Capitalism; Imperialism; Saving and investment; Socialism
Another awkward assumption, which causes serious trouble later, is
implicit in the argument. Savings out of the surplus accruing in each
department (producers' and consumers' goods) are always invested in
capital in the same department. There is no reason to imagine that one
capitalist is linked to others in his own department more than to those
in the other department, so the conception seems to be that each
capitalist invests his savings in his own business. There is no lending
by one capitalist to another and no capitalist ever shifts his sphere of
operations from one department to another. This is a severe assumption
to make even about the era before limited liability was introduced, and
becomes absurd afterwards. Moreover it is incompatible with the
postulate that the rate of profit on capital tends to equality
throughout the economy,[16] for the mechanism which equalises profits is
the flow of new investment, and the transfer of capital as amortisation
funds are re-invested, into more profitable lines of production and away
from less profitable lines.[17]
The assumption that there is no lending by one capitalist to another
puts limitation upon the model. Not only must the total rate of
investment be equal to the total of planned saving, but investment in
each department must be equal to saving in that department, and not only
must the rate of increase of capital lead to an increase of total output
compatible with total demand, but the increase in output of each
department, dictated by the increase in capital in that department, must
be divided between consumers' and producers' goods in proportions
compatible with the demand for each, dictated by the consumption and the
investment plans in each department.
Public-domain text, read in full here on John Shaqi.
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