Transcript Economic Crisis: a Long

Economic Crisis: a
Long-Wave Perspective
Lecture
by
Persefoni Tsaliki
Department of Economics
Aristotle University of Thessaloniki
Perspectives on the Euro(crisis)
Sharing Perspectives Foundation
October 2013
Economic Cycles and Crisis
• All economic variables fluctuate through the years:
– Long-run perspective of a variable → growth theory
– Short-run perspective of a variable → theory of economic cycles
The long-run tendency of a variable functions as its center of gravity
• Economic Crisis → interruption of the reproduction of the economy
• The Great depression in 1930s → questions on market mechanism
– Keynes → state intervention
– The Golden Age of Accumulation (post-war period – early 1970s) → triumph of
Keynesian economics
– The Silent Crisis of the 1970s-1980s gave rise to reconsider Keynesian
economics
– The New Golden Age of Accumulation → Neoliberal economics
– The First Crisis of the Millennium → 2007 - ?????
Fluctuations in Economics
Regular fluctuations → pattern → internal forces → laws of motion
• Neoclassical: any deviation is temporary and is caused by
exogenous forces
• Keynesian: deviations may be serious and through
enhancement in effective demand the state can play a vital role
• New-newclassical: deviations are ephemeral and caused by
state intervention. A ‘free’ market brings the economy back to
equilibrium
• Classical/Marxian: fluctuations are regular and are caused by
the way the capitalist mode of production functions. That is, it is
in its nature to face fluctuations
Categories of Economic Fluctuations
Schumpeter (1935, p. 15) defines the following categories:
•
Kitchin or inventory or business cycle (3-5 years).
•
Jouglar or investment cycle (7-11 years)
•
Kuznets or construction cycle (15-25 years)
•
Kondratieff or long waves (45-55 years)
Ideal presentation of a Long Wave
y
0
Α
B
D
C
Interpretations of Long Waves
• Orthodox economists
→ denial of Long-Wave perspective of economies
→ exceptions (Schumpeter, Rostow, Maddison, Forester and Samuelson)
• Schumpeter
→ mass introduction of innovations
→ the role of entrepreneur
→ the ‘black’ future of capitalism
• Social Structure of Accumulation
→ introduction of new institutions
→ contracts between various social groups
• Classical/Marxian (Smith, Ricardo, Marx)
→ movement in fundamentals, such as rate of profit
Economic Crisis
interruption of the normal reproduction of the economy
• Theoretical approaches to economic crisis
– Self-regulated system
• Neoclassical → invisible hand → no crisis
• Keynesian → visible hand of state → no crisis
– Incapable for its continuous self expansion
• Exogenously: Under consumption (Luxemburg, Lenin, Sweezy)
→ increase in productive capacity and decrease in incomes → fall
in effective demand → need for external markets (imperialism) →
lack of them leads to crisis
→ focus on consumption
• Endogenously: Inner nature of capitalism (Smith, Ricardo, Marx)
→ long-run falling rate of profit
» Profit squeeze
» Rise in organic composition of capital - mechanization
Long-Run Falling Rate of Profit
The most important law of political economy (Marx)
» Rise in organic composition of capital – mechanization
– Capital is a self expanding value – Accumulation
– Competition:
• Against workers
• Against other capitals
mechanization
– Profit Rate in the long-run falls:
π =Π / Κ
» Profit squeeze
- Rise in wage share leads to falling profitability
Mechanization of Production Process
(Greece 1960-2012)
300
250
200
K/Lp
150
K/L
100
50
0
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Net Real Operating Surplus and Investment
(Greece 1960-2012)
0.9
0.4
0.3
0.75
NOS(2005)
0.2
0.6
0.1
0.45
0
Net Investment (2005)
0.3
-0.1
0.15
-0.2
0
1959
-0.3
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Productivity and Real Wage Products
(Greece 1960-2013)
70
productivity CNA
60
50
productivity ONA
40
30
Real product wage
20
10
0
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Long-Run Falling Rate of Profit
(Greece 1960-2014)
0.32
0.24
Net Rate of Profit
(no self-employment)
General Rate of Profit
0.16
0.08
Net Rate of Profit
(with Self-employment)
0
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
Conclusions
• Economic crisis is a stylized and systemic
element of capitalist reproduction
• Long wave approach is vindicated by historical
data
Prerequisites to overcome the crisis:
Rise in Profitability
– Increase profits
– Devalue capital invested
•
•
•
•
Innovations
Mergers and acquisitions
Privatization of state enterprises
War
bibliography
• Bowles S., Gordon D. and T. Weiskopf. (1983) Beyond the Wasteland: A
Democratic Alternative to Economic Decline . Garden City, NY:
Doubleday.
• Glyn A. and B. Sutcliffe. (1972). British Capitalism, Workers and the Profit
Squeeze. London: Penguin Books.
• Klein N. (2007). The Shock Doctrine: The Rise of Disaster Capitalism.
New York: Metropolitan Books/Henry Holt and Company.
• Shaikh A. (1978). An Introduction to the History of Crisis Theories. U.S.
Capitalism in Crisis, U.R.P.E., New York
• Shaikh A. (1989). The Current Economic Crisis: Causes and Implications.
Detroit, MI: Against the Current Pamphlet.
• Shaikh A. (1999). “Explaining the Global Economic Crisis: A Critique of
Brenner,” Historical Materialism, 5.
• Tsoulfidis L. (2010). Competing Schools of Economic Thought. Springer
Thank you for your time
and attention