Robert Brenner and others argue that:
(a) The root of this crisis is a long-term failure to restore profitability after it sagged in the late 1960s and early 1970s;
(b) What is needed to restore profitability is, above all, destruction of capital (of capacity).
The argument gets plausibility from the fact that in the depths of a crisis, the more successful capitalists, the ones who will survive, are able to buy up machines and premises, and grab markets previously held by their competitors, cheaply.
That tends to increase the rate of profit.
But it does not at all follow that the greater the destruction or devaluation of capital, the stronger the ensuing recovery. I fear that the “Marxist” argument here may be only a “Marxist” re-facing of the hard-line free-market argument that crises should be allowed to run as deep as they “spontaneously” go; that no-one can or should try to second-guess the spontaneous self-healing mechanisms of the market.
(a) For each capitalist, other capitalists are not only (possibly) competitors. The other capitalists, and their employees, also represent markets – buyers for the first capitalist’s products.
If the first capitalist sees lots of other capitalists going bust, that is not only, for him, a slackening of competition and a chance to buy stuff and gain new markets cheaply. It is also a decline in his market. In that way, it slows recovery.
(b) It may also slow recovery by slowing the demand for fresh equipment. Even the capitalists who survive may be reluctant to invest in new equipment if they can buy up older equipment which is not so good but on offer at a price which still makes it a best buy.
(c) Empirically, it is by no means necessarily the case that deep crises are followed by smart recoveries.
(d) Empirically, also, the argument that profitability was still lagging before the current crisis is dubious. There is much argument to be had about precise measures of profitability. For now, let us note that Andrew Glyn’s book “Capitalism Unleashed”, for example, a good and careful collection of a lot of empirical data, finds profit rates after tax in US non-financial corporations to be recovered by 2004 to the highest levels since 1950 except for a short peak in the 1960s.
(e) Empirically, yet again, it is dubious that there has been chronic overcapacity since the early 1970s. Capacity utilisation figures in the USA have been low in some periods, including the last decade, but there has been no marked long-term decline. Brenner seems to fend off this fact by considering relatively buoyant capacity utilisation figures to reflect “artificial” stimulation of demand. But on what basis is some demand “artificial”, and other not? Isn’t this argument also a tacit accommodation to the hard-line free-market thesis that demand “should” be whatever it will be if the market is left to its own devices as far as possible, and any variation is “artificial” and harmful?
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