New PDF release: Capitalism without Capital: Accounting for the crash

New PDF release: Capitalism without Capital: Accounting for the crash

By Alan Shipman

An strange consensus has constructed between economists that the 'long growth' earlier than 2008, and the next drawback and recession, resulted from a world far more than capital. Over-supply of saving force down capital charges, encouraging excessively dicy funding and combating the scrapping of outdated plant. Capital's inexorable progress is usually blamed for a chronic squeeze on wages, emerging elite wealth and irritating worldwide inequality. This booklet explores the most obvious conflict among such arguments and real measurements of capital, which express a small and shrinking 'productive' part, and a deepening disconnection among capital accumulation and fiscal progress. It strains the clash to the continuing absence of constant definitions or measurements of capital, and forget of the complicated connection among mixture capital and wealth. Capital 'gains' and 'losses', and the turning out to be domination of source of revenue statements through stability sheets, undermine makes an attempt to stay away from the matter by way of reconstituting economics as a approach of flows.

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Extra info for Capitalism without Capital: Accounting for the crash

Sample text

Conventional economic theory (and a number of radical alternatives, including Marxian theories) assume that the return on capital r will fall as the quantity of capital K rises in relation to national income – an assumption that Piketty endorses (2014: 215–16). 38 Capitalism without Capital With elasticity of substitution of 1 (or below), any rise in β will be offset (or more than offset) by a fall in r, so that capital’s income share α stays unchanged (or declines). To arrive at the steady rise in α since the 1970s – which occurs across the high-income economies, according to Piketty’s calculations – it must be assumed that accumulation of capital K does not significantly reduce the return on capital r.

The word is subtly slipped in to GSG presentations (and the summary of them in this chapter), mainly when a country’s import of saving is described as ‘capital inflow’, creating a surplus on its ‘capital account’ which must (by accounting definition) match the deficit in its current account. For a savings glut to turn onto a capital glut, two further steps are necessary. Savings must turn into investment, and investment must result in net additions to the capital stock. Both of these mechanisms were for a long time central to economic thought, but have taken a battering in recent reassessments.

Savings must turn into investment, and investment must result in net additions to the capital stock. Both of these mechanisms were for a long time central to economic thought, but have taken a battering in recent reassessments. 2 A Still More Obvious Excess: Capital as Wealth Saving may not translate easily into the ‘real’ investment required to expand production, but it is the basis for personal investment aimed at securing some of the income from production. And whereas physical capital assets depreciate, requiring investment simply to maintain them, financial assets have the potential to appreciate, allowing fortunes to expand even if their income flows partly to consumption as well as reinvestment.

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