[PEN-L:33715] RE: Rates of Profit: Recent Estimates

["Devine, James" <jdevine@xxxxxxx>]

Duménil & Lévy are excellent people and scholars. Their research on the (conventional) rate of profit in the US is ground-breaking. (What Fred Moseley calls the "conventional" rate of profit is a measure of the kind of profit rate that matters most to business. It differs from the "Marxian" rate of profit that includes the wages of unproductive labor-power in the numerator as part of surplus-value and excludes them from costs and the denominator (along with some other adjustments).)

 

My interpretation of their work (and others') is that the long fall in the rate of profit up to the early 1980s is part of the process (along with stagflation) that provoked the one-sided class war of the last 25 years or so. This has been seen in the victory (so far) of the neo-Liberal policy revolution (Reaganism, following Pinochetism and Thatcherism and followed by Bush/Clinton/Bushism) which is dismantling what existed of the welfare state and feeding the rich and the military.  This has led to an incomplete recovery of the rate of profit up to 1997. I interpret the incomplete recovery in terms of (1) increased international competition, including unused capacity; and (2) the fact that booming CEO salaries aren't counted as profits.

 

The neo-Liberal policy revolution around the world has depressed wages and working-class government benefits, encouraging the "underconsumption undertow" (chronically inadequate workers' consumer demand). Unlike in classical underconsumption theories, this does not mean that the economy automatically sinks into depression (though that has happened in many countries). Other kinds of spending can replace working-class consumer spending or workers can borrow, allowing temporary booms.

 

I argue that the boom of US GDP growth continued after the profit rate fell starting in 1997 because of credit expansion, i.e., increasing corporate and personal debt accumulation. This corresponds to the US external defict. However, the increasing debt burden -- and the increasing industrial capacity -- meant that the economy was prone to shocks such as the stock market decline of 2000 and after. Thus, the 2001 recession.

 

Of course, once the recession started, that depressed profit rates further, discouraging capitalist accumulation.

 

For a more complete story, see http://bellarmine.lmu.edu/~jdevine/talks/newOhio.htm.

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine

-----Original Message-----
From: Paul_A [mailto:paul_a@xxxxxxx]
Sent: Friday, January 10, 2003 6:14 AM
To: pen-l@xxxxxxxxxxxxxxxxxxx
Subject: [PEN-L:33711] Rates of Profit: Recent Estimates

There is a 'must-see' article in URPE's RRPE, Fall issue (latest?) by Dumenil and Levy.  The most salient point is that they see a LONG RUN upturn in the rate of profit since 1982 which was the bottom of a 34 year decline.  So far, as of 2000, there has only been a partial recovery (since 1982 profit rates have returned roughly to the 1965 level).  This is long wave analysis, so of course there are ups and downs within these trends.  They see changes in "productivity" (technical change) as driving much of the downswing and now the upswing, but there are also shifts in the share of profits.  So, between the lines, they would seem to point to falling rate of profit theory although the article is deliberately limited to "the stylized facts".  They consciously draw on Shaikh, Tonak and Moseley.

To bring out the trends D & L rely on removing from consideration very capital intensive industries such as power, communications and transport on the grounds they are a special case.  They also use 1956-65 as the base years.

Of course the implications are central: are we well into a long upswing in profit rates that, very broadly speaking, might last for another 15 years or so?  I would love to hear what people think of the article (especially Fred Moseley and Jim Devine).  Is the difference in emphasis with Moseley largely because they now bring more recent data into play?

I recall that the paper was to be presented at the ASSA LAST year.  Does anyone know how the discussion went?

Paul A.

P.S.  Who are these French fellows Dumenil and Levy?   They seem to be quite prolific.




At 03:41 PM 1/9/2003 -0800, you wrote:

[was: RE: [PEN-L:33695] Re: Re: quesion from Michael Yates]

> Fred B. Moseley wrote:
> >You might want to take a look at my 1992 book *The Falling Rate of Profit
> >in the Postwar US Economy*, and a more recent 1997 RRPE paper "The Rate of
> >Profit and the Future of Capitalism."

Doug writes: 
> So where's the ROP these days?

according to the SURVEY OF CURRENT BUSINESS (http://www.bea.doc.gov/bea/ARTICLES/2002/09September/0902CorpProfit.pdf), what Fred calls the "conventional rate of profit" for the non-financial corporate sector has fallen pretty drastically in recent years. Its cyclical peak was in 1997, suggesting that the 2001 recession was partly -- or maybe completely? -- caused by the fall. I presume that the ROP fell more drastically in 2002 because of falling rates of capacity utilization (and profit realization) as it did in 2001, though the government hasn't calculated that yet.

------------------------
Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine