schumpeter help

Doug Henwood dhenwood at panix.com
Thu Sep 1 06:29:48 MDT 1994


The problem with policies designed to encourage real investment is that
many of them can squeeze the working class. I'm enough of a Keynesian to
believe that traditional austerity/pro-saving schemes do not work - by
restricting the level of aggregate demand they can depress, rather than
stimulate investment - but the capitalist class belives in them,
conveniently enough for their own wealth and power, and are often
applied. More worker-friendly policies, which would tax the fat boys and
girls, regulate finance more tightly, discourage speculation through
transaction taxes, boost public investment, while hardly revolutionary,
would or could increase social control over capital. Transforming
corporate governance structures to include public, community, and worker
representatives on the boards could have similar effects. I'm aware of
the dangers of co-optation in that last suggestion, but you could say the
same about unions, and what Marxist could ever argue against unions
despite these risks?

There's the more nagging theoretical point that by increasing investment
you're increasing capital's power and providing for greater exploitation
and greater accumulation of surplus value, but I think no less an
authority than Marx argued that the workers were better off when capital
accumulates than when it doesn't. Also, increasing investment doesn't
solve the long-term problem of chronic insufficient demand, that
necessary condition of capitalist production that cannot be cured by
Keynesian schemes, but I'm advocating the pro-investment policies I
mentioned above as non-reformist reforms, steps in a multicentury
transition to socialism, and not as a way to fix capitalism.

I also think that the investment policies I advocate should get some
popular control over innovation - to redirect not only the quantity but
quality of investment and R&D. Innovation to cheapen and control labor is
no damn good, but it's the prevailing kind of investment in the US these
days. (I'm speaking of what the national income accounts call information
processing equipment - computers and telecoms equipment - which accounts
for about 1/5th of real GDP growth in the US since 1991.)

It's just so hard to envision revolution these days.

Doug

Doug Henwood [dhenwood at panix.com]
Left Business Observer
212-874-4020 (voice)
212-874-3137 (fax)


On Wed, 31 Aug 1994, donna jones wrote:

> In his last post, Doug Henwood, re-emphasized  that persistent failure to
> carry out real investment poses real long-term danger. Doug also  pointed
> out that financial chicanery is more tolerated in the US and UK than
> elsewhere--Japan and Germany, I suppose. And this raises the question--if
> this is true--why is it so?
>
> Doug (or anyone else), I was wondering if you could outline some of the
> dangers and prospects you see in the different policies advocated to
> increase real investment--required as you noted by capitalism on its own
> terms.(Or maybe you could refer us to the relevant pages in your new book;
> when is it due out--congratulations!).
>
> Should  "we, Americans" learn from Japan and Germany? What are we to learn?
> Is it possible to import regulations here and graft them onto to American
> capitalism given its objective structure? In a recent MR piece, Paul Sweezy
> uses his theory of monopoly capital to explain the necessity of casino
> capitalism at a late stage of accumulation, i.e., why under conditions of
> monopoly capitalism real investment would only lead to excess capacity and
> thus capital must take on the form of financial wizardry.
>
> Joel Kurtzman's Death of Money calls for a govt-backed policy to increase
> real investment.  He concludes
>
> "Why should America  tolerate what happened in the steel industry when
> United States steel (now USX) bought Marathon Oil, with profits that came
> from operating in a protected market with factories United States Steel
> refused to upgrade?....The global market must be returned to its original
> role of delivering capital to businesses that need it to grow.  The
> financial economy must no longer dominate the real economy. We need
> policy-makers  who understand that, for more than a decade, America has
> languished and its industrial base has withered away as an out-of-control
> financial economy swallowed resources and shifted the focus to ever shorter
> gains...It is time for our policymakers to temper their faith in the market
> with an assessment of what we have received in return.... in the world's
> fastest growing and most successful countries, the invisible hand of the
> market has always had a measure of help form the very visible hands of
> government.  We Americans deserve no less."
>
> Earlier I indicated potential problems with the conceptualization of crisis
> as one of speculative or idle capital. What conditions must be created in a
> capitalist economy for idle/speculative capital to take on again real
> investments? (this seems to be a burning, albeit perfectly bourgeois,
> question for the "radical" theorists of new social structures of
> accumulation).
>
>  In  Marxism: The Last Refuge of the Bourgeoisie,  Mattick provides a
> framework for an answer to that question:
>
>  "A capitalist crisis and the ensuing depression signify the arrest, or the
> decline, of capital accumulation, which disrupts the circulation process
> and thus shows itself as an overproduction of commodities.  Already
> produced surplus value, earmarked for the expansion of capital, remains in
> its money form and thus fails to function as capital. [this is our idle or
> speculative capital]. A falling or low rate of profit indicates that new
> investments would not yield the customary rate of profit and thus would
> reduce the already low rate of profit even more.  For this reason no new
> investments are made.  The curtailment of investment appears as an
> overproduction of means of production, as well as an overproduction of
> consumption goods, for workers who would have been employed inthe case of
> an enlargened reproduction of capital are now also idle.  The shortage of
> surplus value, coming to light in an actual fall of the rate of profit,
> thus appears on the market as a reduction of the effective demand for all
> sorts of commodities.
>
> "***Unless ways and means are found to increase the surplus value***, a
> prolonged depression sets in.  But the the law of value, which explains the
> descent from prosperity to depression, also explains the ascent from
> depression to prosperity--as involving a change in value relations
> favorable to a further expansion of capital."  (p.80, my emphasis)
>
> In other words, if capitalism is governed by the law of value, then the
> renewal of high rates of real investment requires what is in fact
> engendered by depressed conditions:   a lower value of labor power and/or
> the devaluation of constant capital (with all the attendant misery).
>
> However, there is at least one more  way to increase real investments:
> radical Schumpeterian or even major product innovation.  In marxist
> Schumpeterese, the opening up of new branches of production with a lower
> than average organic composition of capital can also raise the general
> rate and the overall mass of  surplus value available for capitalization as
> real investments (even if, as Marx argued against Ricardo, such branches
> don't serve to directly lower via cheaper inputs the overall value
> composition of capital). The export of capital into such branches was an
> important impetus to early imperialism, and also served via unequal
> exchange as an important countertendency to breakdown.  Here is Grossmann's
> description of "the emergence of new spheres of production with a lower
> organic composition of capital"; the passage is important, I believe,
> because it is on the emergence of such branches that many bourgois
> ideologues are hanging their hopes for  a strong recovery in real
> investment:
>
> "If a new branch of production comes into being employing a relatively
> large mass of living labor--in which therefore the composition of capital
> is far below the average composition which governs the average profit--a
> larger mass of surplus value will be produced in this branch.  marx says
> that competition can 'can level this out, only through raising of the
> *general level* (of profit), because capital on the whole realises, sets in
> motion, a greater quantity of unpaid surplus labor' (Marx). Obviously this
> must also restrain the breakdown tendency.  On the one hand the lower
> organic composition of capital raises the rate of profit, on the other the
> formation of new spheres of production makes possible futher investment of
> capital.
>
> "In this way a cyclical movement evolves--the self-expanding capital
> searches out new investment possibilities while new inventions create such
> possibilities, new spheres of industry develop suddenly, superfluous
> capital is reabsorbed, and gradually there is a new accumulation of capital
>  which is destined to become superfluous on an ever larger scale, and so
> on.  This accounts for the importance of 'new offshoots of capital seeking
> to find an independent place for themselves...as soon as formation of
> capital were to fall into the hands of few established big capitals, for
> the which the mass of profits compensates for the falling profit rate, the
> vital flame of production would be altogher extinguished. It would die out
> (Marx).'"(Grossmann, 1992[1929], p.148;the rest of this section stunningly
> reads like a description of what many of us have been calling sunbelt
> industrialization.)
>
>  The branches that have been  opening seem to me to be far from
> labor-intensive (microelectronics, biotechnology, etc), hardly able to
> provide much relief to high capital intensity production! I emphasize
> product innovation because many neo-Schumpeterians emhasize it and seem to
> suggest that as an endogeneous outcome of accumulation, it serves to
> forever open opportunities for increases in real capitalist investment.
> That however, I am arguing, optimistically assumes that the value
> composition of these new branches will be significantly lower than average.
> Nonetheless, even if not directly cheapening inputs or itself enjoying a
> low value composition. product innovation may still serve to slow down
> somewhat--and less so over time--what would have been a more pronounced
> rise in the organic composition of capital in a system of more
> circumscribed relations of exchange.
>
> As I understand it,  marxist theory prevents us from ever turning away the
> hidden abode of the  capital/labor production relations as we  polemicize
> against the waste and irrationality of "unproductive" capital. Silence
> about the former can only be strategically ignorant insofar as it is
> ultimately only in the reorganization of that hidden abode or, more
> specifically,  at the expense of the working class that the latter problem
> can be resolved in capitalist terms.  In a concentrated attack on
> speculative or idle capital or a putatively  autonomous finance capital,
> marxism threatens to become something less (at best) than a proletarian
> exclusvism to uproot capitalist relations of production.
> d jones
>
>


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