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Profit rate, distribution and technology in China’s industrial enterprises, 1978-2011
- 1. Profit rate, distribution and technology in China’s industrial enterprises, 1978-2011 An Li anl@econs.umass.edu Economics Department University of Massachusetts Amherst 12thPost Keynesian Conference
- 2. Research purpose and Relevance • Analyze the movement of profit rate, and of its two drivers: profit share and capital productivity • Relevance: • 1. In progressive theory, profit rate, profit share and capital productivity are all important macroeconomic variables. But researches on them in China are not as many as there should be. • 2. The three measures capture the progress of China’s reform programs very well.
- 3. Research methodology • Calculation and decomposition of profit rate. kyPPkPyPKYLyPPLyPPyPLPYLwYYWKYYKrKYKYYWYWYW×= ××= ×= ××= ×××= ×=−= ×== /)/( 1ωωωπππ
- 4. Key measures • Profit: before tax, but after interest rate payment • Capital: Fixed assets • Wage: Wage and Salaries • Pw: CPI • PY: deflator of industrial value added • PK: deflator of fixed assets
- 5. Overview of profit rate • 1. decline from 1978-90s. • 2. strong recovery since 1998. • 3. coincidence with changing role of state.
- 7. Decomposition results (2) 1. Reform before 1992 appears to be in favor of the workers, whereas since 1992, the capitalists gain increasingly more than workers. 2. After 1992, capital productivity also improves, indicating higher efficiency in capital’s extraction of value from labor. 3. A clearer capitalistic logic since 1990s.
- 8. Decomposition of wage share • Did workers really benefit from the reform? Not necessarily. • Controlling for price changes, workers’ real income does not increase as fast as the increase in their labor productivity.
- 9. Decomposition of capital productivity • Did capital productivity really declined in the period? Not necessarily. • 1. y/k fluctuate around a stable value up until 1993. • 2. after 1993, y/k increases fast! –HOW TO UNDER STAND THIS? • 3. Increases in capital productivity are based on both organizational and technical change in the labor process. (scientific management, hierarchical control, responsibility system, efficiency wage, and introduction of mass production techs)
- 10. Concluding remarks THANKS! The question of economic growth is by essence a question of class relations. Increasing efficiency and growth of industrial sector. Worsening distributional position of the workers. Better stop privatization. Reshape state firms into models of equitable growth. Redistribution in favor of workers.