[OPE-L] Boffy's Blog: "The Tendency For The Rate Of Profit To Rise"

From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Sun Dec 16 2007 - 13:32:15 EST

There is nothing new about the argument he makes. The productivity argument was made by Michel Husson and many others decades ago. The consumer society stuff was already covered by many writers in the 1960s. 

The "law" of the falling tendency of the rate of profit is a law, only in the sense that this tendency must eventually prevail over the countertendencies. Marx however wasn't talking about the rate of profit of "everything", he was talking only about industrial profitability. If there is a sustained recovery of industrial profitability now, where is the evidence?

I've already made many points about this on OPE-L so I am reluctant to go over this again. The main things which Marxists ignore are that (1) profit from industrial production is a strongly declining share of the total generic profit volume in the main OECD countries, and (2) that a growing share of the total generic profit volume in the OECD countries is attributable to profit appropriations from abroad, i.e. from foreign transactions, and from financial intermediation of all kinds. 

What Marxists ignore in their "reproduction schemes" is that they leave out some results of the accumulation process. They act as though the output of capitalist production simply disappears in consumption, whether productive consumption or final consumption. 

But this is a fallacy, because fixed assets and durables are being produced, imported and maintained. You can easily show that the value of the total stock of fixed assets and durables increases year after year. The effect is that in many OECD countries nowadays, the value of the stock of non-productive fixed capital assets is larger than the stock of productive fixed capital. 

But just because the larger part of fixed capital assets is now non-productive, doesn't mean that it plays no role in accumulation. That would also be a fallacy. Contrary to what Marxists argue, production, as Marx knew, is only one source of capital accumulation among others. Originally, as Marx noted, capitalism had almost nothing to do with production, it had to do with trading, leasing, renting, and lending. Marxists claim that capitalism started when British peasants were thrown off the land in the 18th century, but this is a mythical fiction which does no justice to Marx at all, never mind economic history.

Non-productive assets do play a role in capital accumulation, and profits are made from it, in the form of capital gains and property income, interest and rent. Marxist guru's such as Rober Brenner miss all that, because they are fixated on manufacturing and what happens with GDP. They think that what happens in manufacturing determines the world economy, which is a fallacy.

In addition, if we consider the total stock of capital assets of all kinds, an increasing proportion of that stock consists not of physical assets, but purely of financial assets. This is capital not invested in production or physical assets, which just earns interest or rent or some other form of property income.

The effect of all that is, that the total generic profit volume realised can increase, although industrial profit (newly created surplus value) stagnates or falls. So the famous Law of the tendency of the rate of profit to fall may be quite correct, while at the same time the generic profit volume increases. This reality is missed by the Marxists.

Many Marxists say, "ah profitability is increasing, so therefore the law must be false, or, there are countertendencies operating" but this mistakes the real situation, which they haven't researched. Their analysis is based on 19th century capitalism instead of 21st century capitalism, they just try to find superficial analogies with 19th century capitalism.

Marx cited foreign trade as one countertendency to the TRPF. What is "globalisation" if not an enormous expansion of the international trade in money, commodities and capital? Essentially what sustains generic profitability these days is extensive, structural unequal exchange globally. The inevitable effect of that, is a gigantic increase in socio-economic inequality. 

"The increase in incomes of the top 1 percent of Americans from 2003 to 2005 exceeded the total income of the poorest 20 percent of Americans, data in a new report by the Congressional Budget Office shows. The poorest fifth of households had total income of $383.4 billion in 2005, while just the increase in income for the top 1 percent came to $524.8 billion, a figure 37 percent higher. The total income of the top 1.1 million households was $1.8 trillion, or 18.1 percent of the total income of all Americans, up from 14.3 percent of all income in 2003. The total 2005 income of the three million individual Americans at the top was roughly equal to that of the bottom 166 million Americans, analysis of the report showed. (...) Earlier reports, based on tax returns, showed that in 2005 the top 10 percent, top 1 percent and fractions of the top 1 percent enjoyed their greatest share of income since 1928 and 1929. " (David Cay Johnston, "Report Says That the Rich Are Getting Richer Faster, Much Faster" NY Times, December 15, 2007) http://www.nytimes.com/2007/12/15/business/15rich.html http://www.cbo.gov/ftpdocs/88xx/doc8885/12-11-HistoricalTaxRates.pdf


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