Re: The new economy

["Charles Brown" <CharlesB@xxxxxxxxxxxxxxxxxxxxx>]

>>> Louis Proyect <lnp3@xxxxxxxxx> 04/03/00 11:36AM >>>

Bill did not address a question which occurred to me after his talk. In the
old days, boom and bust was very much related to the heavy capital
expenditures of industries that formed the core of American industry. For
example, the sharp countours of the business cycle of the late 19th century
was very much related to rapid expansion of the railroad industry, which
required heavy outlays for rolling stock, bridges, etc. In the 1930s the
collapse of the German economy was very much related to its concentration
in steel and machine tool production, both of which require heavy fixed
capital outlays.

In the new economy, very few such expenditures are required. It is mostly
about gathering together highly skilled people and supplying them with
computers. Microsoft and aol.com can expand rapidly by adding bodies. If
there is a downturn, there is no need to pay off the huge debts associated
with steam engines, foundries, etc. Just lay off excess bodies. Would this
be a possible explanation for the USA's ability to weather the financial
crisis of 2 years ago? Perhaps the vulnerability of South Korea, etc. can
be explained in terms of its continuing dependence on smokestack industries.

_________

Lou,

In a sector such as you describe the computer industry , does the low ratio of constant capital to variable capital , c/v, expenditure mean that the law of the tendency of the rate of profit to fall is not as likely to be a trigger mechanism for crisis because of the this low organic composition of capital ?

CB