Re: 14,000 reasons to be skeptical
On Jul 21, 2007, at 11:57 AM, Rakesh Bhandari wrote:
Doug, this is how I would respond:
Profitability has been quite high in the U.S. for the last few years, but investment has been low.
But that’s Grossman’s point. Profits are still made (and quite a lot through centralization of capital as I have already emphasized), but additional investment is pointless. As Rick Kuhn, quoting Grossman, puts it: ‘instead of accumulating the surplus valueĊ - that is, incorporating it into the original capital - they will earmark it for capital export.’ In this ’state of capital saturation’, ‘[w]ith no chance in production, capital is either exported or switched to speculation’, which can itself be understood as ‘inner capital export’. http://mercury.soas.ac.uk/hm/pdf/2006confpapers/papers/Kuhn.pdf
As you might have guessed, I have several problems with this argument.
“Speculation” is thrown around but never examined very carefully. A
pension fund buying the S&P 500, a hedge fund moving out of Czech
bonds and into German stocks, a dentist trading oil futures, and
Steve Schwarzman buying up entire companies all apparently fall under
this rubric. But they’re all different - economically distinct
activities carried on by different groups of people. Is an oil
company that hedges with oil futures speculating? Or is it just the
dentist?The pressure not to invest but to ship surplus cash out to
stockholders isn’t the spontaneous desire of corporate managers -
it’s been shaped by the increased shareholder assertiveness of the
last 25 years. If a firm invests too much for Wall Street’s liking,
its stock price will sag, and attract takeover targets. In other
words, industry does not “dominate the banks.”Kuhn via Grossman attacks Lenin’s metaphoric use of “overripeness”
without adding any detail of his own. (Maybe Grossman offered it; I
blush to admit I haven’t read Grossman.) Why, if profitability is so
high at the average, aggregate level, are we to assume that marginal
returns on new investment are prohibitively low?Few economies are capital exporters in any simple sense; for almost
all, the traffic goes both ways - they both import and export capital.Why is the U.S. a net capital importer on such a huge scale? Isn’t
ours the ripest capitalist economy of all? Why are we importing
capital from China, the new kid on the block?The U.S. may be attempting to monopolize oil supplies, but China is
busily securing its own resources in Africa as we speak. And why is
China, apparently in the early stages of capitalist development,
already exporting capital?What, if any, are the theoretical distinctions between capital
import/export via government bonds, private securities, and direct
investment?How can anyone type a phrase like “capitalism’s inherent breakdown
tendency” without embarrassment?
Doug