[OPE-L:7562] [OPE-L:1107] Re: US economy

Fred B. Moseley (fmoseley@mtholyoke.edu)
Fri, 3 Sep 1999 15:42:54 -0400 (EDT)

This is a response to Alfredo (thanks for the question).

On Fri, 27 Aug 1999 Asfilho@aol.com wrote:

> Fred has made some very interesting points in his recent message, and in the
> papers he mentions. I would like to ask him a question about his analysis of
> the profit rate. Fred argues - please correct me if I'm wrong - that the
> long-term fall in the US profit rate is partly due to the rising OCC, and
> partly due to the increasing share of unproductive labour.
> Fred: can you elaborate on how exactly these two factors have affected the US
> profit rate? I am particularly intrigued by the impact of the growth in
> unproductive labour: surely it reduces profits in the 'first round', but it
> increases demand too when the revenue is spent - in this case how do you
> calculate its overall impact? Or am I missing something?
> alfredo.

My answer: I assume that the revenue spent by unproductive labor does not
increase aggregate demand, and hence this expenditure does not have any
effect on the rate of profit. If this part of surplus-value were NOT paid
to unproductive labor, but instead became the profit of capitalists, then
I assume that capitalists would spend this profit in some way, either on
capital accumulation or on personal consumption. Therefore, there would
be no net reduction of demand as a result of such a reduction of the costs
of unproductive labor, but only a redistribution of demand from
unproductive labor to capitalists.

My estimates of the rate of profit are for the "full employment" rate of
profit, i.e. what the rate of profit would be if capital and labor were
fully utilized. The estimates of the actual rate of profit are adjusted
to this "full employment" level. If there were less than full
utilization, then the rate of profit would be lower than the "full
employment" rate because of insufficient demand. But this is a cyclical
phenomenon that I wish to abstract from in order to estimate the long-run
secular trend of the rate of profit in the US economy in the postwar

Alfedo, what do you think?