Reproductive vs Non-Reproductive Business Cycles
Discussion
Deepankar Basu:
"Within the Marxist tradition itself, one can discern at least two different, though related, approaches. The first approach, which I will call the traditional Marxist approach, identifies turning points of long waves by relying on qualitative evidence from the historical literature, and uses changes in the average pace of economic activity, measured by changes in the growth rate of output (or exports), as evidence of long waves of capitalist development.
Long waves, in this approach, are generated by fluctuations in the pace of capital accumulation, the latter determined, in turn, by fluctuations in the rate of profit. For this approach, the transition from a long wave downturn to a new long upturn is caused by extra-economic factors like wars, revolutions, spatial expansion of capitalism, and imperialism. The second Marxist approach is associated with the social structure of accumulation (SSA) approach in Marxist political economy that was developed in the United States in the late 1970s (see, e.g., Gordon, 1980; Gordon, Edwards and Reich, 1982; Gordon, Weisskopf and Bowles, 1983). In this approach, a matrix of institutions that impinge on the capital accumulation process – institutions that govern the capital-labour relation, the process of inter-capitalist competition, the provision of money and credit, and other such institutions – is identified as a SSA, and long waves of capitalist development are associated with the succession of SSAs. Once in place, an SSA provides stability to profitability expectations, which, in turn, spurs capital accumulation and economic growth. This upswing phase gradually erodes the conditions that anchor profitability expectations, and gives place to a long downswing phase. A construction of a new SSA, that is the result of political, economic and social factors, is required to initiate the next long wave. Within this general SSA framework of analysis, Gordon, Weisskopf and Bowles (1983) offer an interesting and theoretically grounded way of identifying upswing and downswing phases of long waves. To differentiate the upswing and downswing phases of long waves, they differentiate between reproductive and non-reproductive business cycle downturns. They argue that business cycle downturns that are associated with increases in the expected profit rate should be understood as “reproductive” cycles because these cyclical downturns endogenously restore profitability expectations; in an analogous manner, cyclical downturns that do not display this property could be classified as “non-reproductive” cycles. This leads them to suggest that the upswing phase of a long wave is composed of (possibly a sequence of) reproductive business cycles, and the downswing phase is composed of (again, possibly a sequence of) non-reproductive business cycles. Gordon, Weisskopf and Bowles (1983) also advance a hypothesis about the mechanism that drive the reproductive and non-reproductive cycles: changes in the reserve army of labour is restorative of profitability expectations in one case (reproductive cycle), but stops working in the other (non-reproductive cycle). Thus, increases in the unemployment rate, understood as a proxy for changes in the size of the reserve army of labour, should be positively associated with changes in expected profitability during reproductive cycles; no such association should be seen for non-reproductive cycles.