US economy slows: too much saving or too little investment?

We think Michael Roberts is right and keep up marxist analysis when he’s standing behind «Loi sur la baisse tendencielle du taux de profit» to explain current capitalist economy crisis.

« Nevertheless, the Keynesians continue to claim that this low growth world is due to the lack of fiscal and monetary injections into the economy and has nothing to do with the underlying problems of the capitalist economy: low profitability, high debt and weak investment and poor productivity growth. Only this week, Martin Wolf told us, yet again, that weak growth in the Eurozone is due to the failure of Germans to spend or invest rather than save. Germany needs to absorb its ‘excess savings’ by spending to get Europe and the world going.

This is nonsense. As I explained in some detail in a previous post, there is not a global savings glut that needs to be absorbed. And German corporate savings as a share of GDP are not particularly high compared to other countries. The issue is low investment, yes. But why? Wolf seems to think it is due to ignorant, rigid attitudes in Germany and elsewhere. But the objective reason is low profitability from future investments and existing relatively high corporate debt. Another way of looking at this is to say that it is a ‘supply-side’ problem, not one of the lack of demand. »


« The policy conclusion of the Keynesian position is to pump yet more money into the banks and the economy (helicopter money next) and for governments to launch spending programmes. The neoclassical supply-side policy position is to make companies more efficient by cutting wages and employment and reduce the ‘regulation’ of the capitalist companies to allow the ‘market’ to work; while cut government spending to reduce the level of debt. »

Neither option has worked or will work.

Michael Roberts Blog

Anyway you look at it, the US economy is slowing down.  Indeed, real GDP growth in the US based on the last quarter (Q 2106) has slowed to 1.9% year over year, not much above the rate of growth in the Eurozone. The decline in growth is the product of a decline in investment.  The investment drag is clear with GFCF in the Eurozone outpacing its US equivalent for the last two quarters.

Real GDP

Total investment in the US is now making no contribution at all to the expansion of the economy.  See how the green part of the bars below has disappeared.

Contributions to GDP

As I have shown before, this weak investment mirrors the deterioration in corporate profitability, which is now falling in the US.

Corporate profits growth

The productive sector of the US economy has particularly weakened and is now heavily contracting – in contrast to weak but steady growth in the Eurozone.

Industrial production growth

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