Classical Political Economy and the Evolution of Post-War Capitalism

Lefteris Tsoulfidis () and Persefoni Tsaliki

Chapter Chapter 10 in Classical Political Economics and Modern Capitalism, 2019, pp 405-437 from Springer

Abstract: Abstract In this chapter, the movement of the rate of profit is documented on the basis of data of the USA in the post-war period. We find a downward trend in the rate of profit as a result of the rising capital-output ratio measured in both nominal and real terms, and of the rising value composition of capital. The falling rate of profit is intrinsically connected to the economy’s growth rate which also follows a downward trend. The econometric analysis we applied confirms this interconnection and bidirectional causality. We also test the extent to which unproductive expenditures are subject to limitations that restrict their ‘ratchet expansion’. The chapter concludes with the idea that the falling rate of profit past a point should lead to a stagnating mass of real net profits. The testing terrain for this hypothesis is, once again, the US economy: the hypothesis is to what extent and in which time period the evolution of real net profits follows an S-shaped pattern. The empirical analysis uses quarterly data on corporate profits of the US economy in the post-war period. We distinguish two long cycles, one during the period 1947:1–1982:4 and the second in 1983:1–2018:2. The characteristics of these two long cycles are discussed, and an attempt is made to predict the end of the current recessionary period and the beginning of the expansion phase of a new, long cycle.

Keywords: Rate of profit; USA economy; Unproductive expenditures; Real profits; S-shaped pattern; Secular stagnation; Long cycles (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-17967-0_10

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DOI: 10.1007/978-3-030-17967-0_10

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