Capital investment debate continues

Thanks, Lynn, for your extensive reply to my letter in Socialism Today No.163. Unfortunately I think the serious point I made has been avoided.

My point was simple and clear; that your suggestion that US capital investment had been on the decline since the early 1980s was factually incorrect. It isn’t true. The data I cited was US non-residential private investment (NRPI).

You suggest NRPI is an ‘inappropriate’ measure of investment and dismiss it as a ‘relatively volatile indicator’. Growth of capital stock, in your view, is the ‘more revealing’ and correct indicator. NRPI isn’t an ‘indicator’ of anything, it is the rate of US capitalist investment for that economy measured in dollar terms and is accepted by every Marxist economist I know of.

You remark there were ‘sharp (but short lived) rises’ in investment after 1980 without elaboration and that can be misleading. Readers should examine the graph I supplied closely as one of the ‘sharp’ rises (in the early 1980s when you claim they were declining) was, I repeat, the highest ever recorded in the history of US capitalism.

Investment declined gradually towards the end of the 1980s, recovered strongly in the late 1990s to 2000, before falling sharply due to recession. It was very low on average in 2002-2007. It recovered sharply prior to the 2007 crisis, tracking a spurt in the rate of profit which had been declining after peaking in 1997. My subsidiary point about the falling rate of profit was totally avoided.

The rate of net US capital investment 1983-2001 was 64% of after tax profits, above the average of 61% for 1947-1978. There wasn’t a historical decline in average investment for nearly two decades prior to 2001.

There was an explosion of speculative financial investment at the turn of the century precisely because capital investment was so low in the first decade of the 2000s.

There has been low capital accumulation over the whole period but why? Falling investment for periods after the 1980s is the formal reason for it but what caused this?

You suggested fixed capital formation (see chart) has been in progressive decline since 1980 but it mirrors investment closely. It actually increased in the mid-1980s. The growth rate of US capital stock declines at the end of the 1980s as neoliberal policies began to bite. So I think my critical point holds on the evidence of both sets of data.

Could you explain what you mean by a crisis in capitalist accumulation? I haven’t come across a rounded out explanation in previous issues. What role does the historic fall in the rate of profit play in this process?

Bruce Wallace, Scotland