Download Capitalism without Capital: Accounting for the crash by Alan Shipman PDF

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By Alan Shipman

An strange consensus has built between economists that the 'long increase' prior to 2008, and the following concern and recession, resulted from a world way over capital. Over-supply of saving force down capital expenditures, encouraging excessively dicy funding and fighting the scrapping of superseded plant. Capital's inexorable progress is usually blamed for a chronic squeeze on wages, emerging elite wealth and irritating international inequality. This e-book explores the most obvious conflict among such arguments and real measurements of capital, which exhibit a small and shrinking 'productive' part, and a deepening disconnection among capital accumulation and financial development. It strains the clash to the continuing absence of constant definitions or measurements of capital, and overlook of the complicated connection among mixture capital and wealth. Capital 'gains' and 'losses', and the becoming domination of source of revenue statements by means of stability sheets, undermine makes an attempt to evade the matter by means of reconstituting economics as a approach of flows.

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Canada exhibits a flatter version of the European U-shape, its capital–income ratio dropping from around 550% in 1920 to slightly over 300% in the 1970s but rebounding above 400% by 2010. By equating wealth to capital, and reinterpreting theories linking capital to economic growth, Piketty provides a new explanation for the Western world’s rising inequality of wealth and income. g. g. Stiglitz 2013). In parallel, empirical work on social mobility found that it was slowing down, and even starting to reverse, in parts of Europe that has practised ‘social democracy’ as well as in the US ‘land of opportunity’.

But it is an uncomfortable assumption on which to base an analysis which goes on to show how the capital– income ratio has in fact varied substantially over time. The discrepancy occurs because Piketty has applied a one-sector growth model to economies that consist of many sectors and thereby elided the conceptual distinction between capital as a physical stock and as a financial stock. By assuming only one capital good K producing (along with labour) all the national income Y, Harrod and Domar avoided the problem of aggregating heterogeneous capital goods using a monetary measure.

Financialization becomes a problem if the rate of interest on savings (i) matches or exceeds the rate of profit (r). It will then be more rewarding for individuals and businesses to save any surplus income, receiving compound interest, than to invest it for the much more uncertain returns on equity or debt. Classical and neoclassical approaches recognize that r must be substantially higher than i to induce investment, with the differential offsetting risk so that expected returns to investment are at last as great as those to saving.

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