Profitability Capital Accumulation and Crisis in the Greek Economy 1958–2009: a Marxist Analysis

Abstract

This study examines the behavior of the main Marxian variables in the postwar Greek economy. The different phases of the capital accumulation process are distinguished and analyzed according to the movement of the rate of profit. The ‘golden age’ of the 1958–74 period of high profitability and strong growth was followed by the stagflation crisis of the 1970s and early 1980s. After 1985, and especially after 1991, the ‘neoliberal solution’ to the crisis resulted in a modest recovery of profitability, capital accumulation and output growth based exclusively on the huge increase in the rate of exploitation for labor. When the stimulus to aggregate demand provided from debt driven personal consumption and state deficit spending was removed, the underlying structural crisis in the real economy manifested itself fully in 2009 and after.

Notes

¹Devine (1987) and Shaikh (1978) provide an overview of Marxist theories of crisis.

²Especially in Europe, the role of the European Central Bank and its restrictive monetary policy along with the lack of a sizeable budget in the Eurozone are often emphasized as the causes for slow growth by Keynesian and Post-Keynesian authors, and leftist political parties.

³See also Cronin (2001) and Maniatis (1996, 2005) for earlier applications of this method in the New Zealand and Greek economies.

⁴Those include mining and quarrying, manufacturing, electricity, gas and water supply, construction, hotels and restaurants, transportation and communication, health, education and other community, social and personal service activities.

⁵This follows closely the definition of net value added in Shaikh & Tonak (1994), which is based on the Marxian notion that value is created in the production sphere and then it is realized in the circulation and the financial sphere without changing its aggregate magnitude. In the circulation and realization of the total social product, the costs incurred in the trade and financial sectors (wages, materials, etc) are regarded as deductions, paid from the surplus value created in production.

⁶In Greek National Accounts, self-employment income and income of unincorporated enterprises are reported together with profits and other property income in the category, Gross operating surplus/mixed income. Therefore, we have to adjust this latter category in such a way so as to reflect only the appropriate measure of profits.

⁷Since, , it is obvious that the two ratios move in the same direction.

⁸Note the difference in the magnitude of the two measures in the two axes. The rate of exploitation is generally much higher than the profit share.

⁹Real wages rose somewhat even in 2009, the first full year of the crisis, but they have fallen dramatically in the three years that followed.

¹⁰If we abstract from unproductive costs other than unproductive labor (U), this relation can also be expressed in the following way: Π/W = (S – U)/(U + V) = (S/V – U/V)/(1 + U/V).

¹¹Of course, production services such as transportation and telecommunications increased as well.

¹²As shown in Figure 7 above, the organic composition of capital (K/V*) rose even more than the capital output ratio (K/Y) for the entire period.

¹³Brenner (2006) calls this process ‘asset price Keynesianism’; Bellofiore & Halevi (2010) call it ‘privatized financial Keynesianism’.

¹⁴For the 1995–2010 period, public revenues in Greece were on average 6% lower than those in the EU-15. They were also 6.5% lower than public expenditures, thus creating an equivalent average annual public deficit over the same period, accumulated as public debt.

¹⁵See Camara (2007) for Spain, and Marquetti et al. (2010) for Brazil. The period covered by those studies ends in 2001 and 2003 respectively, so further comparisons regarding the outbreak of the crisis are not possible.

¹⁶See, though, Moseley (1988) and Shaikh (1987) for different explanations of that crisis.

¹⁷Dumenil & Levy (2010) argue that the cause of the crisis is different each time. Their view of the current crisis as one of overconsumption, underaccumulation and ‘crisis of financial hegemony’ is meant to explain primarily the US case and appears to be of limited help in explaining the postwar trajectory of the Greek economy.