Re: [ox-en] Robinsonades (was: Re: Role of markets)
- From: adam <adam diamat.org.uk>
- Date: Thu, 11 Sep 2008 16:01:14 +0100
list-en oekonux.org writes:
Paul said that prices have demonstrated an up to 95% correlation with
Any sources for such studies?
Thanks Paul, Franz for the replies and links .
When I asked the question, I was trying to square the above with what
happened in the US financial sector in the 1990s. Below, I have pasted a
chapter from a paper named "US Boom: Triumph of the Paper Economy"
written about that time  ...
The Irresistible Growth of the Financial Sphere
"How, therefore, to reconcile these figures with those relating to GDP
which has grown 19 per cent over the last few years, against 13.5 for
the EU and 6 per cent for Japan?
First of all a clarification is necessary. GDP includes all sectors;
so, for example, a decline in industrial production could be
compensated and annulled by a growth in agriculture, or a decline in
both these sectors could be compensated or annulled by the growth of
the service sector and so on. Thus it is not so risky to assume that
each positive variation in GDP means that an economy is sailing along.
Moreover, numerous parameters are left out of the equation — such as,
for example, expenditure on public health which, if it were included
(even many bourgeois economists admit this), would give a more exact
indication of the real value of wealth creation than GDP claims to
measure. The same argument is also valid when it comes to calculating
the increase in labour productivity. Here the official statistics for
the United States give an annual growth rate of 1.5 per cent for 1996.
Taken as it stands, like the media and a good part of the specialist
press do, such a figure can give a positive impression, but in fact it
can also conceal a simple reduction in real wages that doesn’t
necessarily mean a more efficient economy.
However, there isn’t any room for doubt when it comes to US financial
data and the speculation associated with it over the last decade. Here
the figures show an exponential growth which, if carefully
interpreted, throw more than a few shadows over the present phase of
the American and world economy.
Since 1996 the Dow Jones industrial share index has increased by more
than 70 per cent.
It may be observed that this figure taken by itself does not
necessarily indicate a dangerous speculative tendency. Using this
reasoning, the typical bourgeois economic theorist asks why shouldn’t
the shares of a healthy company that is making a profit increase in
value? And, from their point of view, they could be right if it were
not that the shares of loss-making firms have also risen fantastically
or that their activity has nothing to do with industrial production.
For example, the virtual bookstore Amazon, though in deficit,
"is worth more than all the big American bookstore chains put
together, and Priceline.com, a cheap air ticket sales service, was
worth $11.7 billion the day after its quotation on the stock
market, i.e. more than any other flight company."
The rise is thus indiscriminate and unrelated to the reality of either
a firm’s economic history or the state of its accounts: shares are
bought because their price is increasing and not because the firm
itself is healthy. And it is for this reason that Greenspan, president
of the Fed, is perpetually raising the alarm against "the irrational
exuberance of the markets" -- something confirmed, amongst other
things, by the unbelievable performances registered by the general
Wall Street index in recent years. The Dow Jones, which in 1996 had
reached 6,000, was quoted at 9,000 in March 1998. In March 1999 it had
climbed to 10,000 and was already at 11,000 in May of the same year.
This progression has no comparison in the real economy, seeing that
the current capitalisation of the stock market is equivalent to more
than the 150% of GDP while in 1988, for example, it had hardly reached
50 per cent.
Oddly however, despite the fact that this phenomenon has taken on such
gigantic proportions, when the tendencies at play in the American
economy come to be appraised, it is either omitted altogether or
considered as marginal. Even so, it is only in the light of this that
a coherent explanation of the incongruities in the argument of the
vast majority of bourgeois economists — that the American boom is
rooted in the excellent course of the real economy — can be found. In
fact a sharpening of the tendency towards centralisation of capital is
intrinsic to the development of financial activity. Thus, as is
typical of expansion in speculative and parasitic activity, service
sector and generally menial jobs are growing markedly in the USA
On the material flip side, Annie Leonard in the *Distribution* section
of this presentation ...
... argues that companies
*externalize the costs* of producing commodities, and are no longer in
the business of trying to recoup production costs, let alone produce a
 US Boom: Triumph of the Paper Economy : Giorgio Paolucci
Contact: projekt oekonux.de