It's actually not reductivist. Calling Greenspan an idiot and leaving it there is, because it reduces the question of "why did 2007-2008 happen" from the complex structural economic risk that existed and still does in the economy to "one guy was bad at his job."
I'm not even necessarily disagreeing with you fully on the proximate causes of the Recession, but I'm actually advancing it one piece further. You posit a bank run in the shadow banking sector, and all I'm pointing out is that bank runs cannot occur if banks can cover their obligations. Banks could not cover their obligations because they invested in mortgage-backed securities which declined in value, and these securities declined in value because, fundamentally, the assets they represented were overvalued.
The government was supporting policies throughout the period leading up to the recession which increased household consumption at the cost of debt. Mortgages fueled consumption which fueled demand, but the whole house of cards was propped up by the idea that assets would continue to grow in value.
That's why the recovery has been so sluggish - the secular decline in consumption that was being obscured by this debt-based system has been unmasked.
I agree that Greenspan being dumb is a very unhelpful way of looking at it. Ultimately Greenspan being stupid should not cause a bank run if things were structured well, and banks would not have nearly as much a decline in the value of their assets if FDIC insurance were extended, as people would not have nearly as much incentive to withdraw their cash and thus worsen the crisis, and the contagion would be far more contained.
In that case I think you're correct in that the bubble was the cause of a recession occurring, but the lack of security in the banking system is the cause of the Great Recession specifically occurring.
Further, I think that a picture of the recent stagnation should take into account the reduction in investment due to interest on excess reserves.
I agree that Greenspan being dumb is a very unhelpful way of looking at it. Ultimately Greenspan being stupid should not cause a bank run if things were structured well, and banks would not have nearly as much a decline in the value of their assets if FDIC insurance were extended, as people would not have nearly as much incentive to withdraw their cash and thus worsen the crisis, and the contagion would be far more contained.
In that case I think you're correct in that the bubble was the cause of a recession occurring, but the lack of security in the banking system is the cause of the Great Recession specifically occurring.
Further, I think that a picture of the recent stagnation should take into account the reduction in investment due to interest on excess reserves.
I think this brings us back to the parts of MMT that I agree with - that the central bank is limited in its ability to respond to crises.
There are a bunch of pressures on central banks that influenced the decisions made by Greenspan - a need to keep growth high on the one hand and probably, as the crisis began to develop, an attempt to send good money after bad in order to head it off.
The contagion was baked into some of the financial instruments, specifically CDOs, and how they functioned and how they were used. Contagion is, to some degree, inevitable at that level of the economy, where it's all just money and a small group of real people with similar interests and similar experiences are acting in close concert with one another.
We're thus discussing completely different things. The declining rate of profit simply describes a secular tendency for the average rates of the gross profits of all firms to decline over time. I brought this up because this has implications for monetary policy, which is the subject of the thread, to whit that in the long run no investments are profitable and that money created endogenously by private banks is, to a larger and larger extent, fictitious.
I haven't heard this before. I was under the impression that shadow banking existed mostly because the FDIC has low (relative to the needs of a large business) limits on coverage. Is there a good summary somewhere?
Shadow bank deposits are investments, not deposits, even though most people thought they were deposits. When you put money in a money market account you're actually buying repos(basically a pawn shop with treasury bonds as collateral) and commercial paper(very short term corporate loans). Generally speaking, both have been extremely safe and people acted as if those investments were as good as traditional deposits.
MMT cannot be separated from what its proponents advocate, which is deficit spending via money printing.
MMT is fundamental statement is that a sovereign nation's own currency can be printed at-will, and inflation would really only happen if the actual resources aren't available. How it approaches 'taxes' is closer to video-game money-sinks than traditional economic thinking.
Eve Online and other MMORPG can actually be good examples of MMT in practice.
MMOs behave much more like a commodity currency economy than MMT. There is no "government" to directly control the money press. Instead it's millions of individual actors literally minting their own money by killing monsters.
Even if MMOs were representative of MMT in action, it would be a negative reflection seeing as how every MMO undergoes rampant inflation due to uncontrollable money printing with the government (devs) usually being too scared of their own voting base(player) to take drastic steps to control inflation.
Except what you posted isn't actually gross corporate profitability, but a rather irrelevant metric of return on capital stock. Lest you forget, labor is the biggest cost for nearly all corporations.
Moreover, even your own marxist source admits that the rate of return has essentially flatlined since the early 80s despite the meteoric rise in the value of land and the rise of the banking sector, directly contradicting your and your source's narrative that corporate profitability is declining.
Other developed countries essentially mirror the US, some have even increased their rate of return on capital.
A somewhat different but related metric of capital's profit share of the overall economy. I can't be assed to show it on my phone but flatlining non-housing profit/flatlining capital formation = essentially no change in return on capital for the past several decades. Piketty's predictions are completely wrong as per usual.
Housing is a separate issue since it's mostly a measure of rent. Rents across all developed nations have risen due to factors unrelated to this topic.
So I ask you again, what declining rate of profit?
Edit: I will also add that if your goal is more income for the workers, you should want the rate of return on capital to decline since that means more "investment"(pay) for labor. The post WW2 decline in rate of return on capital was a great period of income growth for the workers.
With capital's income share having flatlined, changes in income distribution within labor has caused basically all the inequality over the past four decades. It's not the shareholders gaining at the expense of labor, but rather the highest paid labor(executives and doctors) gaining at the expense of the rest. Marxists always focus on capital vs labor because they're still trying to view the world through the lense of a discredited 19th century philosopher.
Except what you posted isn't actually gross corporate profitability, but a rather irrelevant metric of return on capital stock. Lest you forget, labor is the biggest cost for nearly all corporations.
Moreover, even your own marxist source admits that the rate of return has essentially flatlined since the early 80s despite the meteoric rise in the value of land and the rise of the banking sector, directly contradicting your and your source's narrative that corporate profitability is declining.
Other developed countries essentially mirror the US, some have even increased their rate of return on capital.
A somewhat different but related metric of capital's profit share of the overall economy. I can't be assed to show it on my phone but flatlining non-housing profit/flatlining capital formation = essentially no change in return on capital for the past several decades.
Housing is a separate issue since it's mostly a measure of rent. Rents across all developed nations have risen due to factors unrelated to this topic.
So I ask you again, what declining rate of profit?
These three graphs are essentially irrelevant to the point. The first one is too small of a time scale, the second one is only Greece, and the last one is totally unconnected to the point except that it does show that capital is displacing labor, supporting my argument.
Obviously, you're not going to see the decline in the rate of profit if you consider the concept of the rate of profit itself to be "irrelevant". Furthermore, it is not a return on capital stock but, as Roberts puts it,
It is a general rate of profit derived from the total surplus value produced in an economy as a ratio to the total costs of capitalist production. All that surplus is produced by the labour power of workers employed in the 'productive' capitalist sectors of production. But some of that value is also transferred to unproductive sectors in the form of wages and profits and to non‐capitalist sectors in the form of wages and taxes.
To translate that out of Marxism, it's the total value produced in the economy divided by the costs of production. As the costs of production rise thanks to things like automation and more effective production methods, the value of the things produced declines because there's more of them in existence. Simple supply and demand.
Ultimately what the Roberts graph is is no more complicated than a balance sheet for the whole economy and no less important.
To translate that out of Marxism, it's the total value produced in the economy divided by the costs of production. As the costs of production rise thanks to things like automation and more effective production methods, the value of the things produced declines because there's more of them in existence. Simple supply and demand.
Even granting the foundation for those views for sake of argument, this very carefully elides even the simplest of feedback mechanisms, specifically the application of the conclusion -- things get cheaper -- to the premise -- it becomes more expensive to manufacture things.
Even granting the foundation for those views for sake of argument, this very carefully elides even the simplest of feedback mechanisms, specifically the application of the conclusion -- things get cheaper -- to the premise -- it becomes more expensive to manufacture things.
Temporally, that feedback mechanism doesn't work. For more efficient production, you have to buy new tools, when they're expensive, and continually buy newer and newer tools as those become obsolete. You never have a chance to slow down or stop, leading to longer and longer turnarounds on investment, until there basically are no turnarounds and you have to resort to selling houses on the down low to make ends meet.
Temporally, that feedback mechanism doesn't work. For more efficient production, you have to buy new tools, when they're expensive, and continually buy newer and newer tools as those become obsolete. You never have a chance to slow down or stop, leading to longer and longer turnarounds on investment, until there basically are no turnarounds and you have to resort to selling houses on the down low to make ends meet.
That argument elides further feedback mechanisms and is also incorrect on its face because I promise you the idea that corporations are religiously devoted to keeping up to date with bleeding edge, top-flight equipment is laughable. As in, I literally laughed. Only an academic would make that remark.
These three graphs are essentially irrelevant to the point. The first one is too small of a time scale, the second one is only Greece, and the last one is totally unconnected to the point except that it does show that capital is displacing labor, supporting my argument.
1. It's a graph of three of the largest western economies over the past 20 years. That is not 'too short of a timespan' and it corroborates your own graph which shows flatlining rate of return on capital since the 80s.
2. So Greece doesn't exist within Marxist theory? Is it a nation filled with lizard people whose economy operate on a different paradigm from the rest of the planet?
3. Did you actually read what I wrote?
Obviously, you're not going to see the decline in the rate of profit if you consider the concept of the rate of profit itself to be "irrelevant".
I'm not going to see the decline in the rate of profit because there has been no such decline since the 80s, even your own source admits this.
Furthermore, it is not a return on capital stock but, as Roberts puts it,
It is a general rate of profit derived from the total surplus value produced in an economy as a ratio to the total costs of capitalist production. All that surplus is produced by the labour power of workers employed in the 'productive' capitalist sectors of production. But some of that value is also transferred to unproductive sectors in the form of wages and profits and to non‐capitalist sectors in the form of wages and taxes.
To translate that out of Marxism, it's the total value produced in the economy divided by the costs of production. As the costs of production rise thanks to things like automation and more effective production methods, the value of the things produced declines because there's more of them in existence. Simple supply and demand.
Ultimately what the Roberts graph is is no more complicated than a balance sheet for the whole economy and no less important.
This is just completely and utterly wrong, you do not seem to understand your own Marxist theory. Your chart/source uses corporate(capital) profit as the numerator and net capital formation as the denominator. It in no way measures "total value produced in the economy" nor does it measure "the cost of production". The total value produced in the economy is the GDP, not the capital/corporate income share. By your logic a company that makes no net profit produces no value, which is complete and utter nonsense. Moreover, "the cost of production" is comprised of labor, capital, and land(often folded into capital), not just capital.
So no, what your chart measure is not "the total value produced in the economy divided by the costs of production", it is merely the rate of return on capital. But this is irrelevant to the fact that even your own source admits that this measure of profitability has flatlined since the 80s, contradicting Marx's narrative that capital's profit share must always decline.
That argument elides further feedback mechanisms and is also incorrect on its face because I promise you the idea that corporations are religiously devoted to keeping up to date with bleeding edge, top-flight equipment is laughable. As in, I literally laughed. Only an academic would make that remark.
Temporally, that feedback mechanism doesn't work. For more efficient production, you have to buy new tools, when they're expensive, and continually buy newer and newer tools as those become obsolete. You never have a chance to slow down or stop, leading to longer and longer turnarounds on investment, until there basically are no turnarounds and you have to resort to selling houses on the down low to make ends meet.
One of the fastest growing sectors in the current economy is the IT sector. What are the "expensive new tools" for a software company? Their office furniture and a new computer every couple of years? Let me give you an example, the total value of all "tools" for Electronic Arts, consisting of their land, office buildings, and all equipment, is valued at only $500 million dollars. On this they made a net profit of $2.5 billion. The value of a company like EA or Respawn(a game studio they recently paid $455 million to acquire), is almost purely in its intellectual capital, something Marx did not even acknowledge as real.
As the world economy continues to move away from 19th century modes of production, Marx becomes more and more irrelevant and wrong.
That argument elides further feedback mechanisms and is also incorrect on its face because I promise you the idea that corporations are religiously devoted to keeping up to date with bleeding edge, top-flight equipment is laughable. As in, I literally laughed. Only an academic would make that remark.
Indeed, what you see from sectors with falling return on capital investment is falling rates of investment and older equipment being kept in use for decades on end. This is particularly apparent in manufacturing where profit margins are thin and you end up with the largest nail manufacturer in North America using equipment like this:
That argument elides further feedback mechanisms and is also incorrect on its face because I promise you the idea that corporations are religiously devoted to keeping up to date with bleeding edge, top-flight equipment is laughable. As in, I literally laughed. Only an academic would make that remark.
1. It's a graph of three of the largest western economies over the past 20 years. That is not 'too short of a timespan' and it corroborates your own graph which shows flatlining rate of return on capital since the 80s.
2. So Greece doesn't exist within Marxist theory? Is it a nation filled with lizard people whose economy operate on a different paradigm from the rest of the planet?
3. Did you actually read what I wrote?
I'm not going to see the decline in the rate of profit because there has been no such decline since the 80s, even your own source admits this.
This is just completely and utterly wrong, you do not seem to understand your own Marxist theory. Your chart/source uses corporate(capital) profit as the numerator and net capital formation as the denominator. It in no way measures "total value produced in the economy" nor does it measure "the cost of production". The total value produced in the economy is the GDP, not the capital/corporate income share. By your logic a company that makes no net profit produces no value, which is complete and utter nonsense. Moreover, "the cost of production" is comprised of labor, capital, and land(often folded into capital), not just capital.
So no, what your chart measure is not "the total value produced in the economy divided by the costs of production", it is merely the rate of return on capital. But this is irrelevant to the fact that even your own source admits that this measure of profitability has flatlined since the 80s, contradicting Marx's narrative that capital's profit share must always decline.
1. If it is supposed to refute a general trend that has existed since the 1940s, yes, twenty years is too short of a time frame.
2. Greece is not, how can I say this, Greece is not a major economic force.
3. Whether or not it's separately caused, the effect remains.
Robert's writes,
This shows that the overall US rate of profit has four phases: the post-war golden age of high profitability peaking in 1965; then the profitability crisis of the 1970s, troughing in the slump of 1980-2; then the neoliberal period of recovery or at least stabilisation in profitability, peaking more or less in 1997; then the current period of volatility and slight decline.
Emphasis mine.
I'm not sure which source you're referring to. Regardless, he chart is the corporate sector rate of profit over time, that is to say, a section of the economy-wide rate of profit. Only a section appears because, A) The US has rather good record keeping making it easier to study, and B) the US makes ups a significant portion of the global economy. The rate of profit is as I quoted.
You clearly didn't even bother to read the source.
To return to the question of - "does the post-1980s stagnation disprove the declining rate of profit", let's go back to Roberts' actual claim, which is that,
"So between 1948 and 2015, the US rate of profit declined between 25-33% depending on whether you measure fixed assets in historic (HC) and current costs (CC). Between 1965 and 1982, the rate fell 21-36%; but from 1982 to 1997 it rose 10-30%; but since 1997 it is down 3% and 4-7% from 2006."
So between 2015 and 1948, there has been a significant fall in the rate of profit. Within the period 1948-2015, there are places where there is a momentary rise in the rate of profit, but on the whole, there is a decline.
I'm exaggerating it for the purposes of making my point blunter, not because what you actually wrote is any harder to demolish (or, in fact, much different).
Organizations trend conservative with replacing plant and processes and generally require good incentives to do so. Further, when they do, they do not necessarily commit to the most 'productive' solution (new or otherwise), but have many good and sufficient reasons to look for a good enough one, which often provides far more value to them than trying to maximize output ever would. It isn't even a question of a Red Queen's Race, because if someone else does commit to a proposition that reduces their profitability you aren't obliged to follow -- their blunder has put you in a better competitive position!
Incidentally, have you ever read Superiority? It's a very good text on the subject.
@Bhangbhangduc just so I get your point clear and so I don't waste my time rebutting a point you're not making, is your argument that the rate of profit is falling a reference to how much profit is extracted out of capital alone or a reference to profit as a percentage of revenue?
I'm exaggerating it for the purposes of making my point blunter, not because what you actually wrote is any harder to demolish (or, in fact, much different).
Organizations trend conservative with replacing plant and processes and generally require good incentives to do so. Further, when they do, they do not necessarily commit to the most 'productive' solution (new or otherwise), but have many good and sufficient reasons to look for a good enough one, which often provides far more value to them than trying to maximize output ever would. It isn't even a question of a Red Queen's Race, because if someone else does commit to a proposition that reduces their profitability you aren't obliged to follow -- their blunder has put you in a better competitive position!
Incidentally, have you ever read Superiority? It's a very good text on the subject.
@Bhangbhangduc just so I get your point clear and so I don't waste my time rebutting a point you're not making, is your argument that the rate of profit is falling a reference to how much profit is extracted out of capital alone or a reference to profit as a percentage of revenue?
We should probably take this to a new thread, since we're getting away from the causes of the 2007-2008 crisis, but the Marxist argument has to do with neither of those things, but rather with a tendency for there to be more capital in the production process relative to labor over time. Since labor produces all new value, this means that over time, for the same total amount of capital invested in workers (via wages) and machines, less and less value is produced.
'The falling rate of profit is because the cost of the equipment to produce things climbs but what you can get for those things declines'
'Doesn't that mean that the cost of what's needed to produce things should also decline?'
'No, because only the old stuff gets cheaper, the new stuff stays expensive'
'That argument is silly because producers don't actually want to buy the newest stuff'
'you just don't understand marxism'
I am talking about the specific things you have raised. If they're not actually what you're trying to talk about I suggest I don't need to learn more about Marxism, you need to learn more about communicating.
1. If it is supposed to refute a general trend that has existed since the 1940s, yes, twenty years is too short of a time frame.
2. Greece is not, how can I say this, Greece is not a major economic force.
3. Whether or not it's separately caused, the effect remains.
1. Except the trend has not existed since the 1940s. It existed between 1948 and 1982, a 34 year time span. This is now the year of our lord 2018, it's been 35 years since the early 80s and the rate of return on capital has been stagnant for basically this entire timespan.
2. What does this have to do with Marxist theory failing? Where in Das Kapital does Marx say "my theories only apply to the United States, not smaller countries such as Greece"?
3. The effect does not remain at all, as evidenced by stagnant rate of return since the 80s.
Are you actually going to respond to my arguments or are you going to spew rhetoric at me and continuously quote crap someone else wrote that you do not even appear to understand?
Robert's writes,
This shows that the overall US rate of profit has four phases: the post-war golden age of high profitability peaking in 1965; then the profitability crisis of the 1970s, troughing in the slump of 1980-2; then the neoliberal period of recovery or at least stabilisation in profitability, peaking more or less in 1997; then the current period of volatility and slight decline.
Emphasis mine.
I'm not sure which source you're referring to. Regardless, he chart is the corporate sector rate of profit over time, that is to say, a section of the economy-wide rate of profit. Only a section appears because, A) The US has rather good record keeping making it easier to study, and B) the US makes ups a significant portion of the global economy. The rate of profit is as I quoted.
You clearly didn't even bother to read the source.
I can't tell if you're intentionally strawmanning me or if you're just doing it out of sheer ignorance. Let's recap, this is what you claimed:
you said:
Furthermore, it is not a return on capital stock but, as Roberts puts it,
It is a general rate of profit derived from the total surplus value produced in an economy as a ratio to the total costs of capitalist production. All that surplus is produced by the labour power of workers employed in the 'productive' capitalist sectors of production. But some of that value is also transferred to unproductive sectors in the form of wages and profits and to non‐capitalist sectors in the form of wages and taxes.
To translate that out of Marxism, it's the total value produced in the economy divided by the costs of production. As the costs of production rise thanks to things like automation and more effective production methods, the value of the things produced declines because there's more of them in existence. Simple supply and demand
This emphatically and completely wrong. Your source, both the link you provided and then quoted and your chart, does not in any way show "the total value produced in the economy divided by the costs of production", but merely return on capital, nothing else. You don't seem to understand your own Marxist theory, which is quite hilarious given how much you post about this.
To return to the question of - "does the post-1980s stagnation disprove the declining rate of profit", let's go back to Roberts' actual claim, which is that,
"So between 1948 and 2015, the US rate of profit declined between 25-33% depending on whether you measure fixed assets in historic (HC) and current costs (CC). Between 1965 and 1982, the rate fell 21-36%; but from 1982 to 1997 it rose 10-30%; but since 1997 it is down 3% and 4-7% from 2006."
So between 2015 and 1948, there has been a significant fall in the rate of profit. Within the period 1948-2015, there are places where there is a momentary rise in the rate of profit, but on the whole, there is a decline.
Utterly worthless tripe. Let's take income inequality in America using your logic:
"Between 1929 and 2015, the income share of the top 1% declined slightly from 23.9% to 22%. There are places where there is a momentary rise and fall in income inequality, but on the whole, there is a slight decline."
Yeah if we ignore the trend over the past 35 years and purposely set the start date at the end of the Great Depression there has been "a significant decline in the rate of profit". Just like if we ignore the past 45 years and purposely set the start date in the late 1920s where income inequality was at an all time high there has been "a slight decline in income inequality".
You cannot seriously sit here and claim with a straight face that the stagnating rate of profit since 1982 is a "momentary change" when your own graph only goes back another 34 years past that. We've literally spent more time in your "momentary stagnation" than the previous period during which the rate of profit fell.
1. Except the trend has not existed since the 1940s. It existed between 1941 and 1982, a roughly 40 year timespan. This is now the year of our lord 2018, it's been 35 years since the early 80s and the rate of return on capital has been stagnant for basically this entire timespan.
2. What does this have to do with Marxist theory failing? Where in Das Kapital does Marx say "my theories only apply to the United States, not smaller countries such as Greece"?
3. The effect does not remain at all, as evidenced by stagnant rate of return since the 80s.
Are you actually going to respond to my arguments or are you going to spew rhetoric at me and continuously quote crap someone else wrote that you do not even appear to understand?
I can't tell if you're intentionally strawmanning me or if you're just doing it out of sheer ignorance. Let's recap, this is what you claimed:
This emphatically and completely wrong. Your source, both the link you provided and then quoted and your chart, does not in any way show "the total value produced in the economy divided by the costs of production", but merely return on capital, nothing else. You don't seem to understand your own Marxist theory, which is quite hilarious given how much you post about this.
Utterly worthless tripe. Let's take income inequality in America using your logic:
"Between 1929 and 2015, the income share of the top 1% declined slightly from 23.9% to 22%. There are places where there is a momentary rise and fall in income inequality, but on the whole, there is a slight decline."
Yeah if we ignore the trend over the past 35 years and purposely set the start date at the end of the Great Depression there has been "a significant decline in the rate of profit". Just like if we ignore the past 45 years and purposely set the start date in the late 1920s where income inequality was at an all time high there has been "a slight decline in income inequality".
You cannot seriously sit here and claim with a straight face that the stagnating rate of profit since 1982 is a "momentary change" when your own graph only goes back another 40 years past that.
1. Roberts did not say that profits had been stagnant from the 1980s to today, only from the mid 80s to about the turn of the millennium. That is a fifteen to twenty year period of stagnancy in an 80 year period.
2. Marx was describing the economy as a whole. The US, being larger, is a better representative of the economy as a whole than Greece. How is this complicated?
3. Your graph clearly shows capital income displacing labor income.
Reading back over what I wrote, I realize that I did forget to add the word surplus, and that was a mistake.
Your "counter-example" is utterly ridiculous. That graph shows an overall 1% decline but tracks a U-shape. The graph of declining profit declines by 20-30% with no prolonged periods of significant growth. The date was set in the late 40s because that's when modern econometric data became available.
'The falling rate of profit is because the cost of the equipment to produce things climbs but what you can get for those things declines'
'Doesn't that mean that the cost of what's needed to produce things should also decline?'
'No, because only the old stuff gets cheaper, the new stuff stays expensive'
'That argument is silly because producers don't actually want to buy the newest stuff'
'you just don't understand marxism'
I am talking about the specific things you have raised. If they're not actually what you're trying to talk about I suggest I don't need to learn more about Marxism, you need to learn more about communicating.
Alright, let's walk this back. Production is composed of two parts - labor and capital. Over time, more capital relative to labor is necessary because technology advances more quickly than humans in terms of productive power. The constant introduction of new machines means that capitalists have to invest more in their machinery than in their labor force. Capitalists replace their machinery when it becomes profitable for them to do so, the reason for this profitability being the ability to undercut their competitors for a time (until those competitors improve their machinery as well).
However, better machinery does not in and of itself create more value in total, it just creates more value for those firms that can adopt it, and that only temporarily. By increasing the amount of capital you have relative to labor in the production process, you can improve your short-term gains at the expense of long-term economic sustainability.
1. Roberts did not say that profits had been stagnant from the 1980s to today, only from the mid 80s to about the turn of the millennium. That is a fifteen to twenty year period of stagnancy in an 80 year period.
2. Marx was describing the economy as a whole. The US, being larger, is a better representative of the economy as a whole than Greece. How is this complicated?
3. Your graph clearly shows capital income displacing labor income.
Reading back over what I wrote, I realize that I did forget to add the word surplus, and that was a mistake.
1. Good for him, except it's not true. The rate of profit has been stagnating since 1982, that's 36 years in a 70 year timespan. I literally linked you a graph that shows the rate of profit has been stagnant since the turn of the millennium as well.
2. The US economy, while larger, is not representative of the economy as a whole. You would need to use the entire world's economy for that. Moreover, Marx was not describing the "economy as a whole", but rather individual western countries.
3. ...a whopping 3% increase since 1948. This is clearly stagnation.
Your "counter-example" is utterly ridiculous. That graph shows an overall 1% decline but tracks a U-shape. The graph of declining profit declines by 20-30% with no prolonged periods of significant growth. The date was set in the late 40s because that's when modern econometric data became available.
That was literally my whole freaking point. I'm using your argument where you ignored everything that's happened over the past 35 years and only looked at the rate of profit in 1948 and the rate of profit today. No matter how much you try to deny it, the rate of return on capital has been stagnant since 1982.
The US is also not the only country in the world, here's Germany, the largest economy in Europe:
The basis of the falling rate of profit is the idea that capital cannot produce more value than was involved in its creation, which is... rather questionable.
1. Good for him, except it's not true. The rate of profit has been stagnating since 1982, that's 36 years in a 70 year timespan. I literally linked you a graph that shows the rate of profit has been stagnant since the turn of the millennium as well.
2. The US economy, while larger, is not representative of the economy as a whole. You would need to use the entire world's economy for that. Moreover, Marx was not describing the "economy as a whole", but rather individual western countries.
3. ...a whopping 3% increase since 1948. This is clearly stagnation.
That was literally my whole freaking point. I'm using your argument where you ignored everything that's happened over the past 35 years and only looked at the rate of profit in 1948 and the rate of profit today. No matter how much you try to deny it, the rate of return on capital has been stagnant since 1982.
The US is also not the only country in the world, here's Germany, the largest economy in Europe:
There's not a huge disagreement between us on the data. We both basically agree that the economy has been at best stagnant since the mid 80s, obviously declining in 07-08. However, there has been a major decline since 1948. This leads me to contextualize the stagnation within the overall decline and predict future crises and probably continued decline in the future. I'm just not sure what's so crazy about this reading of the data? Do you really think that that we're headed for a turnaround and that profit rates will soon (or ever) grow by 20 or 30 percent? Do you think that's even remotely possible, looking at the modern economy?
There's not a huge disagreement between us on the data. We both basically agree that the economy has been at best stagnant since the mid 80s, obviously declining in 07-08. However, there has been a major decline since 1948. This leads me to contextualize the stagnation within the overall decline and predict future crises and probably continued decline in the future. I'm just not sure what's so crazy about this reading of the data? Do you really think that that we're headed for a turnaround and that profit rates will soon (or ever) grow by 20 or 30 percent? Do you think that's even remotely possible, looking at the modern economy?
Actually in his book the Long Depression Roberts made the argument that the rate of profit rose from the 80s until it peaked in '97 then went into decline which is one of the main components for the recession a decade later. Over a long enough time period the rate of profit declines but there are cycles of rise and fall as countervailing trends temporary buoy profits.
There's not a huge disagreement between us on the data. We both basically agree that the economy has been at best stagnant since the mid 80s, obviously declining in 07-08.
??? The economy has not been stagnant since the 80s dude.
However, there has been a major decline since 1948. This leads me to contextualize the stagnation within the overall decline and predict future crises and probably continued decline in the future. I'm just not sure what's so crazy about this reading of the data? Do you really think that that we're headed for a turnaround and that profit rates will soon (or ever) grow by 20 or 30 percent? Do you think that's even remotely possible, looking at the modern economy?
It's wrong and misleading because you're starting from a high point for profit during the post WWII boom. If you extended the data back another 2 decades, then your data would have showed a huge trough during the Great Depression. The post WWII boom was the exception, not the rule.
No I don't think the rate of return on capital will grow like it did after the Great Depression, but I also think it will not fall significantly like you claimed. It has basically held steady for 35 years and show no sign of changing.
