Monday, May 19, 2014

Dominance of Financial Capital in the United States

Profits by Selected Industry as Percent of Total Profits in the United States

The data for the graph are taken from Use tables for the United States. I am thinking of trying my hand again at some empirical exploration of input-output tables. When graphs for such start looking like those I know how to generate from Java code, I will have begun to start to make some progress. I have found a tool, Apache POI, for Java programs to read Excel spreadsheets.


Blissex said...

Many many years I used to do I-O matrix analysis in APL on an IBM mainframe... It was very convenient.

The best environments for something similar today would probably be the free-software Octave, Yorick and Scilab. For statistics the popular R package is pretty good, but I hardly ever used it. There are a few convenient free-software symbolic math packages like Maxima. Axiom and Yacas also look good.

Probably our blogger is familiar with at least some of them as they are popular in engineering.

Blissex said...

«Dominance of Financial Capital in the United States»

As to this, nothing surprising. There are a few long stories behind this and most importantly they are about government policy, with various twists and turns, of which I think the most dominant are:


First world governments have long realized that "emerging" economies had a much lower cost based and most manufacturing industries would migrate to them. First low-value added manufactures would move to underdeveloped countries, but then also high-value added ones, because some "emerging" countries are not underdeveloped, they are highly advanced countries which happened to be poor.

Eventually of course prices would balance: labour income in the first-world would fall a lot, and it would rise a lot in "emerging" economies, but most ominously capital prices in first-world countries would also fall a lot, both because much lower labor incomes would not support high capital valuations, and because "emerging" countries would manufacture a lot of new capital.

The fall in capital prices and rents was considered catastrophic, so governments started to look for new "national champion" industries, most pointedly in services.

The fashion was to find them in "headquarters"-style services, those typically arising in a national capital city where many business headquarters would be found: such as legal, financial, marketing, research services.

The idea then became to "headquarterize" first-world economies: dirty, nasty factories, or even clean, hitech ones would surely flow to "emerging" countries, but the headquarters of those companies would be in New York, Los Angeles, Chicago, London, Toronto, Vancouver rather than in Seoul, Shanghai, Taipei, Mumbai, Singapore.

The future for the first-world workers would be get very highly paid elegant headquarters jobs at companies like Apple. Pfizer, Lehman.

A repeat of the "plantation" model of the 18th-19th century British Empire in which headquarters were in London and plantations in the colonies.

Therefore first-world governments have been heavily subsidizing "national champion" companies, especially in finance, but not only.

Of course they counted on the governments of Korea, China, India, etc. to be stupid; but those countries are no longer colonies and have sharp elites and businessmen who cannot see any reason why *their own* national champions should not have headquarters in their own capital cities, instead of letting foreigners in the USA and the UK skim the cream off the top.

So eventually Samsung and Huawei arose, and Singapore and Shanghai happened. So those "headquarters" industries started skimmed the cream off the top of the livelihood not of stupid ryots in the colonies, but off the rest of their countries, with layer upon layer of debt-fueled asset stripping...

Driven by "maker" heroes of astounding productivity like Fuld, Mozillo, Cayne, Lay, .... :-)

And applauded by the "first-world" middle classes, who hoped to be on the side of the winners, dreaming that in turning their own countries into plantation economies they would end up winners in the shiny mansions on the "sunny uplands" in the style they were sure they deserved, while losers in the swamps below would toil to provide them that style.

Robert Vienneau said...

If I could justify the license fee, I would like to have Matlab on my home computer. I have a old version of Maple on an old computer. If I ever upgrade my hardware, I might explore some of your suggestions.

I enjoy programming in Java.

Blissex said...

«would like to have Matlab on my home computer. [ ... ] explore some of your suggestions.»

Octave and Scilab are *very* close to Matlab, that's in part why I mentioned them.

«I enjoy programming in Java.»

I am sorry to read that ;-). Have you told your doctor? There may be a treatment if note a cure :-).