Re: Estimating the surplus\Doug's question

["Fred B. Moseley" <fmoseley@xxxxxxxxxxxxx>]

I have been trying to find the time to join this interesting discussion on
the rate of profit in the US economy.  My classes finally ended
yesterday.  A few comments:


1.  I think we can all agree on the "big focus of profit rates", as Paul
put it - that the rate of profit is the most important variable in
analyzing capitalism.  And I agree with Paul that this emphasis on profit
and the rate of profit is what distinguishes classical-Marxian theories
from neo-classical theories.

2.  And I think we are talking about the same rate of profit and the same
share of profit - as measured by the NIPAs.  I (and most others) include
interest so "profit" means total income to capital.

3.  This conventional rate of profit declined about 50% in the early
postwar period, and has regained only about half of that decline since the
1970s.  The profit share declined less (about 30%), but has hardly
increased at all in recent decades.

4.  Where we mainly disagree (as Paul has pointed out) is about the CAUSES
of these important trends - the causes of the decline, and the causes of
the incomplete recovery.

5.  The most popular "radical-Marxian" explanation of these profit rate
trends has been the "reserve army profit squeeze" theory - that low
unemployment rates in the late 1960s and early 1970s increased workers
power, and enable them to gain substantial wage increases and to squeeze
profits.  This theory then explains the increase in the rate of profit on
the higher rates of unemployment and the loss of workers' power in recent
decades.  This seems to be Doug's explanation of these trends.

However, this profit squeeze theory does not provide a very good
explanation of the only-partial recovery of the rate of profit, and
especially the share of profit, in recent decades.  One would think that,
if greater worker power leading to wage increases in the 1960s and 70s
caused the profit share to decline, then surely the last three decades of
wage-cuts, speed-up on the job, and the general attack on workers and
unions should have fully restored the profit share by now.  The average
real wage in the US economy has not increased since the early 1970s and
has even declined some.  Meanwhile productivity has continued to
increase.  And yet the profit share has hardly increased at all.  This
seems hard to explain by the "wage push profit squeeze" theory

6.  I have suggested another explanation of these important trends, one
based on Marx's distinction between productive labor and unproductive
labor - that an important cause of the declines in the share and the rate
of profit was a very significant increase in the ratio of unproductive
labor to productive labor.  I am not sure that this is the correct
explanation of these trends, but I think it may be, and I think that it
worthwhile to at least consider what Marx's theory implies about the
causes of these trends and the likely prospects for the future.

And one important advantage that this theory has over the profit squeeze
explanation is that it provides a consistent explanation of why the share
and rate of profit have only partially recovered in recent decades, in
spite of the loss of workers' power and stagnant real wages - because the
ratio of unproductive to productive labor has continued to increase.

This theory also provides an important prediction about the future - that
if the ratio of unproductive to productive labor continues to increase (as
I expect), then the recovery of the share and rate of profit will continue
to be slow and partial, thus leading to more wage cuts, speed-up,
etc.  According to this theory, the US economy is definitely NOT at the
beginning of another "long-wave" period of growth and prosperity, similar
to the early postwar period (with steady real wage increases).  The only
partial recovery of the share and rate of profit makes such a return to
more prosperous conditions very unlikely.

This theory may be wrong, but it seems to me that it should at least be
considered, and its economic and political implications pondered.


I look forward to further discussion, as time permits.

Comradely,
Fred