5 - Capital accumulation and the realization of profits
Published online by Cambridge University Press: 21 September 2009
Summary
At the aggregate level the tendency towards SOMP will tend to result in an increasingly higher proportion of private disposable income being controlled by the corporate sector; a direct product of the appearance and growth of (direct and indirect) shareholding. Ceteris paribus this will tend to result in an increasingly higher proportion of private disposable income being retained within the corporate sector, in the form of corporate retained earnings and/or the net inflow to life and pension funds. With less than perfect substitutability between personal and corporate saving, the above will tend to reduce the share of consumers' expenditure to private disposable income. In this sense the tendency towards SOMP will tend to introduce an underconsumptionist tendency in advanced capitalist economies, a situation where consumers' expenditure is insufficient to buy the full capacity (consumption goods) product of the corporate sector.
An underconsumptionist tendency contains the seeds of a realization failure, a situation where the total effective demand of the private sector, consumption plus investment, is insufficient to absorb the full capacity (consumption and production goods) product of the corporate sector, thus failing to realize the potential profits of firms. The above need not be the case if private investment increases sufficiently to compensate for the tendency of consumption to decline. Assuming that capitalist firms produce for profits rather than consumption, the latter is a possibility, necessitating the analysis of the determinants of private investment.
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- Corporate CapitalControl, Ownership, Saving and Crisis, pp. 77 - 110Publisher: Cambridge University PressPrint publication year: 1987