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29 August 2010


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Michael Roberts

Just saw your piece in the Guardain on the US lack of recovery. Agree entirely. Indeed, I have just posted the following on my blog which you may like to pick up at:
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Michael Roberts

Capitalism still on its knees
October 15, 2010

In article in the UK’s Guardian newspaper, Thursday 14 October, John Ross makes the telling point that the reason for the snail’s pace in economic recovery since the Great Recession finished in mid-2009 is one of under-investment not under-consumption (http://www.guardian.co.uk/commentisfree/cifamerica/2010/oct/14/currency-wars-dollar-renminbi-exchange-tarrifs).

As he says about the US economy; “At the recession’s core is a US investment collapse. Since it began, household and government consumption has risen by $504bn, while private fixed investment has fallen by $483bn: the US economy remains in recession solely due to this investment decline.”

Indeed, I estimate that US private investment as a share of GDP is at a post-war low of under 12%, or 20% below its historic average.

It’s the same story with the UK. I checked the data and since end-2007, household and government consumption is up £21bn ,or 7%, while fixed investment is down £12bn , or 19%.

It is not as if US and UK corporations are not making profits. In 2009, US domestic profits rose $420bn, while incomes for everybody else fell $377bn. But they are not investing – at least not in real assets (instead there’s even more speculation in stocks, bonds and commodities).

That’s because although profits are up, profitability on existing capital is still too low (there was so much dead capital and debt built up before). This is a point I made in a recent post (Greenspan gets it, 8 October 2010).

Capitalism still cannot get off its knees. It’s time for state investment to get recovery under way. That requires bringing the banks and major industrial companies under state ownership and control to plan productive investment.

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John Ross

  • Is Senior Fellow at Chongyang Institute for Financial Studies, Renmin University of China

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