Review of Radical Political Economics

The theory of a fall in the rate of profit due to a rise in the organic composition of capital has been too quickly discarded in recent years. A mathematical theorem shows that this phenomenon is viable under a "monopoly regulation." Data suggest that both a rise in organic composition and a "productivity-pull profit squeeze" could be at the root of the present crisis.

This paper interprets and measures changes in the rate of profit in Canadian manufacturing over the period 1950-1981. The interpretation stresses endogenous forces that lead to a rising real wage and a rising technical composition of capital, two trends amply confirmed by the evidence. These forces act to reduce the rate of profit. The counteracting forces which are measured include the falling value of consumption commodities (so that, in net the value of labor power does not rise), the falling value of means of production (not sufficient, however, to prevent the value composition of capital from rising) and the increasing rate of turnover of capital. The net effect of these forces is a consistent decline in the rate of profit which translates after 1974 into rising unemployment, falling capacity utilization rates and stagnating output.

The purpose of this article is to ascertain empirically whether the "law" of the tendential fall of the rate of profit, considered as an element of long wave theory, can explain the present economic stagnation in German industry. The results are negative for the explanatory power of the "law": the rate of profit is declining in the long run, but the organic composition, instead of increasing, decreases or remains stationary - the opposite of the predicted change. This evolution of the organic composition of capital is essentially due to: 1) the net effects of technical change (i.e. the technical composition of capital and its results in terms of productivity); 2) the income distribution changes. In fact, generally productivity grew more than technical composition, so exerting a downward pressure on the organic composition (and a positive effect on the rate of profit). The noticeable increase in the wage share had a double effect; it amplified the downward pressure on organic composition and contributed to the decline in profitability.

I find that the general rate of profit in the United States economy remained fairly stable from 1947 to 1967 and then declined sharply between 1967 and 1976. I argue that the movement of the rate of profit over time is a result of two factors: (1) the rate of growth of labor productivity and (2) the rate of growth of the real wage. During the period from 1947 to 1967, the two moved in concert, while in the latter period real wage growth exceeded that of labor productivity. The decline in the profit rate after 1967 is thus a consequence of a profit squeeze, which in turn was induced primarily by the sharp slowdown in labor productivity growth. Though real wage growth also fell after 1967, it did not fall to the same degree, primarily because of large increases in social security contributions.

This paper historically and econometrically explores the hypothesis that the productivity slowdown is in part due to the secular increase in industrial conflict, and that this increase derives from the unraveling of the postwar structure of union-management relations (or truce) and historically low unemployment. The empirical investigation of conflict outside the truce and secular productivity growth provides statistical evidence for this hypothesis.

This paper seeks to explain trends in United States corporate profitability since World War II through an analysis of the rise and subsequent demise of a postwar social structure of accumulation (SSA). Building from a formal model of the determinants of profitability, we provide econometric support for the hypothesis that variations in profitability can be explained to a large extent by variations in quantitative indicators of capitalist power in the postwar SSA.

One important prediction of Marx's theory is that the rate of surplus-value will increase as a secular tendency. This paper subjects this prediction of Marx's theory to an empirical test, by deriving annual estimates of the rate of surplus-value in the United States economy over the period 1947-1977. These estimates show that the rate of surplus-value in the United States economy increased significantly over this period, as predicted by Marx's theory. These estimates are then compared with other estimates of the rate of surplus-value in the postwar United States economy which are based on different interpretations of the main theoretical issues involved in the estimation of the rate of surplus-value. This comparison shows that the theoretical issue which makes the most difference in the estimated trend of the rate of surplus-value is whether or not Marx's distinction between productive labor and unproductive labor is taken into account in the definition of the rate of surplus-value.

The internal dynamics of the United States business cycle have changed from the period of the mild fluctuations of the 1950s and 1960s to thedepressed and crisis-ridden 1970s and 1980s. The article notes changes in the behavior of consumer demand, investment, the rate of exploitation, profit rates, consumer debt, interest rates, and business debt. One finding is that problems of demand and realization were less important in the earlier period than in the later period. Also, the earlier period shows many more series leading the cycle and turning rather slowly, whereas these key series often turned sharply at the peaks and troughs in the severe downturns of the 1970s and 1980s.

One aspect of the contemporary crisis of the United States economy has been a sharp increase since the mid-1960s in the reliance on debt finance by corporations, households, and the federal government. This paper focuses on the borrowing behavior of nonfinancial corporations. It first presents measures of borrowing on the basis of data and accounting methods derived from the Federal Reserve Board's Flow of Funds Accounts. Three alternative approaches are then developed for explaining the corporations increasing reliance on debt: neoclassical cost-of-capital theory; the financial fragility framework of Hyman Minsky; and a Marxian falling-rate-of-profit perspective. For each approach, statistical evidence, including two-variable regression analysis, is presented to evaluate their relative explanatory power. The results of the investigation support the Marxian approach over the other two. In the conclusion, the relationship between these findings and the related contemporaneous phenomena of financial instability and inflation are briefly explored.

This paper argues that the theoretical categories in The Fiscal Crisis of the State (1973) by James O'Connor produce empirical results that fail to explain the financial crisis of the state in the 1960s and 1970s. The argument has three steps: (1) a theoretical examination of the connection between O'Connor's analysis of state expenditures and revenues and the accumulation of capital; (2) an empirical estimation of O'Connor's expenditure and revenue categories for the United States from 1952 to 1980; and, (3) the presentation of an alternative theoretical understanding of the relationship between the state and the accumulation process that produces more plausible empirical results than O'Connor's.