bloody_capitalist_sham
23rd May 2006, 00:59
I recently encountered "long wave theory" in a book about Globalisation.
It was "attempting" to refute globalisation. And i was reading it for an essay i was writing.
Its called "Globalization: Neoliberal Challenge, Radical Responses"
However, a chapter grabbed me, as it sounded kinda marxist. Called "long waves of capitalist development"
Here is a brief extract for us to talk about ;)
"Marx’s analysis of capital’s laws of motion in Das Kapital
still seems surprisingly contemporary, 4 but he did not develop
a complete theory of crisis. Over the course of time economists
identifying themselves as Marxist have developed four
basic explanations for economic cycles: 5
Falling rate of exploitation: Since unemployment declines in
expansive phases, the workers’ movement is better situated to
demand better conditions of labour. For this reason profits
fall relative to variable capital (wages).
Disproportionality: Balanced economic growth requires that
the demand for different sorts of goods grow in a proportional
way. Since individual employers make their own decisions
without any coordination, this is rarely the case.
Underconsumption: Because employers try to keep wages as
low as possible, a gap opens between productive capacity and
effective demand for consumer goods (Department II). This
lag in demand has effects in its turn on the demand for means
of production (Department I).
Overaccumulation: Increasing investment leads to a lower
rate of return on invested capital, since invested constant
capital grows more quickly than the rate of exploitation.
In reality, concrete analysis of short-term cycles shows that
different combinations of these factors are generally at work.
Monocausal explanations seldom do justice to reality."
Now the whole talking about cycles thing put me off a little, because it reminded me of dialectics. Which i later found out was the case.
But to be honest, the above extract sounds coherent enough.
There are also four basic reasons given for why "long waves" occur.
Again they sound pretty reasonable.
1. The capital investment theory, associated with
Kondratiev himself, posits that long waves result from extensive
investments in and depreciation of capital goods used
over long periods of time, such as railways, canals and factories.
During an economic boom over-investment in capital
goods takes place, leading to a decline in which superfluous
capital is written off. This devaluation of capital gives rise to
the possibility of a new boom.
2. The capitalist crisis theory, associated with Leon
Trotsky, maintains that long waves are a product of the
tendential fall in the rate of profit described by the earliest,
classical political economists. According to this theory, long
waves are above all a sign of an increase in constant capital,
and a long recessive phase does not automatically, that is
endogenously, lead to a new expansive phase. A watershed of
this kind is the result of exogenous factors – such as the
discovery of a new naturalresource, an extension of the
market or a historicaldefeat for the workers’ movement –
with the result that long-term conditions become more
favourable for accumulation. The rise in the rate of profit
makes a new expansive phase possible, but a new decline
inevitably follows.
3. The innovation theory, associated with Joseph
Schumpeter, posits that long waves are the result of clusters
of innovations at specific moments and in specific economic
sectors. These clusters of mutually interlinked innovations
create a new leading sector in the economy, which grows
quickly and leads to a new upturn. During this expansive
phase few new radical innovations take place, since investment
in existing technology yields good profits. After a time,
however, the innovations that opened the expansion bring in
declining returns, cooling off the economy and ultimately
leading to a decline. In this phase it becomes attractive once
more to innovate, but that does not happen from one moment
to the next. This is probably the approach with the most
support among long-wave theorists.
4. The war theory, associated with a group of largely
European scholars, including Dupriez, maintains that long
waves are the result of – or closely connected to – major wars.
The consequences of periodic major wars – particularly inflation
– lead to recurring shocks in the world economy and
cause long waves. A group of monetarist economists, related
in some ways to the war theorists, developed in the discussion’s
initial stage a parallel theory, in which not war but gold
production influences prices. In both theoretical variants long
waves are above all a monetary phenomenon. This school has
not played any role in the economic discussion since the
1950s, although it has in political and sociological debates.
So, what up with "long waves"? thumbs up or down?
PS, i can give more extracts if needed.
It was "attempting" to refute globalisation. And i was reading it for an essay i was writing.
Its called "Globalization: Neoliberal Challenge, Radical Responses"
However, a chapter grabbed me, as it sounded kinda marxist. Called "long waves of capitalist development"
Here is a brief extract for us to talk about ;)
"Marx’s analysis of capital’s laws of motion in Das Kapital
still seems surprisingly contemporary, 4 but he did not develop
a complete theory of crisis. Over the course of time economists
identifying themselves as Marxist have developed four
basic explanations for economic cycles: 5
Falling rate of exploitation: Since unemployment declines in
expansive phases, the workers’ movement is better situated to
demand better conditions of labour. For this reason profits
fall relative to variable capital (wages).
Disproportionality: Balanced economic growth requires that
the demand for different sorts of goods grow in a proportional
way. Since individual employers make their own decisions
without any coordination, this is rarely the case.
Underconsumption: Because employers try to keep wages as
low as possible, a gap opens between productive capacity and
effective demand for consumer goods (Department II). This
lag in demand has effects in its turn on the demand for means
of production (Department I).
Overaccumulation: Increasing investment leads to a lower
rate of return on invested capital, since invested constant
capital grows more quickly than the rate of exploitation.
In reality, concrete analysis of short-term cycles shows that
different combinations of these factors are generally at work.
Monocausal explanations seldom do justice to reality."
Now the whole talking about cycles thing put me off a little, because it reminded me of dialectics. Which i later found out was the case.
But to be honest, the above extract sounds coherent enough.
There are also four basic reasons given for why "long waves" occur.
Again they sound pretty reasonable.
1. The capital investment theory, associated with
Kondratiev himself, posits that long waves result from extensive
investments in and depreciation of capital goods used
over long periods of time, such as railways, canals and factories.
During an economic boom over-investment in capital
goods takes place, leading to a decline in which superfluous
capital is written off. This devaluation of capital gives rise to
the possibility of a new boom.
2. The capitalist crisis theory, associated with Leon
Trotsky, maintains that long waves are a product of the
tendential fall in the rate of profit described by the earliest,
classical political economists. According to this theory, long
waves are above all a sign of an increase in constant capital,
and a long recessive phase does not automatically, that is
endogenously, lead to a new expansive phase. A watershed of
this kind is the result of exogenous factors – such as the
discovery of a new naturalresource, an extension of the
market or a historicaldefeat for the workers’ movement –
with the result that long-term conditions become more
favourable for accumulation. The rise in the rate of profit
makes a new expansive phase possible, but a new decline
inevitably follows.
3. The innovation theory, associated with Joseph
Schumpeter, posits that long waves are the result of clusters
of innovations at specific moments and in specific economic
sectors. These clusters of mutually interlinked innovations
create a new leading sector in the economy, which grows
quickly and leads to a new upturn. During this expansive
phase few new radical innovations take place, since investment
in existing technology yields good profits. After a time,
however, the innovations that opened the expansion bring in
declining returns, cooling off the economy and ultimately
leading to a decline. In this phase it becomes attractive once
more to innovate, but that does not happen from one moment
to the next. This is probably the approach with the most
support among long-wave theorists.
4. The war theory, associated with a group of largely
European scholars, including Dupriez, maintains that long
waves are the result of – or closely connected to – major wars.
The consequences of periodic major wars – particularly inflation
– lead to recurring shocks in the world economy and
cause long waves. A group of monetarist economists, related
in some ways to the war theorists, developed in the discussion’s
initial stage a parallel theory, in which not war but gold
production influences prices. In both theoretical variants long
waves are above all a monetary phenomenon. This school has
not played any role in the economic discussion since the
1950s, although it has in political and sociological debates.
So, what up with "long waves"? thumbs up or down?
PS, i can give more extracts if needed.