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The Effect of Neoliberalism on the Fall in the Rate of Profit in Business Cycles

Author

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  • Erdogan Bakir

    (Department of Economics, University of Utah, 1645 Campus Center Dr. Room 308, Salt Lake City, UT 84112-9300, USA, bakir@economics.utah.edu)

  • Al Campbell

    (Department of Economics, University of Utah, 1645 Campus Center Dr. Room 308, Salt Lake City, UT 84112-9300, USA, al@economics.utah.edu)

Abstract

In 1979, Tom Weisskopf found that the crucial late-expansion period of the business cycle, in which the output continues to expand but the profit rate begins to fall, was best explained for his 1949-1975 U.S. data as a result of increasing real wage gains higher than real productivity gains. This led to a profit share decrease that was the primary cause of the cyclical decline in the profit rate. In this work, we extend Weisskopf’s analysis through 2001 and find an important change. Although the fall in the profit share continued to be the key to the fall in the profit rate, unfavorable shifts under neoliberalism in price ratios replaced his earlier (real) wage squeeze. This result is consistent with and supports the generally accepted economic stylized fact of decreased power of workers under neoliberalism.

Suggested Citation

  • Erdogan Bakir & Al Campbell, 2006. "The Effect of Neoliberalism on the Fall in the Rate of Profit in Business Cycles," Review of Radical Political Economics, Union for Radical Political Economics, vol. 38(3), pages 365-373, September.
    • Handle: RePEc:sae:reorpe:v:38:y:2006:i:3:p:365-373
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    Cited by:

    1. Guilherme Klein Martins & Fernando Rugitsky, 2018. "The commodities boom and the profit squeeze: output and profit cycles in Brazil (1996-2016)," Working Papers, Department of Economics 2018_09, University of São Paulo (FEA-USP).

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