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      Global Reset: The Role of Investment, Profitability, and Imperial Dynamics as Drivers of the Rise and Relative Decline of the United States, 1929–2019

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            Abstract

            A new world order is taking shape as a result of the relative decline of the United States (US) and other Western economies. An important aspect of relative decline is a progressive secular slowing down of productivity growth. Another is the way US development has been shaped and to some extent offset by international resource transfers. To explain these phenomena, attention is paid to the role of profitability as a driver of productivity and investment and global hegemony as a driver of international resource transfers. Particular attention is paid to an empirical analysis of the profitability of the US corporate non-financial sector and the existence of a secular decline in profitability since the mid-1960s interrupted only by the upward phases of a series of shorter-term economic cycles. Attention is also paid to the role of financial investments and some of the international resource transfers that have shaped, offset, and contained relative economic decline. An analysis of these trends frame and explain epochal changes in the dynamics and map of uneven and combined development and the likelihood of a global reset as the centre of world development shifts to Asia and the Eurasian continent.

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            Author and article information

            Journal
            10.2307/j50005553
            worlrevipoliecon
            World Review of Political Economy
            Pluto Journals
            2042-891X
            2042-8928
            1 April 2021
            : 12
            : 1 ( doiID: 10.13169/worlrevipoliecon.12.issue-1 )
            : 50-85
            Article
            worlrevipoliecon.12.1.0050
            10.13169/worlrevipoliecon.12.1.0050
            a1652067-c4cc-4b94-994b-86222ba00e3f
            © 2021 World Association for Political Economy

            All content is freely available without charge to users or their institutions. Users are allowed to read, download, copy, distribute, print, search, or link to the full texts of the articles in this journal without asking prior permission of the publisher or the author. Articles published in the journal are distributed under a http://creativecommons.org/licenses/by/4.0/.

            History
            Custom metadata
            eng

            Political economics
            uneven and combined development,financialization imperialism,profitability,capital accumulation,productivity slowdown

            Notes

            1. The claim that productivity statistics do not incorporate quality improvements cannot be used just to explain recent trends. In the past, quality improvements were also a characteristic of product development, and past progress was understated by real GDP estimates (Gordon 2016, 556–557). Official GDP estimates have increased due to changes in methodology and imputations for non-traded goods and services, such as the rent that homeowners would have to pay if they rented their own homes. Imputations reached 14.8% of GDP by 2006 (Bureau of Economic Analysis 2007).

            2. This view differs from endogenous growth theories: instead of attributing growth to knowledge and investment in intangible R&D and human capital, a central role is attributed to their combination with tangible investments in plant and equipment. Empirical research shows that “the great preponderance of economic growth in the US since 1947 involves the replication of existing technologies through investment in equipment, structures, and software and expansion of the labour force” (Jorgenson, Ho, and Samuels 2014).

            3. As Grossmann ([1929]1992, 101–104) pointed out, it is the tendency of the mass of surplus-value or of profit (which generally increases) to increase at a slower rate relative to the total capital employed that matters: in this sense, the rate of profit is merely an index revealing a fall in the mass of profits relative to the accumulated mass of capital, relative to the sum required to valorize the mass of capital advanced and relative to the sum required to maintain existing assets and fund new productivity-increasing investments. Clearly, in conditions of overaccumulation a major crisis resulting in the destruction of accumulated capital would resolve the problem. This diagnosis is reflected in some neoclassical studies. For McGowan and Andrews (2016) insolvency regimes that do not secure an orderly exit of inefficient firms hamper productivity growth.

            4. Recently, the measurement of Gross Fixed Capital Formation has changed with the reclassification of some types of intangible expenditure, which have increased in relative importance as investment. Corrado, Hulten, and Sichel (2009) have claimed that computerized information usually measured by software, innovative property starting with R&D and economic competencies such as advertising, marketing, training and organization that were formerly classified as operational expenses (circulating capital) should be classified as fixed capital. Of these activities the last two are not substitutes for the capital investment in technology, plant, equipment and infrastructure that transform much R&D, innovation and investment in human resources into higher productivity. These intangible assets (goodwill, for example) are sometimes used to warrant the excess of a company's stock market valuation over the book value of its assets (Mullan 2017).

            5. In 2015 the 500 largest American companies held more than $2.1 trillion in accumulated profits offshore to avoid US taxes. See “Big U.S. Firms Hold $2.1 Trillion Overseas to Avoid Taxes: Study.” Reuters Staff. Accessed January 2, 2021. https://www.reuters.com/article/us-usa-tax-offshore-iduskcn0s008u20151006.

            6. As most trade and finance are denominated in dollars, just about every country in the world is subject to US commercial rules and must operate through the US banking system, enabling the US to threaten them, sanction them and impose not inconsiderable economic and social costs if they do not defer to US interests.

            7. Brzezinski (1970, 28) approvingly cited a 1968 article announcing that “the nationstate as a fundamental unit of man's organized life has ceased to be the principal creative force: international banks and multinational corporations are acting and planning in terms that are far in advance of the political concepts of the nation-state.”

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