Re: [OPE] topics for summer discussion: theories of the crisis

From: Dave Zachariah <>
Date: Tue Jul 20 2010 - 14:16:45 EDT

On 2010-07-20 04:03, Alejandro Valle Baeza wrote:
> Dave your idea is excellent to me. Thank you.
> Any thoughts on Husson's paper?
There is a lot to say but let's focus on the theoretical and empirical
issues for the moment.

On the whole I'm sympathetic to Husson's analysis, it is in line with
what I've been thinking since 2008: The dominant factor behind the
current crisis was not a 'crisis of profitability' as in the 1870s or
1970s but rather a 'credit crisis' as in the 1930s. In this case it was
caused by the growing world economic credit and debt imbalances induced
by the specific neoliberal configuration of global capitalism since the

Some further points:

* Measuring profitability

There are many limits to the available data but I think it is essential
to separate profitability in the non-financial firms from the financial
firms. In particular it is the rate of return on investment in the real
economy that is most relevant to the expansion of production.

However, I have a problem with terminology of *the* rate of profit.
There is no such thing. What exists is a *distribution* of rates of
profit over the capital invested in an economy. It is only legitimate to
speak of, say, *the* average rate of profit.

I find it interesting that while there is a difference between measuring
the capital stock at current costs versus historical costs, Husson
reports no fundamental difference in the overall trends. However,
according to him it is when Kliman converts the measures of
profitability into labour value terms that he obtains a different
pattern in which the rate of profit is persistently falling the US. This
seems to me to be of little significance: firms measure and are
concerned with profitability in monetary terms. If some alternative
'value' measure systematically diverges from this, then the usefulness
of the latter measure is surely questionable.

That said, I know that it is possible to employ a labour value estimator
of the average rate of profit that works well as a predictor and that
gives deeper insights to the trajectory of profitability.

* The law of the tendential fall of the rate of profit

I agree with Husson that the orthodox formulation of this 'law' is
inadequate. Especially Marx's variables are not helpful here even if his
insight was correct. Indeed, the real question must be: Under what
conditions will the average rate of profit rise, fall or remain
constant? Do such conditions recur or are they transient? In this way
one can avoid so much of the epicycle-arguments about 'counter-tendencies'.

Husson enters this terrain when he points out the effects of
productivity growth. As an alternative to this formulation, I believe
the approach taken by Paul C, Allin and myself is more fruitful: It can
be shown that average profitability is determined by the balance of
three factors:

    1. Growth rate of labour
    2. Growth rate of productivity
    3. Level of investment ratio

The two first act to raise profitability, while the last factor lowers
it. Clearly the significance of the first factor has vanished in the
industrialized economies. It turns out that in general the most
significant factor is the investment ratio. Note that this is
*independent* of the level of the wage share, thus eliminating one
factor from the analysis of profitability.

* 'Under-consumption' mechanism

Husson is right that one cannot dismiss this mechanism as some sort of
'Keynesian deviation'. If wage shares were falling world-wide and
investment shares were stagnant, the effective demand would have to come
from somewhere: consumption by the propertied classes, indebtness,
exports or government expenditure. What seems to have happened is that
the capitalist economies polarized into two groups:

   1. Deficit- and debt fueled
   2. Export fueled

and this fueled the ever-growing macroeconomic imbalances that
eventually led to the credit crunch.

One a related note, what has struck me about many US-based Marxists,
such as Anwar Shaikh and David Kotz, is how the balance of class forces
is missing from the analysis. Dumenil and Levy are somewhat better on
this, but even here working-class trade-unions and parties have no
clearly theorized position in their framework.

What do you make of Husson's paper yourself?

//Dave Z
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Received on Tue Jul 20 14:19:23 2010

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