The big economic fluctuation, which began with the sub-prime loan crisis, and came to a head with the bankruptcies of Leman Brothers, General Motors and Chrysler, seems to be the greatest world economic crisis since 1929, and be able to be called the World Economic Crisis in 2008(or simply the 2008 Crisis). This paper aims to explain the basic character of the 2008 Crisis. The major points to be discussed are as follows. (1) Is the 2008 Crisis cyclical one as a phase of trade cycle, or a catastrophe like 'a crisis that comes only once in 100 years'? (2) What are the relations between the world financial crisis and the over-accumulation which results in the overproduction crisis? (3) what is the historical meaning of the 2008 Crisis? In other words how will the modern capitalism structurely change after the 2008 Crisis? (1) Tadao KAWAKAMI regards the 2008 Crisis as not only a world economic crisis but also a catastrophe, which arised from the US government stopping to change US dollar into gold in 1971, and has been prepared by US making huge current account deficits and the following enormous volume of speculative money in the world. Originally a crisis as a phase of trade cycle clears off the over-capital, and at the same time changes the precedent regime of accumulation. In this sense the 2008 crisis will transform the global structure of accumulation by strengthening the public control over financial institutions and financial commodities and weakening US hegemony over the world economy, but the author does not agree the world capitalism will fall into a catastrophe just through the 2008 Crisis. (2) Kiyoko IMURA regards the 2008 Crisis as a world-scale big financial crisis, which came from 'the speculative financial activities independent of real economies' that could be appear after the US government stopping to change US dollar into gold in 1971. Makoto ITOH also attaches much importance to financial factors in the 2008 Crisis, refering to Marx's 'the second model of money crisis'. According to the author, a financial crisis is nothing but the result of over-credit which is another expression of over-accumulation. Sub-prime loans, car loans, and other consumer loans, many of which ITOH calls 'financialization of labour-power', are mostly modern forms of over-credit. When financial institutions cannot expand over-credit by the limit of their own capital, over-credit comes to the surface as over-accumulation, which results in over-production and over-export in the real economies. (3) The 2008 Crisis was the first greatest crisis on the global capitalism. The global capitalism stemmed from the big changes in the international monetary system in 1970s, following stagflation and the information-communication revolution, characterized by de-regulation over money, labour and trade. The 2008 Crisis showed the failure of these neo-liberal policies and enormous costs of the crisis. After the crisis, the globalization-orientation will not change, but the global capitalism will have to transform into multipolarized,regulation-acceptable, and more public one. In the middle and long run, the most serious problem to the world economy is the environmental problem, including water, food, energy and other resources. With the 2008 Crisis as a turning point people are expected to be able to control the economy wisely in cooperation.

View full abstract

We focus in this paper on the causes of global economic and financial crisis in 2008 from the viewpoint of the crisis & business cycle theory approach originated by Marx & Kozo Uno. Our conclusion is as follows. American economic prosperity accompanied with the global synchronous prosperity was brought about by superabundant inflow of funds from foreign countries such as mainland China, Europe, Japan and so forth, easy credit policy by FRB, and increased fiscal spending, all of which led to US housing bubble and expanded consumer spending. However, overheating of the global and/or US economy incurred both the bottle-necks in the supply of petroleum, natural resources, grain etc. and the stringency of the labor market. These factors could give rise to an inflationary acceleration in the US economy. To prevent this, FRB began to raise Federal Fund rate successively. On the other hand, profit of US industries reached its peak in 2006 and began to decline since the next year because of a rising trend in unit labor cost and the other unit non-labor costs. It is noteworthy that the declining trend of profit in US industries had began prior to the Rehman Schock in September 2008. The raising of FF rate by FRB necessarily reversed US economy into a recession, but it also invited the collapse of its housing bubble. These results were quite critical: consumer spending decreased abruptly, prices of securitized commodities declined suddenly, sellers of protections in Credit Default Swapping dealing went almost bankrupt and, therefore, many major financial institutions underwent a failure of management, suffering a huge loss. The peak of a series of crises was when Rehman Brothers went bankrupt. Most financial institutions would no longer lend money to other financial ones. Such a massive credit crunch made it impossible for investors and consumers to buy production goods and consumer goods. These economic and financial crises brought about global crises through four channels: credit crunch, a pullout of capital from developing countries, an excessive reduction of import from the US and a global synchronous free fall of stock prices. For the time being, these crises have come to an end, but economic recovery in US and the other advanced countries seems very slow and fragile, as is shown in the case of Dubai shock and Greece fiscal crisis. We must pay attention from now on to the US and the other global economy.

View full abstract

The crisis that has happened on 2008, so called like "Sub-prime Loan Crisis", must be caused by some general and special factors. We could use the theory on capital accumulation that changes in investment and consumption bring about business cycles for analyzing the present crisis. In this case, we should consider about that the factors to decide supply-demand relation of social reproduction are different among the different systems, a closed system and an open system, or a non-imperialism and a imperialism, or Bretton Woods and globalized economy. The world system of the imperialism, they supplemented demand by getting new colonies and territories, dumping exchange rate, increasing customs and the bilateral trade treaty. After the Great Depression and the war, they had built the Bretton Woods system and adapted Keynesian-Social Democrat policies. Keynes insisted that "Socialization of Investment" and "National Self-sufficient". These policies would supplement demand by fiscal policy and keep well export and import balance. But U. S. seceded from this system on 1971 for that they could keep the dollar seigniorage and revive the competitiveness. After that, every country worried about stagflation. Then, new discourse has risen to predominance, and the globalization has developed. This means that a reversal in the supply and demand would happen in the globalized world economy. Though, the present crisis is one of the crisis of capitalism, it has occurred in globalized capitalism without preventing system like Bretton Woods. Booms always happened with speculations, of which forms and contents were different. What is worse, they have weakened Keynesian-Social Democrat policies. We should learn lessons from the experiences of the imperialism, Bretton Woods, the state socialism and globalization for more stable world under the environmental restriction.

View full abstract

The global financial meltdown triggered by the subprime mortgage crisis in the US can never be considered without reference to the difference between the traditional "originate to hold" model of financial intermediation, where loan assets are held by banks till their maturities, and the "originate-to-distribute" model, which is based on the securitization of loan assets. This paper examines how the evolution of a financial system affects the macroeconomy from the perspective of the securitization of loan assets and the resulting shifts in the flow of funds among economic sectors. The examination yielded the following findings and interpretations. First, the sales of loan assets from banks to securities-issuing institutions (represented by the Special Purpose Vehicles, or the Structured Investment Vehicles) and the issuance of securities backed by those loan assets allow illiquid loan assets on the balance sheets of banks to be converted into more liquid assets, such as cash or reserves, thus extending flexibilities in the banks' management of their assets. Second, in case loan assets should be sold from banks to the asset-purchasing entities without issuance of securities backed by those loan assets, there can be no conversion from loan assets to more liquid assets like cash or reserves in the asset column of banks' balance sheets. Third, those institutional practices to enhance the market liquidity of the securities backed by loan assets, and those that facilitate investors to acquire those securities as stores of value, can be considered to lead to greater flexibilities in the banks' management of their assets. Fourth, the liquidity preference of banks can provide relevant perspectives for the reason why banks will sell their loan assets to security-issuing institutions and hold the proceeds from the sales of those assets in liquid form at the cost of interest revenues from loan repayments. From the perspective of this paper, those policies that facilitate securitization of loan assets and, more broadly, securitization of finance, will lead to higher priorities on extending flexibilities in the asset management of financial sectors.

View full abstract

This paper develops three arguments relevant to Marxian exploitation theory. First, it argues on two alternative equilibrium notions proposed in Marxian general equilibrium models: one is the balanced growth equilibrium (BGE) which was originated from von Neumann (1945), while the other is the reproducible solution (RS) proposed by Roemer (1980). Though it is the BGE which has been traditionally taken as canonical, the paper discusses that the RS is more appropriate than the BGE if the Marxian equilibrium notion is to characterize the competitive structure of market economies. Second, the paper provides an alternative elementary proof of the Fundamental Marxian Theorem (FMT) in a simple economic model with 2×2 Leontief input matrix of commodities. Even in such a simple model, the FMT has been usually shown by using an algebraic technique. In contrast, our proof is based a geometric method, which is simpler, more intuitive, and useful as a pedagogical note. Finally, the paper discusses the robustness of the Generalized Commodity Exploitation Theorem (GCET) when the so-called augmented input coefficient matrix M≡A+bL is not necessarily indecomposable. It shows that the GCET holds for every commodity if the matrix M is indecomposable, whereas it holds only for commodities of basic sectors if M is decomposable.

View full abstract

Today, as the market economy progresses, fields such as family care, nursing care, medical care, and childcare are transacted as interpersonal service labor in the market, and wage laborers are becoming increasingly in charge of such services. With regards to this trend, the concept of emotional labor was proposed by Hochschild as something that expresses a feature of interpersonal service labor in contemporary capitalism. Emotional labor aims to create an appropriate mental state in the targeted people (Hochschild). In interpersonal service labor, emotional labor is used for smoothly performing the work concerned, and it is often an essential factor. Emotional labor can be discussed as a series of labor processes consisting of three phases: (1) the emotion of the laborers toward customers; (2) acting as a visible expression of emotion; and (3) the emotion of customers that receive the service concerned. In discussions that focus on emotion, emotion management has often been considered a skill in emotional labor, and it is necessary to pay more attention to (2) acting as a visible expression of emotion. In a wide sense of general labor, emotional labor is performed in the form of nursing care or the like as part of household work. When it becomes associated with commodity economy, interpersonal service takes the form of article of commerce, and it may be provided in the form of selfemployment (for example practicing psychiatrist and psychological counselor), or it may be provided as wage-labor. Even in the same wage labor, there are qualitative differences between emotional labor in standardized customer service that is regulated by a manual, as is represented by fast food restaurant service (type A) and emotional labor by nursing/care personnel or the like (type B). In type B, it is difficult to complete service just by combining surface acting; instead it requires deep acting, unlike type A. In emotional labor by nursing/care personnel or the like (type B), it is necessary to consider the situation in which laborers and customers face each other in the form of multiple laborers versus multiple customers; and group-to-group, instead of one-to-one or individual-to-individual. Since Hochschild's proposal, emotional labor, which has tended to be discussed from the viewpoint of individual-to-individual, needs to be reevaluated from the viewpoint of group-to-group, with capitalistic labor organizations in mind. In emotional labor performed by a labor organization, acting becomes rather theatrical; or in other words, emotional labor is performed cooperatively. While taking a theatrical structure, emotional labor progresses qualitatively. Discussions on emotional labor are considered to have abundant possibilities to elucidate what kinds of features are possessed by labor power that is a commodity closely related to character, and how labor power commodities are formed and function in capitalism.

View full abstract

Kuznets cycle is usually discussed related to the construction and the specific periodicity. But the studies in 1950s and 60s focused on the wider perspective, i.e. the investment shift between the construction and others, the shift between domestic and foreign investments, and the inverse correlation between American and British construction, which were thought to indicate the "Atlantic Economy". This paper revisits the studies on Kuznets cycle with the wider perspective. Section I describes "dynamic innovation-adjustment process" theory by Rostow, "investment shift" by Kuznets and Abramovitz, "pseudo-Juglar" hypothesis by Coppock, counter-cyclicality of housing by Habakkuk and "Atlantic Economy" theory by Thomas. These theories and hypotheses are logically rearranged, and the Kuznets cycle is characterized as the business cycle in global capitalism. Section II examines whether these theories and hypotheses are judged favorably by the data before World War I. The result is that though the investment shift theory cannot be wholly applied to the analysis in each country, Atlantic Economy theory is persuasive in the analysis of the international relation. Section III investigates the possibility that the Kuznets cycle revives in the era of Neo-liberalism after 1980s. The analyses present the shift between the industrial and the housing investments in the 2001 recession in the US, the switch of assets by the commercial banks in the US between the industry and the housing, and the shift of domestic investment boom between the emerging countries and the US. Finally, "Neo-liberalism" is characterized as the historical economic structure enabling the investment shift and causing Kuznets cycle. This paper focuses on the validity of the Kuznets cycle as a framework rather than as a specific periodicity or a cycle of construction activity. Different from Juglar cycle considering each cycle as independent, Kuznets cycle analyzes the interaction between temporally and spatially different cycles. In one country, the cycles with different characters alternates temporally through investment shift. Internationally, firstly, the spatial interaction is observed in the complementary relation between countries with prosperity led by domestic investment boom and countries with prosperity led by export. Secondly, temporal interaction is observed in the shift of domestic investment booms from countries to others.

View full abstract

Nobuo OKISHIO (1927-2003) is famous as one of pioneers in the introduction of mathematical model analysis into Marxian economics. However, there is no common understanding about what is the essence of Okishio's economics. The purpose of this paper is to explore theoretical and methodological features of Okishio's economics through investigation of his works concerning the principles of capitalism. Naturally this task involves a critical review of some aspects in its accomplishments. Okishio's theory of the general principles of capitalism consists of four parts: reproduction structure, wage-price relation, short-term equilibrium, and capital accumulation. These four parts are further divided into two groups. The first two parts analyze the objective structure of capitalist production by Leontief type input-output models. The latter two parts deal with the mechanism which keeps the fluctuation of real wage rate within a certain range through business cycle. Here Okishio adopts the framework of Keynes-Harrod type macro model which presupposes the independence of the demand for investment. These four parts are mutually connected and each presupposes others. As a whole, they constitute a theoretical system explaining the reproduction of capitalist economy. His description of the reproduction of capitalist relations is completed through the whole of these four parts. Starting from the relation between physical quantities and labor hour, he critically and rigorously reconstructed Marx's theory of value and exploitation. By clarifying the concept of surplus labor, he succeeded to show internal linkage between categories in the world of commodity exchange and objective structure of reproduction. At the same time it is also possible to regard Okishio as one of the most penetrating internal critics of Marx's value theory. On the problem of wage-price relation, he elucidated the law of the uniform profit rate caused by the change of technology and real wage. This analysis is based on the assumption that the choice of technique by capitalists follows the cost-minimizing principle. Beyond the analysis of objective structure of capitalist economy, Okishio tried to build a coherent theory of business cycle as the process of cumulative disequilibrium by clarifying the peculiarity of the decision-making of capitalists concerning production, employment and investment. Considering that many Marxian economists had been indifferent to the problem of how individual capitalist behaved, Okishio's attempt was certainly a great challenge. However, his theory on this matter is unsatisfactory on several counts. His characterization of capitalist's supply behavior does not correspond to his formal model. His analysis of business cycle lacks explanation of the mechanism preventing the perpetuation of cumulative disequilibrium. In spite of Okishio's exceptional talent and passion, his endeavors to incorporate the theory of individual choice and behavior into the explanation of reproduction of capitalism did not reach the goal. Thus Okishio's economics has left us a difficult problem to combine structural and behavioral analysis into single coherent theoretical framework.

View full abstract