The Vanishing Of Investment Opportunity

A fundamental change is upon the capitalist process.

We have been witnessing:

• a depression
• a bad recovery, accentuated by anti-capitalist policies
• a permanent loss of vitality
  • This is expected to go on

Hence, no inference as to the future can be drawn from the functioning of the capitalist engine and of its performance in the past.*

But we shall understand why socialists with whom it is, should have with particular alacrity availed themselves of the windfall—some of them to the point of shifting the base of their anti-capitalist argument completely to this ground. In doing so, they reaped the additional advantage of being able to fall back once more upon Marxian tradition which, as I have pointed out before, the trained economists among them had felt compelled to discard more and more. For, in the sense explained in the first chapter, Marx had predicted such a state of things: according to him capitalism, before actually breaking down, would enter into a stage of permanent crisis, temporarily interrupted by feeble upswings or by favorable chance occurrences.

Nor is this all. One way of putting the matter from a Marxian standpoint is to stress the effects of capital accumulation and capital agglomeration on the rate of profits and, through the rate of profits, on the opportunity to invest. Since the capitalist process always has been geared to a large amount of current investment, even partial elimination of it would suffice to make plausible the forecast that the process is going to flop. This particular line in the Marxist argument no doubt seems to agree well not only with some outstanding facts of the past decade—unemployment, excess reserves, gluts in money markets, unsatisfactory margins of profits, stagnation of private investment—but also with several non-Marxist interpretations. There is surely no such gulf between Marx and Keynes as there was between Marx and Marshall or Wicksell.

Both the Marxist doctrine and its non-Marxist counterpart are well expressed by the self-explanatory phrase that we shall use: the theory of vanishing investment opportunity. 2

It should be observed that this theory really raises three distinct problems. The first is akin to the question that heads this part. Since nothing in the social world can ever be aere perennius and since the capitalist order is essentially the framework of a process not only of economic but also of social change, there is not much room for difference about the answer. The second question is whether the forces and mechanisms offered by the theory of vanishing investment opportunity are the ones to stress. In the following chapters I am going to submit another theory of what will eventually kill capitalism, but a number of parallelisms will remain. There is however a third problem. Even if the forces and mechanisms stressed by the theory of vanishing investment opportunity were in themselves adequate to establish the presence in the capitalist process of a long-run tendency toward ultimate deadlock, it does not necessarily follow that the vicissitudes of the past decade have been due to them and—which it is important to add for our purpose—that similar vicissitudes should therefore have to be expected to persist for the next forty years.

For the moment we are mainly concerned with the third problem. But much of what I am going to say also bears on the second. The factors that are held to justify a pessimistic forecast concerning the performance of capitalism in the near future and to negative the idea that past performance may be repeated may be divided into three groups.

1. The environmental factors.

The capitalist process produces a distribution of political power and a socio-psychological attitude—expressing itself in corresponding policies—that are hostile to it and may be expected to gather force so that they will eventually prevent the capitalist engine from functioning. This phenomenon I will set aside for later consideration. What follows now must be read with the appropriate proviso. But it should be noted that that attitude and cognate factors also affect the motive power of the bourgeois profit economy itself, and that hence the proviso covers more than one might think at first sight—more, at any rate, than mere “politics.”

Then there is the capitalist engine itself. The theory of vanishing investment opportunity does not necessarily include, but as a matter of fact is apt to be in alliance with, the other theory that modern largest-scale business represents a petrified form of capitalism in which restrictive practices, price rigidities, exclusive attention to the conservation of existing capital values and so on are naturally inherent. This has been dealt with already.

Finally, there is what may be described as the “material” the capitalist engine feeds on, i.e., the opportunities open to new enterprise and investment. The theory under discussion puts so much emphasis on this element as to justify the label we have affixed to it. The main reasons for holding that opportunities for private enterprise and investment are vanishing are these: saturation, population, new lands, technological possibilities, and the circumstance that many existing investment opportunities belong to the sphere of public rather than of private investment.