Brenner On Distribution

This paper discusses one important component of the analysis of the decline of the profit rate in the recent decades in Robert Brenner’s Economics of Global Turbulence. Our single focus in this paper is Brenner’s implicit theory of distribution. It must be emphasized from the outset that the present discussion does not question the central role given by Brenner to the profit rate in his investigation of the crisis which began in the 1970s. There is now a significant convergence among Marxists concerning the decline of the profit rate, diminished accumulation rates, and the slowdown of labor productivity— in the US as well in major capitalist countries. In combination with the reassertion of the power of financial capital within Neoliberalism and the threat of a major financial crisis, these developments have sparked new interest in Marxist economics and Marxism in general. One can distinguish between two components in Brenner’s approach to the decline of the profit rate. A first aspect, to which he devotes much attention, concerns competition within manufacturing industries among major capitalist countries. The second aspect is Brenner’s analysis of distribution. A discussion of the model underlying Brenner’s treatment of competition is presented in G. Duménil, M. Glick, D. Lévy, 1999. We contend that Brenner’s analysis of competition is based on an arbitrary assertion concerning the determination of prices, and an unconvincing argument concerning the extension of the fall of the profit rate to the entire economy. We will abstract here from these difficulties. The central point in this paper is that Brenner resurrects, at least implicitly, a quite specific theory of wage determination, that of Michael Kalecki. The thesis is that the real wage or the wage share are functions of the “intensity” of competition among producers. Why is the issue of distribution so crucial in Brenner’s analysis? The answer is straightforward. Price competition among firms within one industry can diminish the profit rate of this industry. If Brenner’s analysis stopped at this point, there would be no need to further the investigation. However, this lower than “normal” price will benefit other agents, either firms within other industries or wage earners, and Brenner is quite aware of this difficulty, which prohibits the direct extension of the decline of the profit rate to the entire economy. Brenner’s way out is that the profit rate for the entire economy will decline, following a competitive warfare within one industry, if and only if wage-earners benefit to some extent from this diminished price. Thus, the real wage becomes a central variable in his demonstration. Outside of his theoretical framework of section II of chapter one, i.e., in his historical-empirical investigation, the bulk of his study, Brenner does not consider the movements of the real wage. The central variable becomes the mark-up rate. It is because firms cannot mark up over costs that both the real wage and the wage share increase, and this is what explains the fall of the profit rate. Section 1 first presents several of Brenner’s references to the real wage and to the mark-up rate as sketched above. Then, we examine how he contrasts his interpretation with that of “supply-siders”. Among supply-siders, Brenner criticizes economists explaining the decline of the profit rate by a profit squeeze while he, himself, accounts for the falling profit rate by the decline of the mark-up rate, i.e., the rise of the wage share! The difference is that he does not see the cause of the rise of wages in the pressure exerted by workers, but in the competition among producers which contributes to diminish prices. Very little is said about those who emphasize the transformation of technical change, except to observe that capital productivity (in real terms) hardly declined for the entire economy. Although no sophisticated empirical investigation is undertaken in the present paper, the first section finally examines the core of Brenner’s demonstration: the empirical profile of the mark-up rate within US Manufacturing since World War II. It turns out that the decline of the productivity of capital explains to a significantly larger extent the decline of the profit rate than the share of profits. The discussion in section 2 is strictly theoretical. We compare two frameworks: (1) that of KaleckiBrenner, in which the intensity of competition fixes the mark-up rate and the wage rate; (2) the classical-Marxian analysis, in which the real wage is determined “exogenously”, i.e., by a variety of circumstances, political, social, and economic. The Kaleckian framework assumes a given productive capacity (larger than demand levels), i.e., it is a short-term model. We show in the appendix why we do not accept this model, which is not compatible with the consideration of investment and capital accumulation, and profit rate maximizing, as in the classical-Marxian model. It can certainly not be used in an historical-empirical investigation such as that of Brenner. In section 3, before restating our own view of wage determination and of the profit share, we recall, for comparison, Marx’s analysis in Capital. Marxists, in general, emphasize the role of workers’ wage pressure on their employers. To this basic mechanism, one must add the importance of the