[OPE-L] That hissing? It's the sound of bubblenomics deflating

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Sun Sep 30 2007 - 06:52:54 EDT

As I indicated before, I think Brenner's analysis merits critique both for its theoretical foundations and its quantitative analysis of economic aggregates. Just a few points:

(1) According to Brenner's American-centric analysis, US manufacturing net output growth by itself is supposed to have determined the growth pattern of the whole world economy, no less. This is not a credible argument from an economist's point of view, and in addition the manufacturing net output of Europe is actually larger than that of the US anyway. Europe also accounts for more of total world trade. 

(2) Profit volume data derived from GDP data are suspect because of the definitions used, and they understate true profitability. It is meaningless to talk about the "economic health" of an economy in terms of profit rates, without mentioning profit volumes, especially in the context of a world economy in which international trade is strongly expanding. Additionally, the value of fixed capital and inventories is notoriously difficult to estimate with any accuracy. 

(3) The surface phenomenon of "bubbles" (fictitious capital) masks the reality of a very large mass of "excess capital" or 'surplus capital" in the world economy which is not invested in expanding real production but in the trade in money capital and financial assets. At a guess, for every 10 dollars of US physical assets there exists something like 7 dollars of US "tradeable" financial assets. A large portion of this excess capital is tied up in insuring its owners again risk, making capital accumulation for the large owners not more risky, but less risky. Thus, the real problem is that owners of large capital assets are unwilling to risk this capital by investing it in real production. This is influenced probably both by deregulation and trade liberalisation which creates more market uncertainty, and by the sluggish growth of final demand.

(4) Whereas on grand average, the value-added per physical unit of product is in long-term decline world-wide, the physical volume of output has continued to increase. An increasing proportion of profit income is obtained from the intermediation (the trade) between the direct producer and the consumer. Overall, the growth rate of physical output of goods tells us less and less about the total pattern of capital accumulation.

(5) All the Marxist analyses of capital accumulation which focus on GDP data are wrong, because (a) they conflate the profit component in value added with total real profit (b) they ignore "property income" not included in GDP (c) they ignore that in rich countries the value of fixed assets external to production is larger than the value of fixed assets used in production. In Marx's own analysis, production is only one avenue for capital accumulation, not the only one. The circuit of capital reflected in GDP is not the total circuit of capital.

(6) Quantitatively speaking, it is no longer possible for governments to act as guarantor of profits for the whole capitalist class, or "bail out" the capitalist class from losses. The magnitudes of capital involved are simply too great. The state can bail out capitalists only in some critical areas.


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