fred's theory

donna jones djones at uclink.berkeley.edu
Sat Oct 1 10:54:44 MDT 1994


My longer post to Fred is still on the way, but I am finding my questions
answered by his work. At the end of this post, I return to Fred's theory of
unproductive expenditures via a discussion of Abramowitz's growth theory.

  I am also writing a reply to Paul C's post on rentier capital and the
tendential failure to capitalize a sufficiently large mass of surplus
value.

 In thinking about Paul C's post, I am re-looking at G Pilling's Crisis of
Keynesianism (especially on the rate of interest and rentier capital) and
at Kevin Brien's Marx, Reason and the Art of Freedom, which shows (among
many other things) that the very means by which the mass of surplus value
grows (especially in commodity form) brings about a fall in the average
rate of profit.  That is, Brien sees the law of a rising surplus and the
law of tendency of the rate of profit to fall as correlative tendencies.
Any answer to Paul C which I do post will be far inferior than what can be
found in either of these two books.

By the way, sometime back Brien's book was reviewed in RRPE (in the section
edited by Fred) by Daniel Little.  The exchange between Brien and Little
was quite interesting, and for anyone out there trying to understand
Marxism, I recommend both Little's and Brien's works.  They have helped me
immensely, but I recommend that one begins with the Little.  Brien has
delved deeply into the modern philosophy of science to update Marx's method
of explanation.

OK for Fred, I wanted to call your attention to an article about which you
probably know--Moses Abramovitz, "The Search for Sources of Growth", The
Journal of Economic History, vol. 53, no 2 (June 1993).

A's main thesis here is that "the large 20th century contributions of
education and R & D conceal technology's new intangible capital-using
bias." How is this relevant to the unproductive/productive distinction at
the basis of Fred's work?

Well, A also points to the growth of the so-called service sector as the
consequence of differential productivities among sectors.  A points to "the
relative growth of industries in the service sector whose functions are
required for the exploitation of scale-intensive technological progress.  I
mean trade; communications; finance; the legal, accounting, and engineering
professions ; and much of goverment itself, both local and national." A
also argues with Fred that there has been "the industry bias of technical
advance, which raised the productivity of labor far more in agriculture and
industry than in the service sector."

A thus provides evidence that the scale economies by which capital can
accumulate a greater mass of surplus value despite the tendency for unit
values to fall also bring forth--aside from upward pressure on the organic
composition of capital--great unproductive expenditures which are quite
difficult to rationalize.

What A adds here is that these unproductive expenditures are functionally
capital-using in another way: the costs of reproducing labor-power in these
sectors are inordinately high because they are "education-intensive
occupations"--what A calls an "intangible capital-using bias."

 "An important generalization about economic growth, therefore, is that the
scale-intensive technological progress that made productivity growth in the
basic agricultural and industrial occupations so rapid was gained only by
an expansion of employment in EDUCATION-INTENSIVE occupations that,
considered in isolation, exhibited much slower productivity growth."(my
emphasis)

But... A does not see this as a burden on capital accumulation. In fact, he
is arguing that 20th century productivity cannot be explained as the result
of "a large expansion in physical capital per worker." The intangible
capital used by workers in education-intensive occupation is seen as a
proximate cause of growth today.

 So as Steven Cullenberg has argued that  "service" expenditures can enable
either the scale economies and/or the quicker turnover that accelerate SV
production, A argues that these "education-intensive functions have paid
for themselves, AT LEAST IN PART, by larger 'throughput,' which is in
itself tangible capital saving.  It HELPS JUSTIFY the use of more capital
per unit of labor input by raising the output intensity with which capital
is employed."(my emphasis)A is unsure, but he seems to agree with Steve
that what Fred understands as unproductive expenditures can be "an
enhancement on th dynamic production of surplus value." (Cullenberg)

Of course,  many of these functions and the educational costs associated
with them are capitalistically necessary, but Fred has raised the question
of whether they are capitalistically productive.  At any rate, does Fred or
anyone else have any comments about A's growth theory? Fred, would you
reply to A in much the same way you replied to Steve?

Oh, by the way, for all the economists out there, I am not an economist,
and I apologize if I have totally misrepresented A's argument.

d jones



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