[OPE-L:5155] re: counteracting factors

Gerald Levy (glevy@pratt.edu)
Sun, 1 Jun 1997 04:59:16 -0700 (PDT)

[ show plain text ]

Re: Andrew K's [5125] and John's [5153] (was "RRI and the Rate of

Andrew wrote in [5125]:

> [...] Capital is devalued, which then raises the profit rate and leads
> to an upturn. So to relate turnover to the FRP, one needs an
> explanation of the link between devaluation and turnover. Rather than
> the bunching of investment being cause and the FRP being effect, it
> seems more plausible that the reverse is the case. [...]

John responded, in part:

> In my scenario, investment in techniques that bring about
> an increasing difference between the social value and
> the individual value would lead to an increasing RRI as well
> as increasing depreciation funds which could be used for
> more investment. It is this "accelerated accumulation"
> that brings about the falling rate of profit albeit with
> an increasing RRI. The resulting "bunching" of investment
> seems to the cause. I'm not sure how the FRP per se
> leads to a bunching of investment.

These involve some very important questions, e.g.

a) how do we articulate the relationship between the LTGRPD and the
counteracting factors?, and;

b) what happens during the crisis and in what sequence?

Regarding b), I would suggest the following scenario:

1) as the organic composition of capital increases and when the general
rate of profit declines, firms respond initially during the crisis by
reducing output since the fall in profitability manifests itself to
individual firms as an overproduction of commodities.

2) this causes the relative surplus population to increase ("counteracting
factor" #4) further.

3) As the relative surplus population increases, increasing competition
for jobs (and the increase in bargaining power of capitalists) causes a
"more intense exploitation of labour" (#1) and a "reduction of wages below
their value" (#2). This results in an increase in the mass and rate of
both surplus value and profit, but the output level is constant.

4) Although the demand for output of the firms producing means of
consumption would remain constant or decrease (because of the general
reduction in wages and the increasing industrial reserve army), firms now
[after 3)] have more money capital that can be used for investment in c.

5) The larger firms, and the ones with the better credit-ratings, are now
able to increase expenditures on new more advanced means of production --
especially since the rate of interest charged by banks has been decreasing
during the crisis. This leads to a "cheapening of elements of constant
capital" (#3) through an "accelerated devaluation" of existing fixed
capital and a "bunching of investment."

6) As the demand for new and better means of production increases from the
firms producing means of consumption, output and employment increases in
the firms producing means of production.

7) Firms are now expanding output and also increase their demand for
labour-power (since wages are still relatively low). The economy enters
the expansionary phase.

[NB: "foreign trade" (#5) and "the increase in share capital" (#6) were
not considered above].

What's wrong with the above scenario?

In solidarity, Jerry