globalization/fixed capital

jones/bhandari djones at
Wed Sep 27 03:08:50 MDT 1995

In hopes of eliciting analysis from those with substantial understanding of
things economic, here is a  summary and some questions on Andrew M Warner,
"Does World Investment Demand Determine US Exports?", American Economic
Review, v 84, n 5, December 1994:1409-1422

This article attempts to establish several things:

--"In the past 25 years, a large share of the growth and variability of US
mercandise exports was driven by exports of capital goods and industrial
supplies, rather than consumer goods."

--"...investment determinants rather than consumption determinants are at
the root of export demand.  It helps explain why exports are highly
variable: because they are driven by a relatively variable component of
foreign demand. It also implies that economic reforms around the world that
stimulate global investment at the expense of global consumption are
favorable demand shifts for the US economy."

--"...the evidence from the late 1980s suggests that, by ignoring the
importance of global investment, traditional analysis overplayed the role
of the depreciating dollar in accounting for strong exports.  What happened
essentialy was that investment spending in Western Europe and Asia grew
faster than GNP during this period.."

Some questions for the experts:

1) exactly why is the demand for capital goods and industrial supplies a
relatively variable component of foreign demand?

2) why is the US becoming increasingly reliant on exports which are "driven
by a relatively variable component of foreign demand"? That is, why is US
capital subjecting itself to such variability?

3) what are the consequences on US employment and American society in
general if exports are driven increasingly by capital goods and industrial
suppliers?  Are they as labor-intensive as consumer goods?

4) if dollar depreciation does not explain past export booms, what reforms
must US exporters push for in order to stimulate global investment?

5) what are the consequences for world employment be if a global investment
boom is to lead to the import and use of presumably more advanced,
labor-displacing capital goods and industrial supplies?  Will there be
enough capital widening to compensate for the relative increase in the
capital/labor ratio?

6) what are the limits on global investment demand? Relatedly, how are we
to explain the *realization* difficulties faced by US exporters of capital
goods and industrial suppliers?

In terms of the last question, I was reminded of Paul Mattick's rather
brilliant analysis in *Marx and Keynes: The Limits of the Mixed Economy*
(Boston: Porter Sargent, 1969); it is perhaps more relevant today than it
was 25 years ago:

"Designed and built up with a view toward an expanding world market, the
productive capacity of capitalistically-advanced nations exceeds the scope
of their national markets.  As this is more or less true for all industrial
countries, their combined produciton exceeds the scope of the world market,
unless a GENERAL rapid capital formation expands the world market as fast
as it does production.  Although this is seldom the case, it is not
impossible.   Marx's model of capital accumulation assumes that this is
possible and therefore restricts the tendential fall of the rate of profit
to events in the sphere of production.  In reality, of course, the widening
productivity gap between the capitalistically developed and  underdeveloped
world regions impairs the realization of surplus value through the latter's
increasing impoverishment.  By fostering only the exploitation of primary
goods production, by transferring products made in these areas to the
industrially-advanced nations, and by imposing terms of trade favoring the
developed capitalist countries, the advanced nations reduce the
underdeveloped world area's ability to buy manufactured goods.  The poorer
the underdevloped nations become, the less a market they offer for the
products of the industrailly-advanced coutnries, and the less able they are
to capitalize themselves and thus to increase the general demand.  This
lacking demand is actually a lack of surplus value in terroritories unable
to buy.  What appears as a REALIZATION PROBLEM in advanced capitalist
countries is a PRODUCTION PROBLEM in less developed nations.  The total
effect, however, is a shortage of surplus value, which hinders the advance
of the GENERAL accumulation process.

"Whether one looks at the production of surplus-value, or its realization,
when seen from the position of total capital, the real problem of
capitalism is a shortage, not an abundance, of surplus value.  Only by
looking at a particular capitalist nation in isolation, or by separating
the developed capitalist world from the world as a whole, does an actual
lack of surplus value appear as an overproduction of commodities.
Similarly, it is only from the standpoint of individual producers in any
capitalist nation that an acutal shortage of socially-produced surplus
value appears as a declining market demand.  But in the world at large and
in each nation separately, there is overproduction only because the level
of exploitation is insufficient.  For this reason, overproduction is is
overcome by an increase in exploitation--provided, of course, that the
increase is large enough to expand and extend capital and thereby increase
the market demand." (81-82)

Some comments:

1.The bourgeois economist's call for "reforms to stimulate global
investment" is nothing less than global class war to increase the
exploitation of the workers of the world.  The unpleasantness of Mattick's
analysis does not invalidate it.

2. The greater the realization difficulties on a global scale, the more US
exporters will be forced to revolutionize continuously the value of their
exports in order to survive in a marketplace for which there is
insufficient room for all.  The social consquences both on a domestic and
global scale of this mad drive to dominate a shrinking world market through
accelerated "technological progress"  needs to be analyzed.

Bibliographic note:

There is a fascinating discussion of capital goods in James K Galbraith,
1989.  *Balancing Acts: Technology, Finance, and the American Future*. New
York: Basic Books, pp. 9-26.  It is this book which led me to grasp the
significance of Warner's analysis, which in turn reminded me of the  power
and relevance of Mattick's theoretical work.

Rakesh Bhandari
Ph.D Candidate
Group in Ethnic Studies
UC Berkeley

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