It is almost universally accepted by economists of all persuasions that capitalism’s current neoliberal economic structure has yielded slower growth than capitalism’s previous post WWII economic structure. Related to this but very seldom discussed is the increase under neoliberalism in the divergence between the rate of profit and the rate of accumulation. Increases involved in the partial recovery of the rate of profit have not been paralleled by increased accumulation, thus contributing to the weak growth. This paper first documents this increased divergence.
Next it argues that an important contribution to the slowed accumulation is the increased transfer to finance of profits created in production. It then turns to discuss the behavior of factors contributing to this increased transfer: the interest rate, the non financial corporate debt and the reduced retained earnings. It resolves the riddle of why despite becoming net creditors after 2000, the productive sector continues to lose potential profits to the financial sector. It documents the increased growth of the financial sector in the economy under neoliberalism, but also the little discussed result that this growth has stopped since at least 2000. The paper ends by reviewing the structural change in capitalism represented by this change under neoliberalism in the relation of the rate of profit to capitalism’s central process of capital accumulation.
It is almost universally accepted by economists of all persuasions that capitalism’s current neoliberal1 economic structure has yielded slower growth than capitalism’s previous post WWII economic structure. In a Marxist framework, growth is dialectically related to investment, as both a cause and an effect. Investment in turn is similarly dialectically related to the rate of profit. Marxists and many other economists consider the rate of profit to be both a key determinant and an indicator of the health of a capitalist economy.
In a previous work (Bakir and Campbell, 2009) we carefully empirically documented a result that is also widely accepted by many Marxists, that the rate of profit has been lower in the neoliberal period than in the previous period. This is one important structural cause (again, as well as an effect) of the lower rate of growth. The purpose of this brief essay is to consider another structural cause of the slower growth.
Marx’s opus work on Capitalism, Capital, is well known for weaving together two different approaches to the description of capitalism, its historical/descriptive passages, and its logical/theoretical passages. A bare-bones presentation of the part of the logical/theoretical structure that is relevant to this paper is as follows. Workers create more value in production than the part of it that they receive back in wages, the value of labor power. The rest of the value that they create is divided into two parts. One part is used to replace the values consumed in production, constant capital. The other part is expropriated from them by the owners of capital, surplus value. A large part of the surplus value is then thrown back into the circuits of capital as new capital, as value seeking self-expansion in the process of expanded reproduction. The goal of the capitalist system, whether described as the goal of the dominant agents in the system, the capitalists, or as the goal of the system itself, its law of motion, is described by Marx frequently in two different ways. These are closely related but not entirely equivalent – the drive for profits, or the self-expansion of capital (accumulation).