The Failure of Capitalist Production

Andrew Kliman

Description

The recent financial crisis and Great Recession have been analysed endlessly in the mainstream and academia, but this is the first book to conclude, on the basis of in-depth analyses of official US data, that Marx's crisis theory can explain these events.



Marx believed that the rate of profit has a tendency to fall, leading to economic crises and recessions. Many economists, Marxists among them, have dismissed this theory out of hand, but Andrew Kliman's careful data analysis shows that the rate of profit did indeed decline after the post-World War II boom and that free-market policies failed to reverse the decline. The fall in profitability led to sluggish investment and economic growth, mounting debt problems, desperate attempts of governments to fight these problems by piling up even more debt - and ultimately to the Great Recession.



Kliman's conclusion is simple but shocking: short of socialist transformation, the only way to escape the 'new normal' of a stagnant, crisis-prone economy is to restore profitability through full-scale destruction of existing wealth, something not seen since the Depression of the 1930s.
Acknowledgements

List of Abbreviations

List of Tables

List of Figures

1. Introduction

2. Profitability, the Credit System, and the “Destruction of Capital”

3. Double, Double, Toil and Trouble: Dot-com boom and home-price bubble

4. The 1970s––Not the 1980s––as Turning Point

5. Falling Rates of Profit and Accumulation

6. The Current-cost “Rate of Profit”

7. Why the Rate of Profit Fell

8. The Underconsumptionist Alternative

9. What Is to Be Undone?

Bibliography

Index

Sujets

• Political Science
• LIBOR
• Great Depression
• Freddie Mac
• London Interbank Offered Rate
• OPEC
• General officer
• Political economy
• International Monetary Fund
• Federal Home Loan Mortgage Corporation
• General
• IMF
• Standard & Poor's
• FED
• Organisation des pays exportateurs de pétrole

Informations

• Publié par: Pluto Press
• Date de parution: 07 novembre 2011
• Nombre de lectures: 0
• EAN13: 9781849646208
• Langue: English
• Poids de l'ouvrage: 2 Mo

Extrait

The Failure of Capitalist Production

First published 2012 by Pluto Press 345 Archway Road, London N6 5AA
www.plutobooks.com
Distributed in the United States of America exclusively by Palgrave Macmillan, a division of St. Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010
Copyright © Andrew Kliman 2012
The right of Andrew Kliman to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988.
British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library
ISBN 978 0 7453 3240 6 Hardback ISBN 978 0 7453 3239 0 Paperback Kindle ISBN 978 1 8496 4619 2 eISBN 978 1 8496 4620 8
Library of Congress Cataloging in Publication Data applied for
This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental standards of the country of origin.
10 9 8 7 6 5 4 3 2 1
Designed and produced for Pluto Press by Chase Publishing Services Ltd Typeset from disk by Stanford DTP Services, Northampton, England Simultaneously printed digitally by CPI Antony Rowe, Chippenham, UK and Edwards Bros in the United States of America
In memory of Ted Kliman (1929–2009) and Chris Harman (1942–2009)
For Jesse
For Anne
Contents

List of Tables
List of Figures
List of Abbreviations
Acknowledgments


1 Introduction
2 Profitability, the Credit System, and the "Destruction of Capital"
3 Double, Double, Toil and Trouble: Dot-com Boom and Home-price Bubble
4 The 1970s Not the 1980s as Turning Point
5 Falling Rates of Profit and Accumulation
6 The Current-cost "Rate of Profit"
7 Why the Rate of Profit Fell
8 The Underconsumptionist Alternative
9 What is to be Undone?

Notes
Bibliography
Index
List of Tables



2.1 Non-Linear Effect of Falling Profitability on Business Failures
4.1 Growth Rates of Real GDP Per Capita
4.2 Sovereign Debt Defaults and Restructurings, 1946–2005
4.3 Debt and GDP, U.S.
5.1 Rates of Profit, U.S. Corporations, Selected Trough Years
6.1 Rates of Profit and Equity-market Rates of Return
7.1 Rapid Depreciation of Computer Equipment
8.1 Real Income Growth, U.S., 1979–2007
8.2 The Final Part of Output and Economic Growth
8.3 Initial Situation
8.4 First Ten Periods
8.5 Worldwide Growth of Real GDP since 1600
8.6 Investment and Growth, 1965–92 Averages
9.1 Pay, Exports, and Economic Growth in the U.S. and China
List of Figures



2.1 Distributions of Rates of Profit
3.1 Mortgage Borrowing and Real Home Prices, U.S.
3.2 Relative Increases in Liabilities and Assets, U.S. Households
3.3 Net Lending or Borrowing by U.S. Households
3.4 TED Spread, August 2008–January 2009
3.5 S&P 500 Index
3.6 Nonfarm Payroll Employment, U.S.
3.7 Nominal and Real Federal Funds Rates
3.8 Federal Funds Rate and Home Mortgage Borrowing
3.9 Excess Savings as Percentage of World GDP
4.1 Growth of World GDP Per Capita
4.2 Impact of China on Growth of GDP Per Capita
4.3 Gap between Actual and Potential Real GDP, U.S.
4.4 Growth Rate of Industrial Production, U.S.
4.5 Growth of Industrial Capacity, U.S.
4.6 Outstanding Debt as Percentage of GDP, U.S.
4.7 Change in Debt, All U.S. Domestic Nonfinancial Sectors
4.8 Changes in Debt of U.S. Treasury and Households
4.9 Individual and Corporate Income Taxes, U.S.
4.10 U.S. Treasury Debt as Percentage of GDP, Actual vs. Hypothetical
4.11 Gap between Actual and Potential Labor Force, U.S.
4.12 Average Duration of Unemployment, U.S.
4.13 Real Hourly Compensation of U.S. Employees
4.14 Changes in Income Inequality among U.S. Households
4.15 Growth of Government Structures, U.S.
5.1 Rates of Profit, U.S. Corporations
5.2 U.S. Multinationals’ Rate of Profit on Foreign Direct Investment
5.3 Effect of Inventories on Before-Tax Rate of Profit
5.4 Inflation-Adjusted Property-Income Rates of Profit
5.5 Inflation-Adjusted Before-Tax Profit Rates
5.6 Adjusted and Unadjusted Rates of Profit
5.7 Effect of Alternative Adjustments on Rates of Profit
5.8 The Rate of Profit and the Rate of Accumulation
5.9 Net Investment as Percentage of Profit, U.S. Corporations
5.10 Net Investment as Percentage of After-Tax Profit, U.S. Corporations
6.1 Cherry Picking Troughs and Peaks
6.2 Current-Cost "Rates of Profit," U.S. Corporations
6.3 Property-Income Rates of Profit
6.4 Relationship between Current-Cost and Historical-Cost Rates of Profit
6.5 Current-Cost and "Real" Rates of Profit, U.S. Corporations
6.6 Current-Cost, "Real," and Inflation-Adjusted Rates of Profit, U.S. Corporations
7.1 Net Value Added and Compensation of Employees, U.S. Corporations
7.2 Profit Share of U.S. Corporations’ Net Value Added
7.3 Actual and Constant-Profit-Share Rates of Profit
7.4 Standard Decomposition of the Rate of Profit
7.5 Compositions of Capital, U.S. Corporations
7.6 Gap Between Nominal and MELT-Adjusted Rates of Profit
7.7 Alternative Decomposition of the Nominal Rate of Profit
7.8 Rate of Depreciation, U.S. Corporations
7.9 Rate of Non-IPE&S Depreciation, U.S. Business Sector
7.10 Losses Due to Additional Moral Depreciation, U.S. Corporations
7.11 Variables Adjusted for Excess Depreciation
7.12 Adjusted and BEA-Based Rates of Profit
8.1 Workers’ Share of U.S. National Income, 1960–2009
8.2 Real Hourly Compensation, Private-Industry Workers in U.S.
8.3 Real Hourly Wages and Salaries, Private-Industry Workers in U.S.
8.4 Shares of Income
8.5 Growth of Investment, Consumption, and GDP in U.S., 1933–2009
9.1 Fall in Six Largest Economies’ Real GDP Growth, 2007–2009
List of Abbreviations

AIG
American International Group
BEA
Bureau of Economic Analysis
BLS
Bureau of Labor Statistics
CBO
Congressional Budget Office
CPI-U
consumer price index for all urban consumers
CPI-U-RS
CPI Research Series Using Current Methods
CPI-W
consumer price index for urban wage earners and clerical workers
Fed
Federal Reserve System
GDP
Gross Domestic Product
IMF
International Monetary Fund
IPE&S
information-processing equipment and software
LIBOR
London Inter-Bank Offered Rate
LTFRP
law of the tendential fall in the rate of profit
MELT
monetary expression of labor-time
NIPA
National Income and Product Accounts
OECD
Organization for Economic Cooperation and Development
OPEC
Organization of Petroleum Exporting Countries
PCE
personal consumption expenditures
S&Ls
savings and loan associations
S&P
Standard and Poor’s
TARP
Troubled Assets Relief Program
TSSI
temporal single-system interpretation
Acknowledgments

I thank everyone who provided expert advice on technical matters and everyone who offered comments on the papers, book reviews, talks, interviews, and draft manuscript that eventually turned into this book. I have benefited enormously from their feedback. It not only improved the book significantly but guided the direction of my research in crucial ways. I would like to thank each one by name, but unfortunately I cannot. Even were they not too numerous to list, they include many audience members and reviewers whose names I do not know. If you are among them, please know that the difference between what you originally read or heard and the ideas as they appear in the final text is a sign of my debt and gratitude to you.
I thank my departmental colleagues at Pace University, who have been very supportive of my research. I also thank the university’s Dyson College of Arts and Sciences, which granted me released time to pursue my research on profitability trends and provided a research grant that enabled me to purchase a supersized computer monitor. The monitor has made the work of data analysis much less onerous and more productive.
None of the book is a republication of previously published works of mine, but I have drawn freely on those listed below. I thank the following publishers for allowing me to do so:


•
The Commune, which published "The Economic Crisis: An interview with Andrew Kliman" as pamphlet no. 4, November 2008.
•
The Institute for Social Sciences of Gyeongsang National University, which published "Masters of Words: A reply to Michel Husson on the character of the latest economic crisis," in Marxism 21 , vol. 7, no. 2, Summer 2010.
•
International Socialism , which published "A Crisis for the Centre of the System," in issue no. 120, October 2008, and "Pinning the Blame on the System," a review of Chris Harman’s Zombie Capitalism , in issue no. 124, September 2009.
•
Lexington Books, which published Reclaiming Marx’s "Capital": A refutation of the myth of inconsistency in 2007.
•
Marxist-Humanist Initiative, which published "The Persistent Fall in Profitability Underlying the Current Crisis: New temporalist evidence" in March 2010 and, in With Sober Senses , its online publication: "On the Roots of the Current Economic Crisis and Some Proposed Solutions," April 17, 2009; "How (Not) to Respond to the Economic Crisis," May 5, 2009; "Cherry Picking Peaks and Troughs," May 13, 2009; "Appearance and Essence: Neoliberalism, financialization, and the underlying crisis of capitalist production," May 17, 2010, and "Lies, Damned Lies, and Underconsumptionist Statistics," September 16, 2010.
•
Megafoni , an online journal, which published Joel Kaitila, Lauri Lahikainen, and Jukka Peltokoski’s interview, "‘Kukaan ei tiedä, onko kriisi ohi’ Andrew Klimanin haastattelu," on November 23, 2009.
•
Palgrave Macmillan, which published "Production and Economic Crisis: A temporal perspective," in Richard Westra and Alan Zuege (eds), Value and the World Economy Today in 2003.
•
Razón y Revolución, which published Juan Kornblihtt’s interview, "Entrevista al Economista Estadounidense Andrew Kliman," in El Aromo no. 50, July 2009.
•
Taylor & Francis, which publi