7 Development
Rotta Abstract
We assess Marx’s hypotheses about capitalist development on a global scale by constructing a new dataset of Marxist variables (profit rates, exploitation rates, composition of capital, and shares of productive activity) for 43 major economies, derived from world input-output data and national accounts in the 2000–2014 period. Consistent with Marx’s hypotheses, the average profit rate declines at the world level, between countries, and within countries. The global rate of exploitation increases until 2008 but stagnates after the financial crisis, while capital intensity continued to increase. At the cross-country level, rich countries became increasingly dominated by unproductive activity. China absorbed much of the world’s productive activity and kept the labor share of value added roughly constant at the world level.
Rotta Conclusion
To better capture the essence of Marx’s theory of capitalist devel opment, one must argue based on empirical evidence across a large set of economies. In this paper we produced a new dataset which makes progress on this issue. Our dataset estimates Marxist variables at a moment when the capitalist mode of production dominates the global economy. Our primary aim was to produce new stylized facts at the world level in line with Marx’s insights. We estimated Marxist variables at the world level in the 2000–2014 period and decomposed them into between- and within-country dy namics. The world rate of profit declined driven mostly by a secular rise in capital intensity and as the weight of emerging economies increased in global output. The global relocation of productive activities has been swift, gravitating towards China and other BRICS countries and thus keeping the Marxist labor share of the world economy roughly stable. In 2014, China already sustained the highest share of the global capital stock in productive activities. Due to great differences in wages, location-based inequality between countries also dominated exploitation-based inequality within countries. Profit rates declined at the aggregate global level, across countries, and within countries. Besides the rise in capital intensity in productive activities, as Marx expected, structural transformations in post- industrial economies also contributed to the fall in profitability. The capital stock, net income, and employment of unproductive activity increase relative to productive activity as per-capita GDP rises. This increase of unproductive activity occurred both across and within countries, thus lowering surplus value per unit of total capital. In terpretations of Marx’s theory should therefore be updated considering the empirical evidence on the relocation of productive capital to emerging markets and the greater share of unproductive activity in developed countries. The stylized facts presented in the dataset, however, face important limitations. First, the data are limited to the 2000–2014 period and marked by the great financial crisis of 2008. Second, due to data limi tations, our procedure classifies as productive all labor in productive activity, thus underestimating the true rate of surplus value and rate of profit. Despite these limitations, our paper is the first to develop a methodology to estimate a comprehensive set of Marxist variables from multi-country input-output data that account for cross-border value flows and global value chains. Our methodology is fully automated and can be easily updated once new data are published. This paper only touches the surface of some important debates within the Political Economy tradition and is a first step towards other applications that include econometric testing of poverty, income inequality, deindustrialization, global value chains, and capital-output ratios using Marxist variables. We leave these applications for future research.
Rotta (2024) Was Marx right? Development and exploitation in 43 countries, 2000–2014 (pdf)