Productivity growth after reading the last Michael Robert's text

 

On his last text on inflation, Michael Roberts addresses the fact of highest productivity in emergent countries than in advanced countries. We celebrate this acknowledgement of the event unfolding, which contradicts schematic dependentism frameworks, and puts a more realistic picture on view. Now what we need to do, is explain why and how that is happening. How come is productivity growing when we have a falling profit rate? Sometimes, the attention on the profit rate as a variable, has made us forgot other variables in which, even if the profit rate had preeminence and precedence over the macroeconomy (assuming that hypothesis as true), the profit rate would and does depend on other variables, in order to fall: for example, a growing organic composition. But the fall in the profit rate, affects precisely investment, just like multinationals have gone from integrating and expanding, to Mergers&Acquisitions, predating each other as competitors, or predating smaller capitals and speculating, instead of investing, expanding and integrating. That has produced a fall in gross capital formation and gross fixed capital formation (specially the former: a bigger reduction in inventories than in fixed assets). This obviously produces a countertendency to the fall in the profit rate. This might explain why we haven’t gotten into a full depression, or why has it lasted so long since 2007/8: we’re not saying the profit rate stopped falling, as a tendency, but that this fall in capital formation is a countertendency that might have softened or pressured back in the opposite direction of the historical fall in the profit rate. The fall in the profit rate itself, produces a reduction in investment, which produces a countertendency to it’s own cause, de-accelerating or slowing down the fall.

The variable capital share of total expenses (compensations) has grown in Europe and Latin America. That means the labor share is growing with respect to total capital advanced. But the share of Subsaharan Africa, the Middle East and North Africa and Latin America’s compensations and variable capital expenses, is much bigger compared to capital-intensive regions like North America and Europe (gradually also East Asia and the Pacific). Also, unemployment has grown along with the fall in investment and capital formation, which should reduce the labor component instead of constant capital. But also capital formation and fixed capital formation have been much bigger in low and middle income countries than high income, or in regions like Subsaharan Africa, East Asia and Pacific, and Middle East and North Africa, within the overall decreasing trend itself of both variables. This happens specially during the first decade of the XXI century, while the second decade turns into a relative fall for all regions alike throughout the world, that never recovered the world average of past points.

That means Europe and Latin America are actually in the opposite trend than a growth in organic composition. It also means a bigger exploitation rate for those regions. But Europe has more constant capital than Latin America, and has increased its fixed capital formation: Europe is increasing its labor share from the perspective of a capital intensive economy, and Latin America is also increasing its labor share, but from the perspective of a labor intensive economy with backwards constant capital. That creates two completely different scenarios: the productivity growth is based mainly on a reduction of reproduction, investment and accumulation, which augments the labor component, or at least, as a minimum, reduces capital and fixed capital formation. Actually, the overall trend is for rising unemployment and a downwards capital formation, so in terms of low, middle and high income countries, the XXI century saw the rise of middle income countries in terms of capital formation, just to slow down with the others in the overall at the turn of the second decade, just like in the constrained expanded reproduction Mandel elaborated. But even still, the first places are for middle and low income countries, even during this slowing down. Those were the regions which slowly removed high income countries from the top of the capital formation indicator, and are now at par with high income countries in  terms of capital formation. That means the growth in productivity is really based on a contraction of reproduction, mainly, but also, just like in any productivity boost, there’s also an increasing organic composition, which is basically, the industrialization of the “Third World” itself: a reduction in necessary labor against surplus labor, based on augmenting its constant capital component. This is not reducing their bigger share of labor compared  to high income countries, but it’s a contradictory pressure. 

The difference in the inverted relationship between the organic compositions of high income countries, and the organic compositions of middle and low income countries: since the lower and middle income countries have a bigger labor component, they can contract their investment in capital and fixed capital formation, and at the same time, doing it in a smaller proportion than the contraction of labor through unemployment. So the lower and middle income countries are contracting their investment as well, but in a smaller proportion related to constant capital, and on a bigger proportion in terms of labor. Since it has more than double the share of labour than high income countries, it won't change its position as labor-intensive processes, or regions with a backwards organic composition. This contraction but in a smaller proportion, helps them increase their positions internationally in terms of capital and fixed capital formation, although with receding labor shares at the same time. The bigger reduction is in terms of labor, obviously, through higher unemployment.