The Effect of Neoliberalism on the Fall in the Rate of Profit in Business Cycles

Erdogan Bakir and Al Campbell
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Erdogan Bakir: Department of Economics, University of Utah, 1645 Campus Center Dr. Room 308, Salt Lake City, UT 84112-9300, USA, bakir@economics.utah.edu
Al Campbell: Department of Economics, University of Utah, 1645 Campus Center Dr. Room 308, Salt Lake City, UT 84112-9300, USA, al@economics.utah.edu

Review of Radical Political Economics, 2006, vol. 38, issue 3, 365-373

Abstract: In 1979, Tom Weisskopf found that the crucial late-expansion period of the business cycle, in which the output continues to expand but the profit rate begins to fall, was best explained for his 1949-1975 U.S. data as a result of increasing real wage gains higher than real productivity gains. This led to a profit share decrease that was the primary cause of the cyclical decline in the profit rate. In this work, we extend Weisskopf’s analysis through 2001 and find an important change. Although the fall in the profit share continued to be the key to the fall in the profit rate, unfavorable shifts under neoliberalism in price ratios replaced his earlier (real) wage squeeze. This result is consistent with and supports the generally accepted economic stylized fact of decreased power of workers under neoliberalism.

Keywords: rate of profit; business cycle; Marxian crisis theory; wage squeeze (search for similar items in EconPapers)
Date: 2006
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