Re:

["s.artesian" <sartesian@xxxxxxxxxxxxx>]

No, it was in response to Charles Brown who, I think
holds to an underconsumption theory to explain declining
rates of profit.

-----Original Message-----
>From: Jim Devine <jdevine03@xxxxxxxxx>
>Sent: Jun 6, 2007 5:48 PM
>To: PEN-L@xxxxxxxxxxxxxxxx
>Subject: Re: [PEN-L] "crisis theory" [was: What is Marx's view of fiscal policy?]
>
>On 6/6/07, s.artesian <sartesian@xxxxxxxxxxxxx> wrote:
>> Perhaps this might become more clear if you could explain
>> the "secular trend" and "underconsumption" in relation to
>> the US economy in recent history, let's say 1994-2000, the
>> recession in 2001, and the recovery to 2006.
>
>I don't know if this is aimed at me or not, but I'll assume that it
>is, just because I'm feeling electronically loquacious today.
>
>[for a longer, historical, presentation of my theory, see
>http://myweb.lmu.edu/jdevine/JD-1994-Depression.pdf, which aims to
>understand the Great Collapse of 1929-33.]
>
>> At least to me, none of that has anything to do
>> with the workers' ability to purchase commodites.
>
>First of all, I reject classical underconsumptionism (as defined by
>Michael Bleaney's book a few years ago). The underconsumptionists
>posited that consumer demand (C) was the main, if not the only, factor
>determining aggregate demand (AD). I think that Marx and Keynes had it
>right, that there are more factors determining AD than simply C.
>
>Even the underconsumptionists were willing to accept the role of the
>extension of credit as a force that (temporarily) breaks their posited
>link between C and AD. That is, working people can consume more than
>seems justified by their incomes by borrowing a lot (as during the
>period since 1994 or so). There can even be overconsumption! Of
>course, eventually debt service (interest + principal repayments)
>weigh heavily on spending, ending this role of credit in delaying any
>crisis caused by low C.
>
>And as Keynes suggested, AD is also directly determined by government
>borrowing, private fixed investment spending (Marx's capital
>accumulation), and net exports. The extension of credit can be behind
>any of these.  I'd agree with Marx that in the longer tun, it's
>accumulation that rules AD.
>
>Because of this, I reject the second main underconsumption view -- as
>defined by Bleaney and seen very clearly in the work of Baran and
>Sweezy -- that capitalism normally gravitates toward stagnation,
>depression.
>
>However, during a period such as the neoliberal era since 1980 or so,
>the US has seen what I call an "underconsumption undertow," due to the
>widening income gap between capitalists and workers. Unlike for
>underconsumptionists, I do not see this as the normal state of
>capitalism, but instead the result of one specific era of capitalism,
>the results of what might be called the neoliberal policy revolution
>or the one-sided class war. In other eras, like the 1960s, there was
>no underconsumption undertow.
>
>The undertow means that though it's quite possible for the economy to
>boom (as in the late 1990s and to a lesser extent since 2002),
>consumer credit expansion and other kinds of aggregate demand must
>substitute for the direct effects of consumption. With a widening
>income gap between classes, as we've seen in the last couple of
>decades, there has to be more and more substitutes for the direct
>effect of consumer demand.
>
>Now get to specifics. In the period of 1994-2000, the boom was not
>built on government borrowing, since the Clintonoids did more than
>balance the budget. Instead it was based on investment -- driven first
>by rising profit rates and then (after 1997) by hope, credit, and some
>bubbles (fiber optic cable, Silicon Valley, dot-coms, etc.)
>Consumption also rose, driven by credit. The credit largely came from
>abroad: net exports were negative, corresponding to an inflow of
>capital funds. To a smaller extent, it came from the government's
>surplus of funds.
>
>In 2001, the results of over-investment hit (as the big profits in
>fiber optics, etc. turned out to be largely illusory), causing a
>sudden dive of fixed investment. This would have caused a major
>recession (not only for labor but for capital) but this was
>counteracted by the Fed, which started the major phase of the housing
>bubble.
>
>This gave way to the recent boom, which was driven by government
>deficits (the wars, tax cuts for the rich, etc.), investment (rising
>profits), and consumer demand (home equity loans, etc.) Consumer
>demand seems based on the housing bubble -- and on a startling
>increase in luxury spending out of surplus-value.
>
>I cannot predict the future, but except for the government deficit, it
>seems to me that this is a "bubble economy," based on extremely flaky
>spending (investment, luxury spending, credit-based consumption). It's
>also based on a massive inflow of foreign capital funds, which seems
>unsustainable. This suggests that if the economy goes into a
>recession, it will be a steep fall. Of course, as the hegemonic
>imperialist power, the US may be able to foist off the costs on the
>rest of the world...
>--
>Jim Devine /  "Segui il tuo corso, e lascia dir le genti." (Go your
>own way and let people talk.) -- Karl, paraphrasing Dante.