jones/bhandari djones at
Fri Oct 27 23:27:08 MDT 1995

Jeffrey Madrick, 1995. The End of Affluence: The Causes and Consequences of
America's Economic Dilemma. NY: Random House.  Book jacket: "I want to say,
flat out, that this will be one of the best books on what's happening in
the American economy to be published in many years."  Richard Nelson,
Columbia prof of international political economy.

Now a very short note on Madrick's book.  There are some very interesting
arguments in this book, for example about the historic centrality of the
vast US market: "Rather, American mass production was a highly complex
system of production and distribution that reduced the costs of
manufacturing each unit dramatically as the volume or production was
raised. What made this increased production possible was a market large
enough to absorb the goods that high-volume factories could produce.  This
only American had." (p.40)

  A student of economic thought, Grossmann already had drawn  from Adam
Smith in 1927 to draw this conclusion about the decisive importance of the
size of the US market to the unique and dynamic productivity of American
capitalism.  Of course Madrick attributes the insight to today's economic

  Madrick is at pains to emphasize that the US no longer uniquely enjoys
such a market as the telecommunication and transportation revolutions now
allow other capitals to gain the productivity and competitiveness which can
be achieved in a sufficiently big market due to economies of scale.
Madrick also downplays the competitive advantage of declining unit values
on standard commodities since, he claims, markets have now become
fragmented and customized.  So that which has been been at the base of
American exceptionalism is no longer unique or no longer important. Much of
this book is about how to deal with the resulting depression and pessimism.

Of course Madrick treats the telecommunication and transportation
revolutions as external events; in other words, his explanation for
globalization is entirely technological; he does not probe any economic
necessity which has driven the systemic adoption of new technologies in
telecommunication and transportation.  This treatment contrasts to
Grossmann who understood periods of crisis and deflation to be also ones of
exceptional technical advance.

What most drew my attention however is the following paragraph:

"Capital investment in traditional plant and equipment will probably
require more of our resources if we are to stay competitive.  A lack of
capital wasn't a significant hindrance in the past two decades, in part
because American business performed slowly and had excess capacity.  But as
we have seen, flexible production, fragmenting markets, and aggressive
world competitors will probably keep rates of return on investment both
lower and more uncertain in the futre than they have been in the past.
Therefore, American business will have to put more  money, accept more
risk, and invest for longer-term payoff, perhaps again with help from
public funds directly or through tax incentives. Though capital spending
rose rapidly in 1993 and 1994, it grew no more quickly than it had during
expansions of similar length in the 1970s and 1980s.  And much of the
capital spending has been for computerized equipment whose useful lives are
unusually short and which will have to be upgraded or replaced frequently."

So much of Grossmann's dynamics are suggested in this paragraph and
Madrick's analysis in general:

--how in order to spread declining unit values over a greater mass of use
values the latter must be variegated by new production techniques.

--how increasing productivity nonetheless manifests itself as a falling
rate of profit

--the reappearance of a threat of a shortage of surplus value at a late
stage of accumulation, though Madrick is unable to relate this shortage
back to changes in the mode of production itself.

--the threat of moral depreciation as the life of fixed capital is cut
short by further value revolutions and the pressure such depreciation
exerts on the system as a whole.


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