July 27, 2020

The U.S. economy hangs on the state ventilator for its survival

Comment on Nathan Tankus on ‘Where do profits come from?’* and Barkley Rosser on ‘Donald Trump's Only Chance’


Macroeconomic profit is not made from a longer labor time, not from higher productivity, not from innovation/creative destruction, not from a lower wage rate, not from more greed, not from exploitation, not from monopoly power, not from risk-taking, not from rent-seeking, not from profit maximization or any other subjective factor, but in the most elementary case of the production-consumption economy from the dissaving/deficit spending of the household sector, i.e. Qm≡−Sm. Starting with a balanced-budget economy, macroeconomic profit presupposes credit/money creation by the banking sector (central bank and commercial banks). Macroeconomic profit has nothing to do with property rights. The Profit Law holds for capitalism and communism.

Accordingly, microeconomic profit is the result of the continuous redistribution of macroeconomic profit between the firms that constitute the business sector. If macroeconomic profit is zero, i.e. if the household sector's budget is balanced, then the sum of microeconomic profits is equal to the sum of microeconomic losses.

In the elementary production-consumption economy with a state sector, macroeconomic profit comes ultimately from the household and state sector’s deficit spending/money creation, i.e. Qm≡(G−T)−Sm.#1-#6

This means that the greater part of the profit in the United States is actually produced by the state. The U.S. economy hangs for a long time already on the state ventilator for its survival. The outstanding amount of public debt is a rough metric for the dysfunctionality of the system.

The policy of deficit-spending/money-creation is ultimately a means of postponing the breakdown of the U.S. economy. Deficit-spending/money-creation is a free lunch for the Oligarchy. Financial wealth grows in lockstep with public debt. Mr. Trump’s current policy will blow up macroeconomic profit to hitherto unimaginable proportions. This, after all, is why the Oligarchy put him into office in the first place.

Egmont Kakarot-Handtke

* Notes on the Crises
#1 Profit
#2 The Levy/Kalecki Profit Equation is false
#3 Truth by definition? The Profit Theory is axiomatically false for 200+ years
#4 The profit theory is false since Adam Smith
#5 Cross-references Profit
#6 Wikimedia AXEC143d The Profit Law with growing complexity