive" attitudes that integrate people in society. To the extent
that people find that they can still make real gains, i.e. improve their
conditions of life significantly, that can work, but if people find that
they cannot make gains any more, that their position deteriorates, then all
hell can break loose. How low can we go, while we still grow?


There is no depression in New Zealand
There are no sheep on our farms
There's no depression in New Zealand
We can all keep perfectly calm
Perfectly calm, perfectly calm

- Blam Blam Blam

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