Re: [OPE] A profit squeeze in Germany? A study in punk economics

From: paul bullock <paulbullock@ebms-ltd.co.uk>
Date: Mon Dec 22 2008 - 07:13:18 EST

Jurrian

IF wages go up, the rate of exploitation falls ( even a Smithian accepts this)..so the rate of profit is threatened directly.

The only conceivable way that the bourgoisie can think of managing expansion at the moment, is for the state to seize the funds in the banks ( held by businesses of all sorts), including pension funds, and spend itself to simplify matters. This is a 'solution' consistent with their own 'demand' led conceptions of market expansion that overides individual capitalist protests. Otherwise/also, the state has to create credit for its own use, indebting the state and pray that the spending generated that way will, justified la Keynes balanced budget multiplier, repay itself through expansion.

Paying the workers in imperialist countries more is now out of the question, (other than limited tactical concessions to buy sectoral social peace as the situation gets worse, eg US). Insufficient plunder is being extorted from developing states to do this now. This is understood y the labour aristocracy who really get upset over signs of independence, and so start 'criticising' any movement that wants to remove superprofits from the activities of foreign corporations.( Usually by criticising such movements eg Venezuela for NOT appropriating everything at one fell swoop - ultra leftism - or picking holes in the 'democracy' of their programmes - liberal imperialists)

This is why France and Germany propose state spending.... this is why public works always appeared as a solution in depressions, and why even Brown proposes forcing more debt, even via loans to the unemployed!! on the workers here.

In fact the bourgeoisie are in a terrible mess.. concentration of capital still pushes ahead in the classical fashion as capitals take advantage of the weakening of others... BUT who has the markets for a new expansion in reality? The workers can't constitute a market for capital to escape its own contradictions. Another capitalist state will have to be beaten into accepting huge market losses. Which state is going to displace which? and how? That is the question that faces us now.

Paul B.

  ----- Original Message -----
  From: Jurriaan Bendien
  To: OPE@lists.csuchico.edu
  Sent: Sunday, December 21, 2008 7:11 PM
  Subject: [OPE] A profit squeeze in Germany? A study in punk economics

  On 12 September 2008 I posted:

  UNCTAD notes that "a non-recessionary correction of global imbalances would require stronger stimulation of domestic spending and imports in the major surplus economies, especially in Germany and Japan, as well as a measured appreciation of the Chinese currency. As UNCTAD economists see "a strong likelihood of a sharp and prolonged downturn of the world economy," they deplore that policymakers are unable to tackle this challenge". http://www.unctad.org/Templates/webflyer.asp?docid=10444&intItemID=1528&lang=1

  Martin Wolf later argued:

  "creditworthy surplus countries must expand domestic demand relative to potential output. How they achieve this outcome is up to them. But only in this way can the deficit countries realistically hope to avoid spending themselves into bankruptcy. (...) We are all in the world economy together." ("Global imbalances threaten the survival of liberal trade", FT 2 dec 2008).

  Niels de Hoog, a Dutch policy analyst at the Dutch Reserve Bank http://www.dnb.nl/home/ however claims that if German wages rise, this threatens profits there. ("Loongroei bedreigt Duitse winstmarges", ESB 93 (4550), 19 December 2008, p. 782). http://esbonline.sdu.nl/do/welkom He provides data on wage demands and number of employees affected for 15 German industrial bastions, and calculates the weighted average wage rise that is likely to be realised at 4%, with a spin-off effect on other wage rounds.

  His argument is that if workers get more pay, they will in current conditions most likely save it rather than spend it, while industrial employers will then have "additional financing problems".

  Adding up the total employees in his table, you get 5,748,000 workers. Let us assume fairly realistically a grand average annual salary per German worker of $31,200 euro. Then that's a total salary bill of 179.3 billion euro, and 4% of that, would be about 7.2 billion euro. (Germany has a GNI of 2.4 trillion euro; the richest 10% of households supposedly get one quarter of the country's personal income, and own about 44% of German asset wealth. The total German-owned asset wealth would be circa 8-10 trillion euro).

  The question then is, can a 4% wage rise at a cost of 7.2 billion euro really have much of a macro-economic effect? The answer is no, but obviously Germany has about 38 million employees in total, and then if they earn an average 31,200 euro a year, the annual wage bill is something like 1.2 trillion euro, in which case de Hoog's projected average wage rise "across the board" of 3.2% would imply an extra 40 billion euro or so in pay per year among all German workers if their pay claims succeed reasonably well.

  Compare, if you like, the reported German bank losses (write-downs) from the American subprime crisis (in US dollars):

  Deutsche Bank 7.7 billion
  LBBW 1.1 billion
  Hypo Real Estate 0.58 billion
  Commerzbank 1.1. billion
  WestLB 2.6 billion
  BayernLB 6.7 billion
  DZ Bank 2.1 billion
  IKB Deutsche Industrie Bank 3.45 billion
  Dresdner Bank 3.49 billion

  If you add all that up, the total loss is $28.8 billion or about 21 billion euro. Well, if German workers get an extra 40 billion euro a year and save it, that solves the bank's problem, right? And if the banks happily accept workers' savings, they are able to finance industry, right?

  Maybe some German businesses cannot sustain such a wage rise, but in that case they ought to raise the pay of those on lower incomes, capping the higher incomes. Then the additional costs would be less, and the addition income would be more likely to be spent on consumables. But in reality, although Trichet calls for concerted action by all parties to halt inflation, inflation is not the problem of the moment, and basically everybody goes for what they can get - if they don't, others will.

  Never in the whole history of the world has there been a more powerful economic case for a more egalitarian income distribution than today, it's just that the Left isn't making it.

  What does Angela Merkel plan to do? She plans to spend "40 billion euro" on improving roads, schools, universities and sports facilities. http://www.spiegel.de/international/germany/0,1518,597539,00.html

  Jurriaan

  99 red balloons.
  floating in the summer sky.
  Panic bells, it's red alert.
  There's something here from somewhere else.
  The war machine springs to life.
  Opens up one eager eye.
  Focusing it on the sky.
  Where 99 red balloons go by.

  99 Luftballons
  Auf ihrem Weg zum Horizont
  Hielt man fuer UFOs aus dem All
  Darum schickte ein General
  Eine Fliegerstaffel hinterher
  Alarm zu geben, wenn es so war
  Dabei war da am Horizont
  Nur 99 Luftballons

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