The long roots of the present
crisis
By Michael Roberts and Guglielmo
Carchedi
HM conference November 2013
US average rate of profit
• Ten-year rolling average indexed 1947=100
210
200
190
180
170
160
150
140
2011
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
1957
1954
1951
130
US average rate of profit 1982-2011 (%)
25.5
25.0
24.5
24.0
23.5
23.0
22.5
22.0
6% fall in ARP; 5% fall in
rate of surplus value; and
3% rise in the organic
composition of capital
19% rise in ARP; 24% rise in rate
of surplus value; and 6% rise in
the organic composition of
capital
21.5
21.0
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
US: rate of surplus value and the
organic composition of capital
0.63
1.44
1.42
0.61
Rate of surplus value
1.40
0.59
Organic comp of capital (HC) -RHS
1.38
0.57
1.36
0.55
1.34
1.32
0.53
1.30
0.51
1.28
0.49
1.26
0.47
1.24
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
World* and G7 average rate of profit (%)
indexed 1963=100
100
95
* World = G7 plus BRICS
90
85
80
World ave
75
G7 ave
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
70
US average rate of profit for the productive
sector and wage/profit ratio (%)
13.0
7.0
12.0
6.5
11.0
6.0
5.5
10.0
5.0
9.0
4.5
8.0
4.0
7.0
3.5
6.0
3.0
5.0
2.5
4.0
2.0
2010
2007
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
1971
1968
1965
1962
1959
1956
1953
1950
1947
ARP
Wages/profits RHS
US corporate profits, real investment
and GDP Q1-2001 to Q2-2012, $bn
2100
1900
1700
14000
Mass of
profits peaks
in mid-2006
Investment
and GDP peak
two years later
1500
13500
13000
1300
1100
900
700
Corporate profits
Investment
Profits turn up in
Q3'08 and
investment follows
one year later
GDP - RHS
500
12500
12000
11500
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jan-01
The Marxist multiplier
STATE-INDUCED REDISTRIBUTION
CAPITAL FINANCED (if Labour financed,
wages fall and so does consumption, the
opposite of Keynesian objective)
SECTOR I (Means of
production)
Numerator falls,
denominator rises,
labour consumption
rises, sector rate of
profit falls
STATE-INDUCED INVESTMENTS
CAPITAL FINANCED OR LABOUR-FINANCED
SECTOR II (consumption
goods)
SECTOR I (Producer of
public works)
Numerator unchanged,
denominator rises, labour
consumption rises, sector
rate of profit falls
State pays for public works
valued at S - p, where p is
profit for Sector I
SECTORS I AND 2
NUMERATOR AND DENOMINATOR UNCHANGED
CONSUMPTION RISES, ARP FALLS
SECTOR II (rest of
economy)
State taxes profits in sector
2 which fall by S
State receives public works
valued at S - p + P* (new value)
PROFITS FALL BY S - p , NUMERATOR OF ARP FALLS
Sector I invests in more means of production and labour for public works
FINAL OUTCOME FOR ARP DEPENDS ON MARXIST MULTIPLIER
1. Organic composition of capital unchanged; ARP unchanged
2. Organic composition of capital rises, ARP falls
3. Organic composition of capital falls, ARP rises - but only
because inefficient capitals benefit, lowering future productivity
and growth
Global liquidity as % of world GDP
1989-2011
400
350
Derivatives (market value)
300
Securitised debt
250
Bank credit
200
Power money
150
100
50
0
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Greek rate of profit and real investment
since 2000 (indexed 2000=100)
160
150
140
130
120
110
ROP
100
Real inv
90
80
70
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
UK rate of profit and business
investment since 2006
16.0
15.0
14.0
39000
Net return on capital
(%)
Business investment
- RHS £bn
37000
35000
33000
13.0
31000
12.0
29000
11.0
27000
10.0
25000
Q2-12
Q1-12
Q4-11
Q3-11
Q2-11
Q1-11
Q4-10
Q3-10
Q2-10
Q1-10
Q4-09
Q3-09
Q2-09
Q1-09
Q4-08
Q3-08
Q2-08
Q1-08
Q4-07
Q3-07
Q2-07
Q1-07
Q4-06
Q3-06
Q2-06
Q1-06
ARP (%), OCC and ROSV (ratios) in
Argentina, 1963-2007
6.0
45.0
OCC
5.0
ROSV
ARP -RHS
40.0
4.0
35.0
3.0
30.0
2.0
25.0
1.0
0.0
20.0
63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07
Sources and methods
•
•
•
•
•
•
•
•
•
•
•
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Figure 1. The ARP has been smoothed into a ten-year rolling average.
Figure 2. The US ARP measure is based on the whole economy.
Profits = net national product (BEA, NIPA table XX) less employee compensation (BEA NIPA table 6.2)
Constant capital = historic cost net fixed private non-residential assets (BEA, NIPA table 4.1)
Variable capital = employee compensation (BEA NIPA table 6.2)
Figure 3. The rate of surplus value =Profit divided by variable capital;
organic composition of capital = constant capital divided by variable capital
Figure 4. Data sources and methods can be found in Roberts M (2012).
Figure 5. Profits are from NIPA tables 6.17A, 6.17B, 6.17C, 6.17D: corporate profits before tax by industry. In the first three tables, utilities are
excluded.
Fixed assets. The definition is “equipment, software, and structures, including owner-occupied housing”
(http://www.bea.gov/national/pdf/Fixed_Assets_1925_97.pdf). The data considered in this paper comprise agriculture, mining, construction, and
manufacturing (but not utilities, see above). Fixed assets are obtained from BEA, Table 3.3ES: Historical-Cost Net Stock of Private Fixed Assets by
Industry [Billions of dollars; yearend estimates].
Wages for goods producing industries and are obtained from NIPA Tables 2.2A and 2.2B: wages and salaries disbursements by industry [billions of
dollars].
Employment in goods producing industries is obtained from: US Department of Labor, Bureau of Labor Statistics, series ID CES0600000001.
The money ARP is computed by dividing profits of a certain year by constant and variable capital of the preceding year conform the temporal
approach. It is computed for the productive sectors. The best approximation to that are the goods producing industries. These are defined as
agriculture, mining, utilities, construction and manufacturing. However, utilities are disregarded (see above). N.B. Constant capital includes only fixed
and not circulating capital because of difficulties of estimating the latter on the basis of the available statistics. The inclusion of circulating capital
would only depress the ARP further. See footnote 4 above.