Re Nicky's [5916]: I certainly agree that terms like 'war' and 'act of war' (btw, an expression I didn't use in the post you were responding to) are less clear in meaning in today's world than in other historical periods (including Marx's). In the context of this week's events, the government and media in the US have referred to the attack on the WTC and the Pentagon as 'acts of war' in order to mould and rally support for a concerted military action by the US against groups and nations, irrespective of their role or non-role in these events. I think that this 'dragnet' is going to be very wide and the US will use this opportunity to make decisive military interventions against a number of groups and nations internationally which have been labeled 'terrorist' or 'terrorist states'. Indeed, if you listen closely to what the White House representatives have been saying, they say that this will be a 'war against terrorism' which obviously is an expression that has far greater scope than a 'war against the terrorists responsible for the attack on the WTC, etc". I think that this has especially ominous meaning for Israel and Palestine since the former will no doubt use the 'war against terrorism' as a further pretext to assault Palestinians, invade neighboring countries, and launch deadly air strikes. My last post, though, didn't address these concrete issues but was admittedly more abstract and theoretical. What I was trying to get at was an identification of the major economic causes and consequences of war -- a depression of wages being only one consequence. Let me raise a related question: what are the macroeconomic effects of a depression of wages below the value of labor power during a crisis? Marx suggested that this was "one of the most important factors in stemming the tendency for the rate of profit to fall" (_Capital_, Volume 3, Penguin edition, p. 342). Let's put that perspective in the context of the famous critique by Keynes of 'the classics': 1) for Keynes 'the classics' not only embraced classical political economy but all pre-existing schools of thought including the marginalists (yet, at the same time he was a marginalist). The belief that Keynes was critical of was the belief that there were various 'adjustment mechanisms' that would automatically restore macroeconomic equilibrium if there was instability. One of these adjustment mechanisms that would help pull an economy out of an economic slump and restore profitability was a depression of wages. Briefly put, the argument was that there would be increased competition for jobs during an economic downturn and that this increased supply of workers would, ceteris paribus, drive down wages which would lower firms' costs of production, which would increase profitability, which would stimulate increased investment, which would then increase aggregate supply and pull the economy out of the slump. Note that for 'the classics' state intervention was not required to bring about this result. 2) Keynes rejected the classical adjustment mechanisms and argued that they all rest on the fallacy of Say's Law. From his perspective, once you reject Say's Law the following dynamic emerges during an economic crisis: there tends to be a depression of wages (for the reasons cited by the 'classics', even though Keynes thought that was also a contrary force causing wages to be 'sticky') which lowers firms' costs of production. Yet, will those decreased wages lead to increased profitability, investment, supply, and growth? From Keynes' perspective: not necessarily. He argued that what was crucial for understanding levels of investment demand was the level of aggregate demand (since he viewed investment demand as a derived demand). Yet, aggregate demand is decreasing during the slump. The combination of low aggregate demand and poor expectations of profitability will lead to less investment. Moreover, if wages go down, he argued, this would lower disposable personal income which he anticipated would lead to decreases in consumption spending which when the multiplier was taken into account would lead to further decreases in aggregate spending which would further depress aggregate demand and push the economy further into the crisis. Thus, whereas decreased wages promote macroeconomic expansion for 'the classics', they deepen a depression for Keynes. This debate has much contemporary relevance. E.g. when the Fed lowered interest rates, they were implicitly accepting the classical belief that lower interest rates would lead to increased levels of investment. This also assumes Say's Law (eventhough Fed intervention qua intervention implies a rejection of the classical faith in laissez faire). As we know, Marx also -- like Keynes -- rejected Say's Law. What does this mean then in terms of the dynamics of a crisis? Clearly, Marx believed that a depression of wages below the value of labor-power was, ceteris paribus, a stimulus to cyclical economic growth (along with the rest of the 'counteracting factors'). Yet, what of Keynes' argument? After all, even if firms succeed in lowering their costs of production this will not lead to an increased general rate of profit _unless_ firms sell more commodities. Yet, during the slump they have unsold inventories of commodities. And a depression of wages will mean that workers will have less money with which they can purchase the commodities intended for working-class consumption. In other words, if a depression of wages leads to decreased commodity sales then that can be expected to depress the rate of profit and heighten the slump. The upshot of this is that in thinking about decreased wages on the crisis, one has to conceive of that as _more than_ just a counter-acting factor to the tendencial decline in the general rate of profit. It also suggests, I believe, that we have to root out Say's Law from every level of our analysis. In solidarity, Jerry
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