Anti-Schanoes?

Jurriaan Bendien bendien at tomaatnet.nl
Tue Sep 16 20:35:12 MDT 2003


David,

Thanks for the info. I am normally a bit hesitant in using the Marxian term
"overproduction" since few people understand what it means - it refers
essentially to an overproduction of exchange-values (marketable entities),
that is to say, commodities which cannot be sold because of a lack of
monetarily effective market demand for them. This overproduction could be
relative or it could be absolute. The concept of overproduction of
exchange-values is of course different from an overproduction of physical
goods in regard to real social needs; the latter may, or may not, accompany
the former.

A second aspect is that, especially in developed capitalist economies, the
form which overproduction of exchange-values takes is often overcapacity
(excess capacity, underutilisation), in other words, there is a longterm
discrepancy between installed productive capacity and actual output, which
means that output by value is on average somewhere around 20 percent below
what it could be (this was already stressed by Ernest Mandel in the 1960s;
he noted that overcapacity tended to grow, because the corporations were
inclined to invest more in order to reduce cost-prices even further, in
order to sell more and increase profit margins).

In modern capitalism, the "market mechanism" has in some respects much more
"elasticity" than it had before, despite monopolisation, since output can be
increased and reduced much more flexibly according to verified demand and
because demand conditions for equipment and durables can change much more
rapidly than in the past, the increased availability of credit facilities
etc. Paradoxically, therefore, you could say that, globally, the
overproduction of exchange-values (marketable entities) nowadays really
means a global underproduction of use-values, that is to say, the incentive
to use existing productive capacity optimally or maximally just is not
there, regardless of the massive amount of unsatisfied social needs, never
mind the incentive for a significant cumulative expansion of production -
which is a symptom of the decadence of the capitalist system (the
"fettering" of the productive forces by the relations of production and
distribution if you like).

The relationship between overaccumulation and overproduction is often not
well understood. An overproduction of commodities implies simultaneously an
overproduction of capital, because commodities are but one form of capital,
so if you are overproducting commodities, you are overproducing capital at
the same time. Therefore disputes about whether or not a capitalist crisis
is essentially one of overproduction or one of overaccumulation are
spurious. The whole point however is that if there is overproduction of
commodities, then capital will be diverted to other activities than
producing commodities. If that fraction of capital becomes very large, as it
has, then this begins to change the very meaning of the classic concept of
overaccumulation. In turn, this affects the whole of culture and the social
fabric.

As regards the Marxian concept of overaccumulation, this could be conceived
in at least three different basic ways: (1) the inability to re-invest
realised surplus-value (realised profits, returns) in production at the
previously ruling rate of profit (occurence of a falling rate of profit),
(2) an absolute decline of the mass of surplus-value (the total volume of
profits), and (3) an absolute overproduction of capital which can no longer
be invested in the sphere of production. Because of different rates of
growth in the different variables involved, some further permutations are
possible, but this is the essential thing. It is quite easy to show that the
mass (volume) of profit can increase, while the rate of profit declines, and
indeed this is the normal effect of capitalist economic growth. However, the
whole process of overaccumulation is "distorted" in modern capitalism by a
number of factors: credit, inflation, monetary manipulations,
underutilisation of installed capacity, the internationalisation of
production, and foreign trade. This means among other things that the
effects of overaccumulation can be "exported" or displaced to other
countries, and the effects of relatively lower output postponed or
attentuated for some time, such that economic growth continues, but remains
well below what it could be (a bit like driving a car while pressing the
brakes). This may mean that devalorisation may not occur as rapidly or
dramatically as before.

Because of these considerations, I consider that the sluggish condition of
the capitalist world economy is better described in terms of
over-accumulation (excess capital) in preference to overproduction. It is
not so much a question of an absolute overproduction of physical goods and
services which cannot be sold at all and must be destroyed or disposed of
otherwise (although it does occur as well in some sectors, leading to
dumping practices; but many overproduced goods are simply transferred to
another country) but an overaccumulation of capital, which is not invested
in the expansion of production, but is tied up in trade, financial dealings,
real estate, etc. In other words, the essential motive for expanding real
production has declined despite the plethora of capital to which I have
referred. The main reasons for that are profitability differentials, risk
factors, lack of monetarily effective demand among ordinary consumers, and
what Marx calls the centralisation of capital in the hands of investors who
are only interested in realising the maximum return, which very often is not
in expanding production.

This situation, combined with high productivity in material production, has
reached such an extent, that some economists doubt the importance of the
concept of what is called the "real economy" or "real production" (actually
physically making things) in the modern world, because a very large amount
of tradeable objects in the West these days simply does not consist of
physical goods or material services, and you can make more money out of
non-material production. The problem however is that the whole intricate and
complex structure of financial dealings and trade in non-material goods
still depends in the last instance on real production, and they are
ultimately claims on real production, unless you believe people can or want
to live on air. If for example the overall base of real production shrinks,
then at some point the credit mechanism must ultimately break down. This is
not happening now, except in some poorer countries, it is just that the real
growth of real production is around a quarter less than it could be, other
things remaining equal. The multiplication of financial claims to real
production is much greater than the actual expansion of real production. Of
course, in a socialist economy you could easily raise output by about 50
percent if that was a social and political priority of the population, for
example, to assist the development of poor countries.

As regards foreign investment, the BEA statistics do not cover just FDI but
much more, and the concept of FDI used by BEA is different than that used by
UNCTAD, among other things because different cut-off points are used for the
percentage of holdings in foreign enterprises. You can see this in the
survey questionnaires used. Even so, these investment statistics must be
treated with some caution, since the questionnaires used are dodgy (allowing
a margin of interpretation by respondents, leading to data aggregates which
do not conform to a clear concept) and because some forms of foreign
investment not related to stocks, equities and securities are simply not
captured by the data. A limitation of most foreign investment data is that
they relate to foreign investments by domestic enterprises in foreign
enterprises, and FDI data specifically relate only to equity holdings which
are deemed controlling interests, not all share holdings. Therefore it is
clear in advance, that the total foreign investment exceeds that which is
statistically recorded, also because it excludes some private investment not
related to production or trade, for example, foreign investments by
consumers or non-commercial entities.

The annual world investment report released by UNCTAD on 4 September shows
clearly that the largest decline in FDI flows is that which applies to
developed capitalist countries, a drop of nearly 60 percent in 2001. Total
FDI inflows in all countries recorded in 2001 declined to US$ 735 billion,
less than half of the total in 2000. For a trend graph, see
http://r0.unctad.org/en/subsites/dite/fdistats_files/fdistats.htm .  The
biggest falls were in the USA, UK, Netherlands, Mexico and Hong Kong. Two
significant rises in FDI are in Luxemburg and Australia (in the case of
Luxemburg, investment dwarfs production). But in interpreting this data, you
must be aware not just that FDI is NOT equal to total foreign investment, as
I insisted repeatedly, but also you must be aware of the change in the value
of the existing stock of foreign-owned assets, and I previously pointed out,
which can be very importantly affected by currency exchange rates.

Thus, for example, while the flow of foreign direct investment in the UK
declined by 37 billion US$ in 2001, the value of the existing stock of FDI
in the UK rose from 552 billion pounds to 639 billion pounds (the fall in
the US dollar helps this along of course) (UK Department of Trade and
Industry, as quoted by The Independent, 5 September 2003, p. 21 - I do not
know exactly what period this refers to). Anyhow, using these figures, it is
easy to see that the actual rise in the value of the foreign-owned assets
was 87 billion pounds (approx. US$ 138 billion in today's values), i.e. well
over THREE times the amount of the loss of inflow of foreign capital. But to
really understand the overall significance of this, you need to have a look
at the total equity stock of the UK and the total value of the fixed capital
stock. Total market capitalisation of equity of all UK companies is
estimated at about 1269 TRILLION pounds in 2002 or about  1900 trillion US$
(http://www.londonstockexchange.com/cmsattach/2215.pdf) and about 80 percent
of that sum is represented by 94 companies. By contrast, total foreign
investment by the UK in other countries is estimated at about 900 BILLION
pounds or about 1.3 trillion US$ (see
http://www.statistics.gov.uk/articles/economic_trends/ET_May03_Humphries.pdf
). As regards the capital stock of the UK, I cannot get an OECD estimate
just now.

I have also mentioned previously on the list, in relation to our discussions
about fictitious capital, the specific case of how a large amount of foreign
liquid capital simply sat in Hungarian banks earning interest. This does not
show up in your FDI stats but it is foreign investment nevertheless (see
further Bank of International Settlements data). The point I am trying to
make to you constantly is: if the total FDI declines drastically, then where
do you think that capital goes ? If it is not invested in equity
domestically, then where is it ? And it is clear that the capital must in
that case be invested in securities of some sort, or some non-productive
activity of some sort. We can split hairs about the precise definition of
equity and securities, but in so doing we miss the real point.

I tend to think that when Leftists get worked up about foreign direct
investment, they're thinking about a quick marriage, not economics. They
really ought to get more grip on the quantitative picture, because only when
you do that, then you can understand better what is really relevant in
economics and politics. As regards your reduction of my clear arguments to
"personal problems", that is just a bit of nonsense which reveals your own
incapacity to go beyond superficial rhetoric. Needless to say, I would not
rely on you insofar as I have "personal problems".

Jurriaan

----- Original Message -----
From: "DMS" <dmschanoes at earthlink.net>
To: <bendien at tomaatnet.nl>
Sent: Friday, September 05, 2003 7:49 PM
Subject: Anti-Schanoes?


> Now that's good.  I like that.  Sorry I missed the
> post on Tuesday.  Just read it.  Regarding your questions:
>
> My sources on FDI, and Indirect investment are the US BEA
> reports.  The US BEA makes the distinction between equity
> ownership and bond holdings, based on the type of security
> instrument that is held-- i.e. stock shares or bonds.
>
> Other sources for the types and distribution of US overseas
> investments are the Statistical Abstract of the US, 2001 and
> 2002, and the Federal Reserve Bank of NY's report on US
> overseas investments by type.
>
> The US BEA provides its criteria for distinguishing different
> categories and types of investment and if you contact them
> they will direct you to the proper link, and even mail/fax you
> a copy, as they did me.
>
> The issue was/is/will be overproduction.
>
> The rest of your issues are just that-- your personal problems.
>
> dms
>
>
>



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