Going out of the Great Recession? Contrast between the United States and Europe: Proposed work from economic history, 1960–2014

ABSTRACT

In recent work, the authors have proposed to the United States a model that explains the trend behavior of the rate of profit from share surplus, capital productivity, and the coefficient of financialization. The main results of the explanatory model allow the authors to affirm that with the change of control of Keynesianism to neoliberalism since 1980, there has been a substantial fall in the profit rate to half the values achieved in the years of Keynesian regulation (1945–1973). This significant fall in the level of benefits is due to a substantial fall in capital productivity. The authors are currently working on adapting the explanatory model for the U.S. economy to the main countries of the European Union (Germany, France, Italy, United Kingdom, and Spain). The results show that the pattern of behavior of the variables described in the reference country—the world capitalist economic system, the United States—is repeated more or less precisely in the main countries of the European Union; Germany, France, Italy, United Kingdom, and Spain.

KEYWORDS:

• Economic growth since 1945
• economic history
• European union
• Keynesian economics
• United States

JEL CLASSIFICATION:

• B22
• B23
• E12
• N12
• N24

Notes

¹The works of Sylos Labini (1984) enable us to construct a timeline of the different regulation trends between 1929 and 2010, which includes two major accumulation crises:

• The 1929 crisis: In terms of income distribution equilibrium, this was a demand crisis resulting from the excessive rise in profits as a proportion of national income. As a result, the contribution of wages to national income fell, driving down consumption and sparking a crisis due to insufficient demand.

• The 1970s–1980s crisis: In stark contrast to the 1929 crisis, company wages and production costs increased (due to the 1973 and 1979–1980 oil shocks), leading to an investment crisis because of lower profits.

The more recent works by Flassbeck (2012, 2014) were inspired by Sylos Labini’s approach.

²The 2013 European Commission report, Research and Innovation Performance in the EU: Innovation Union Progress at Country Level 2014, highlights the surprising fact that the European Union economies are following a similar structural-change dynamic to the US economy.

³Statistical measurements of K are always dubious (which may induce relative results in capital productivity). In spite of this, we decided to use the data chosen as a proxy for our calculations.

⁴Online database available at: http://ec.europa.eu/economy_finance/ameco/user/serie/SelectSerie.cfm.

⁵We argue that the variable q can predict GDP falls and recoveries based on whether its value is within its equilibrium range (q*), so in Figure 1 we have used q as the key variable that determines the business cycle and the rate of profit (r) as the key variable that determines a change to the effective regulation model.

Additional information

Notes on contributors

Carles Manera

Carles Manera, Ferran Navinés, and Javier Franconetti are with the Universitat de les Illes Balears, Palma de Mallorca, Spain.

Ferran Navinés

Carles Manera, Ferran Navinés, and Javier Franconetti are with the Universitat de les Illes Balears, Palma de Mallorca, Spain.

Javier Franconetti

Carles Manera, Ferran Navinés, and Javier Franconetti are with the Universitat de les Illes Balears, Palma de Mallorca, Spain.