The Need for Crowding out Capitalism and Collective Capital Formation Klaus Hagendorf
[email protected] Université Paris Ouest – Nanterre, La Défense, April 2011
Figure 1: The Need for Crowding out Capitalism
The Need for Crowding out Capitalism Net-Investment as % of Net Profits : Germany 1950-2010 Net-Investment as % of Net Profits
Unemployment as % of Civilian Employees
90,00%
12,00%
80,00% 10,00%
60,00%
8,00%
50,00% 6,00% 40,00% 30,00%
4,00%
Unemployment Rate
Net-Investment/Net-Profits
70,00%
20,00% 2,00% 10,00% 0,00% 1950
1960
1970
1980
1990
2000
0,00% 2010
Year
Source: OECD and Federal Statistical Office, own calculations. The Figure 1 above shows the typical pattern of financial capitalism for the case of Germany. After WWII and the currency reform of 1948 there was - after an adjustment period of a couple of years a relatively high use of net profits for new net investment which led to a period of full employment. However, with maturating capitalism it became more profitable to export capital instead of facing trade unions demanding economic democracy.
1
The decline of the percentage of net profits used for new investment is strongly negatively correlated with the increase of unemployment. The decisions of finance capital and the monetary authorities, in particular the German Central Bank led to severe recessions. The ups and downs of the red curve are not the results of the economic machine but are the decisions of the German finance capitalists. Rudolf Hilferding in his Finance Capital (1910) has brilliantly analysed these monopoly capitalistic strategies. The trend observed for Germany is typical for other European and Western Countries. It is the result of the high concentration of productive wealth in the hands of a few. The response of labour must be, to take over the control of the profits which are the results of labour. Those profits have to be reinvested in order to maintain and increase the productivity of labour and to prevent unemployment. The obligation for the labour movement is to create the democratic institutions to introduce collective capital formation via workers earnings investment funds and other means and to assure the control of investments in the economy. Figure 2: The Investment Gap as Part of the Compensation of Employees
Net-Investment as % of Net Profits Germany 1950-2010 Net-Investment as % of Net Profits Investment Gap as % of Compensation of Employees 100,00%
Net-Investment/Net-Profits
90,00% 80,00% 70,00% 60,00% 50,00% 40,00% 30,00% 20,00% 10,00% 0,00% 1950
1960
1970
1980
Year
2
1990
2000
2010
The second Figure shows that the investment gap (the part of net profits which is not reinvested) as part of the compensation of employees is increasing in the case of Germany for 40 years by now. It is high time that the labour movement takes action and that the left political parties recognize that it is not over-accumulation (over-investment) which creates the economic miseries but the misuse of the returns to capital for capitalist imperialist strategies and capitalist consumption instead of being used for the improvements of working conditions. The capitalist mode of production has to be overcome. Collective capital formation is the essential element in this as it breaks the ultima ratio of the capitalists, the supply of capital.
Further Evidence from other Western Economies The U.S. Economy 1970 – 2010
The Need for Crowding out Capitalism Net-Investment as % of Net Profits : U.S. 1970-2009 Net-Investment as % of Net Profits 50%
Unemployment as % of Civilian Employees 12% 10%
40% 35%
8%
30% 25%
6%
20% 4%
15% 10%
2%
5% 0% 1970
1975
1980
1985
1990
Year
Sources: OECD
3
1995
2000
2005
0% 2010
Unemployment Rate
Net-Investment/Net-Profits
45%
The UK Economy 1970 – 2010
The Need for Crowding out Capitalism Net-Investment as % of Net Profits : U.K. 1970-2009 Net-Investment as % of Net Profits Unemployment as % of Civilian Employees
14% 12%
50%
10%
40%
8% 30% 6% 20%
4%
10%
2%
0% 1970
1975
1980
1985
1990
Year
1995
2000
2005
Unemployment Rate
Net-Investment/Net-Profits
60%
0% 2010
The French Economy 1955 – 2010 When the French ratio of net investment/profits is somewhat above the average of Western countries this is due to a stronger growth of the labour force. The same is true for Canada.
The Need for Crowding out Capitalism Net-Investment as % of Net Profits : France 1955-2010 Net-Investment as % of Net Profits Unemployment as % of Civilian Employees
12%
60%
10%
50%
8%
40%
6%
30%
4%
20%
2%
10% 0% 1955
0% 1965
1975
1985
Year
4
1995
2005
Unemployment Rate
Net-Investment/Net-Profits
70%
The Canadian Economy 1970 – 2010
The Need for Crowding out Capitalism Net-Investment as % of Net Profits : Canada 1970-2009 Unemployment as % of Civilian Employees
60%
14%
50%
12% 10%
40%
8% 30% 6% 20%
4%
10% 0% 1970
Unemployment Rate
Net-Investment/Net-Profits
Net-Investment as % of Net Profits
2%
1975
1980
1985
1990
1995
2000
2005
0% 2010
Year
The Italian Economy 1970 – 2010
The Need for Crowding out Capitalism Net-Investment as % of Net Profits : Italy 1970-2009 Net-Investment as % of Net Profits Unemployment as % of Civilian Employees
14%
45%
12%
40% 35%
10%
30%
8%
25% 20%
6%
15%
4%
10%
2%
5% 0% 1970
1975
1980
1985
1990
Year
Sources: OECD 5
1995
2000
2005
0% 2010
Unemployment Rate
Net-Investment/Net-Profits
50%
The Japanese Economy 1970 – 2010
The Need for Crowding out Capitalism Net-Investment as % of Net Profits : Japan 1970-2009 Net-Investment as % of Net Profits Unemployment as % of Civilian Employees
6%
70%
5%
60% 4%
50% 40%
3%
30%
2%
20% 1%
10% 0% 1970
1975
1980
1985
1990
Year
1995
2000
2005
Unemployment Rate
Net-Investment/Net-Profits
80%
0% 2010
Sources: OECD
Some of the BRICS Economies In the BRICS economies the trend is quite different. Unfortunately the data is not very good. The Russian Economy 1989 – 2010
100%
Net-Investment as % of Net Profits Unemployment as % of Civilian Employees
14%
80%
12%
60%
10%
40%
8%
20%
6%
0% 1989 -20%
4% 1994
1999
-40%
2004
2009
2% 0%
Year Sources: OECD, UN, Worldbank 6
Unemployment Rate
Net-Investment/Net-Profits
The Need for Crowding out Capitalism Net-Investment as % of Net Profits : Russian Federation 1989-2009
The Indian Economy 1989 – 2010 The Need for Crowding out Capitalism Net-Investment as % of Net Profits : India 1981-2008
Net-Investment/Net-Profits
Unemployment as % of Civilian Employees 5%
45%
5%
40%
4%
35%
4%
30%
3%
25%
3%
20%
2%
15%
2%
10%
1%
5%
1%
0% 1981
Unemployment Rate
Net-Investment as % of Net Profits
50%
0% 1986
1991
1996
2001
2006
Year
The South African Economy 1970 – 2009
The Need for Crowding out Capitalism Net-Investment as % of Net Profits : South Africa 1970-2009 Unemployment as % of Civilian Employees
70%
35%
60%
30%
50%
25%
40%
20%
30%
15%
20%
10%
10%
5%
0% 1970
1975
1980
1985
1990
Year
Sources: OECD, UN, Worldbank Copyright © 2011, Klaus Hagendorf, Paris. 7
1995
2000
2005
0% 2010
Unemployment Rate
Net-Investment/Net-Profits
Net-Investment as % of Net Profits
