Private Capital Accumulation Research Articles

Public Investment Rules and Endogenous Growth with Empirical Evidence From Canada

Abstract This paper examines theoretically and empirically the effects of public investmentrules on output growth in an economy with private and public capital. It is shownthat the decisions on public capital formation are closely associated with the growthrate of output and generate endogenous growth. A permanent change in the policyrule implies a new long‐run growth rate of output, but the economy will onlygradually approach the new steady‐state due to adjustment costs in private capitalaccumulation. The model predictions are tested using data from Canada for theperiod 1955‐1999. The data support the endogenous growth hypothesis and thetwo central assumptions of the model: (i) the growth rate of output follows closelythe rate of infrastructure formation and (ii) private capital formation also followsthe rate of infrastructure formation but adjusts with a delay.

Democratic Coordination: Towards a Working Socialism For the New Century

SOCIALISM: MARKET, HURRAH, NEW. Following the end of the real 20th century in 1989-91, socialists have felt • a need to re-define their project from ground up. The notion of market spontaneous markets without private capital accumulation experienced a revival of sorts (Roemer, 1994; Wright, 1996; Schweickart, 1992, 1996; Roosevelt and Belkin, 1994; cf. Oilman, 1998). One line of opposition to this has been a return to the traditional orthodoxy based on classical Marxist texts, complete with grand references to freely associated producers and calls for abolition of the law of value (e.g., Ticktin, in Oilman, et ai, 1998). I call this hurrah a term clearly designed to signal its utter inadequacy in the face of the new challenges to the socialist project. New socialism, by contrast, refers to the effort, strongly represented in this Special Issue of Science & Society, to create visions of socialist possibility that both transcend the pale capitulation to the elemental, atomistic, polarizing and alienating qualities of spontaneous markets, and begin to answer the hard questions about the actual institutional forms and structures of socialism (Devine, 1988; Albert and Hahnel, 1991a, 1991b, 1992; Cockshott and Cottrell, 1993, 1997).

The Multinational Corporation and Social Justice: Experiments in Supranational Governance

The multinational corporation (MNC) is dichotomous in nature. While on the one hand it is a vehicle for private capital accumulation, when socially-embedded it may serve as a means to further social provisioning and social justice. A social economics approach to the MNC is developed to incorporate both private and social transaction costs in international production and trade where the divergence in these costs may require collective action to mitigate the effects of social dislocation. These issues are illustrated by experiments in corporate codes of conduct related to child labor and environmental sustainability. Since corporate codes may be insufficient to socially embed the activities of MNCs, efforts to develop supranational governance mechanisms to better achieve social justice are also considered.

The Mexican Social Security counterreform: pensions for profit.

The social security counterreform, initiated in 1997, forms part of the neoliberal reorganization of Mexican society. The reform implies a profound change in the guiding principles of social security, as the public model based on integrality, solidarity, and redistribution is replaced by a model based on private administration of funds and services, individualization of entitlement, and reduction of rights. Its economic purpose is to move social services and benefits into the direct sphere of private capital accumulation. Although these changes will involve the whole social security system--old-age and disability pensions, health care, child care, and workers' compensation--they are most immediately evident in the pension scheme. The pay-as-you-go scheme is being replaced by privately managed individual retirement accounts which especially favor the big financial groups. These groups are gaining control over huge amounts of capital, are authorized to charge a high commission, and run no financial risks. The privatization of the system requires decisive state intervention with a legal change and a sizable state subsidy (1 to 1.5 percent of GNP) over five decades. The supposed positive impact on economic growth and employment is uncertain. A review of the new law and of the estimates of future annuities reveals shrinking pension coverage and inadequate incomes from pensions.

The Mexican Social Security Counterreform: Pensions for Profit

The social security counterreform, initiated in 1997, forms part of the neoliberal reorganization of Mexican society. The reform implies a profound change in the guiding principles of social security, as the public model based on integrality, solidarity, and redistribution is replaced by a model based on private administration of funds and services, individualization of entitlement, and reduction of rights. Its economic purpose is to move social services and benefits into the direct sphere of private capital accumulation. Although these changes will involve the whole social security system—old-age and disability pensions, health care, child care, and workers’ compensation—they are most immediately evident in the pension scheme. The pay-as-you-go scheme is being replaced by privately managed individual retirement accounts which especially favor the big financial groups. These groups are gaining control over huge amounts of capital, are authorized to charge a high commission, and run no financial risks. The privatization of the system requires decisive state intervention with a legal change and a sizable state subsidy (1 to 1.5 percent of GNP) over five decades. The supposed positive impact on economic growth and employment is uncertain. A review of the new law and of the estimates of future annuities reveals shrinking pension coverage and inadequate incomes from pensions.

Government Spending and Capital Accumulation with Endogenous Time Preference

This paper extends S. Djajic (1987) to allow for an endogenous rate of time preference, and reexamines Djajic's experiment: how the optimal rates of private consumption and capital accumulation will respond to an unanticipated temporary expansion in government spending. The key factors determining the adjustment patterns are the difference between the marginal utility of private consumption and that of public spending, the timing of policy reversion, and the relationship between private and public consumption in household utility. If private and public consumption are Edgeworth independent, whether investment increases with the length of fiscal expansion depends on whether the marginal utility of private consumption exceeds that of public consumption.

Political Resources and Direct State Intervention: The Adoption of Public Venture Capital Programs in the American States, 1974-1990

Discussions of policy formation have reached an impasse with accumulating support for rival theories. We address this impasse by advancing a 'political resource theory that synthesizes class-, state-centered, neocorporatist and institutional ideas to explain policy formation in advanced capitalist democracies. Political institutions constitute infrastructural resources that condition the instrumental resources of class actors and channel the effects of class mobilization. Capitalists have systemic power by virtue of the state's dependence on private capital accumulation. We use this theory to explain the direct economic intervention of state governments in the U.S. in creating public venture capital programs in the 1970s and 1980s. An event history analysis shows that the adoption of these programs was shaped by a mesocorporatist 'pact combining capital/labor peak association bargaining with administrative capacities, structural dependence on corporate profits and manufacturing industry, professionalized state legislatures pressured by deindustrialization and the loss of instrumental resources due to declining Federal transfers to state governments. In an era of globalization and economic restructuring, the subnational state has become a centerpoint for industrial policy innovations in pluralistic states like the U.S. *Both of us share equally in this paper., We thank Michael Wallace and Don Grantforproviding some of their data on state economic policies and contexts. We also thank Kurt Schock, Brian

Public Investment, Congestion, and Private Capital Accumulation

This paper analyses the impact of public investment on the dynamics of private capital formation in an intertemporal optimising market-clearing framework. The key feature characterising the analysis is that the public good is treated as a durable capital good, subject to congestion. We show how in the presence of congestion the effect of government investment on private capital formation involves a tradeoff between the degree of substitution between private and public capital in production and the degree of congestion. Both lump-sum and distortionary tax financing are considered, with this tradeoff being tightened in the latter case

Evidence of public spending crowding-out from a panel of OECD countries

The empirical relationship between government spending and private investment is examined, using a panel of 14 OECD countries. The evidence suggests the existence of a significant crowding-in effect of private investment by public investment, through the positive impact of infrastructure on private investment productivity. Moreover, government consumption appears to crowd out private investment. The implications of these results are of foremost importance when it comes to fiscal consolidation. Deficit reductions engineered through cuts in public investment could severely impinge on private capital accumulation and growth prospects.

Fiscal policy and public capital in interdependent economics

A two-country model is presented that has the following features: public and private capital accumulation, government debt and current account dynamics, differential saving propensities for profits and wages, imperfectly substitutable domestic and foreign commodities, a floating exchange rate, wage rigidities and flexible prices. Public capital enters into the aggregate production function. Congestion is taken into account by adjusting infrastructure for aggregate use of private factors. Numerical methods are used to trace the effects of higher public investment. Raising government investment proves to be advantageous for both regions. However, sensitivity analysis demonstrates that the long-run results in particular depend on the production-elasticity of congestion-corrected public capital.

Taxes, Federal Grants, Local Public Spending, and Growth

In a dynamic model with both private and local public capital accumulation, this paper examines how federal and local income taxes, local consumption tax, and federal matching grants for local public consumption and local public investment affect the long-run equilibrium (equilibria) of private consumption, private capital accumulation, local public consumption, and local public capital stock.

Does public capital crowd out private capital?

The central focus of this paper is on the question: does higher public capital accumulation ‘crowd out’ private investment? Higher public capital accumulation raises the national investment rate above the level chosen by rational agents and induces an ex ante crowding out of private investment. However, an increase in the public capital stock also raises the return to private capital, which crowds in private capital accumulation. Empirical evidence on the net effect of these opposing forces is presented.

Decommodification and the Transformation of Capitalism: welfare state development in seventeen OECD countries

Two distributional mechanisms can be identified in advanced capitalist systems: states and markets. State distribution of resources according to needs-based non-market criteria repre sents a departure from capitalist relations of distribution and accumulation and the 'decommodification' of labour power. Such a departure has been achieved with the development of particular sorts of welfare state institutional forms. These insti tutions are the outcome of a number of political and economic pressures. Politically, the way in which a labour movement is organised in parties and unions has been a crucial determinant of decommodification. Economically, conditions of prosperity and full employment seem important to welfare state develop ment. Regression analyses, and a brief historical survey of the ex periences of Australia, Sweden and the United States confirm the above propositions suggesting that decommodification as a departure from the logic of private capital accumulation is an important basis for the transformation of capitalism.

Defense Expenditures and Private Capital Accumulation in Nigeria

In a dependent capitalist state, state policies, particularly government expenditures, are the fundamental basis for private capital accumulation. The Nigerian Civil War provided the objective conditions and the quadrupling of oil prices provided the resources to fund defense expenditures. Cost over-runs, outright frauds, and corruption are endemic in the defense procurement process in Nigeria. The article argues that these are devices deliberately designed to facilitate private enrichment. The final section of the article examines the contradictions that the use of defense expenditures for private capital accumulation inflict upon the Nigerian economy.

Defense Expenditures and Private Capital Accumulation in Nigeria

In a dependent capitalist state, state policies, particularly government expenditures, are the fundamental basis for private capital accumulation. The Nigerian Civil War provided the objective conditions and the quadrupling of oil prices provided the resources to fund defense expenditures. Cost over-runs, outright frauds, and corruption are endemic in the defense procurement process in Nigeria. The article argues that these are devices deliberately designed to facilitate private enrichment. The final section of the article examines the contradictions that the use of defense expenditures for private capital accumulation inflict upon the Nigerian economy.

ECONOMIC AND POLITICAL DETERMINANTS OF REGIONAL INVESTMENT AND TECHNICAL CHANGE IN CANADA

ABSTRACT This paper seeks to develop an understanding of the most significant determinants of spatio‐temporal patterns of private capital accumulation in Canadian regions by focusing on both economic and political attributes of the regional investment context. Economic variables include spatial variations in profitability of production. labor costs, and aggalomeration economics, while the chief political dimension is the extent of union organization and militancy within the regional labor force. Analysis of provincial manufacturing activity1 investigates the relative importance of economic versus political variables in shaping the histories of investment and technical change in individual provinces from the mid‐1980s to the present.

Schooling and Work in the Democratic State

A new explanation of the relation between schooling and work in the democratic, advanced industrial state emerges from this study that rejects both traditional views and the more recent Marxian perspective. Traditional views consider schools as autonomous institutions that are able to pursue the goals of equality and social mobility irrespective of the inequalities of capitalist society; the Marxian perspective views schools as serving the role of producing wage-labor for capitalistic exploitation. The authors suggest that the shortcomings of both views are rooted in the fact that they do not recognize the true functions of the democratic, capitalist state. The state is seen as an arena for struggle between forces pushing for egalitarian, democratic reforms and those seeking to use the resources of the state for private capital accumulation. Depending on which side has primacy at the moment, schools will reflect one set of goals over the other. However, victory is never complete, and the tide of battle has shifted back and forth historically. The authors develop this theory through interpreting the dynamic relation between U.S. schools and the workplace. Based on this approach, they predict changes in both schooling and work as well as the forms that future conflicts between the contending forces are likely to take.

Recognizing Constraints to Local Economic Development

Drawing on Kaufman's distinction between development in the community and development of the community, this paper discusses the contraints on local economic development associated with increased concentration of capital. The likelihood of successfully employing import substitution and other localization strategies without confronting issues of non-local control of the investment process is also examined. Two options for responding to capital constraints are discussed: (1) attempts to restore the conditions for non-local private capital accumulation in the community, and (2) attempts to create alternative local investment institutions. It is suggested that the strategy of development in the community subordinates the needs of the community to non-local interests, while the strategy of development of the community carries more potential for improving the quality of life for community residents.

SOCIAL SECURITY AND AGGREGATE CAPITAL ACCUMULATION REVISITED: DYNAMIC SIMULTANEOUS ESTIMATES IN A WEALTH‐GENERATION MODEL

This paper re‐examines Feldstein's(1974, 1982)results of the effect of social security on private capital accumulation in the context of a simultaneous‐equation model of capital accumulation. The model incorporates dynamic feedback effects in capital accumulation and is estimated by FIML to incorporate theoretical restrictions that are tested against the data. It is then simulated as a full dynamic model to analyze the long‐run effect of SSW on private capital accumulation. The simulated effects are in the same direction as found by Feldstein, but are considerably weaker.

Factors Influencing Private Capital Accumulation on the "Eve of Retirement"

THE present difficulties in social security financing will probably be further compounded in the coming decades by the low birth rate and consequent aging of the population. Workers approaching may have to look forward to minimal social security payments with little prospect of escalator clauses to protect the purchasing power of their pensions. Therefore, it will be necessary to investigate levels of private savings to determine whether prospective retirees will have adequate to cover their needs. If these holdings are inadequate it may be necessary to formulate a policy to stimulate savings amongst families who are approaching retirement. This paper will examine net worth situations of a nationwide sample of men (National Longitudinal Study, 1966-1971) on the eve of retirement (age 45 to 59 at the time of the first interview) to find out (a) the current state of net worth, (b) factors related to high levels of net worth, (c) future prospects for these factors and (d) policies that might be employed to stimulate growth in net worth.