Re: [OPE-L:7217] Re: Re: Re: Re: fundamentalismRakesh,
Like David I don't want to pursue this discussion for its own sake. However let me just respond briefly to the p0ints made below. I do appreciate your interest of course and I'm pleased that you accept our general line of argument.
I have added remarks below in the usual fashion. Cheers
Paul
----- Original Message -----
From: Rakesh Bhandari
To: ope-l@galaxy.csuchico.edu
Sent: Sunday, May 19, 2002 7:19 PM
Subject: [OPE-L:7219] Re: Re: Re: Re: Re: fundamentalism
David and Paul B,
let me reiterate: I am not saying that I find your responses to Fine and Harris unpersuasive. In fact I find very much of what you both say quite persuasive, though I am not clear as to why David thinks Sweezy mishandled the treatment of money in his reconstruction of the Bortkiewicz critique.
It is just that Fine raises a complicated set of criticisms which may indeed have been indeed already been answered implicitly or explicitly in your writings. But there seems to me no reason not to repeat oneself and hone one's own perspective, given the complexity of the issues.
Paul B writes:
Rakesh,
The article we wrote clearly spells out how the contradictory nature of the commodity develops into an inflationary crisis. It was not necessary for us to go, writer by writer, through the efforts of others since the differences should be clear to the normally interested reader.
Now let me (Rakesh) requote what Fine says:
In addition, a *monetarist theory
of inflation* has been utilized with the (false) presumption that
the state predominantly appropriates resources through
over-expansion of the money supply"
Let's forget the label monetarist theory of inflation. Do you deny that the state did in fact appropriate resources through the over-expansion of the money supply? Do you deny that the Central Bank accomodated the issuance of govt debt by pumping liquidity into the system in order to stave off a crowd out effect yet ending up engendering runaway inflation that indeed did have redistributional effects?
WHILST THE STATE DEFICIT EXPANDED AND THE PROPORTION OF STATE EXPENDITURE TO GDP ROSE, THE KEY TO THE INFLATION WAS THE INCREASE IN COMMERCIAL DEBT AS PROFITABILITY COLLAPSED. THE STATE WAS AND IS ALWAYS A SECONDAY MOMENT. OF COURSE THE BANKS TEND TO BE IMPORTANT HOLDERS OF STATE DEBT NOTES AND THESE BANKING 'ASSETS' ALLOW THE FURTHER EXPANSION OF NEW CREDITS. HOWEVER FOR YEARS IN THE UK , AS PROFITABILITY BECAME MORE DIFFICULT, THE STATE RELAXED ITS RESTRAINTS ON BANK LENDING, REDUCING LIQUIDITY AND CASH RATIOS. THIS WAS AS A RESULT OF THE BANKS OWN DEMAND TO BE FREED TO MEET THE NEED FOR CREDITS BY THE NON BANKING SECTOR. THE IMPETUS IS ALWAYS, AT BASE, FROM THE NEEDS OF CAPITAL TO CIRCULATE. IN ORDER TO ACCUMULATE.
SO YES OF COURSE THE STATE PLAYS 'A MAJOR ROLE' IN DEFICIT FINANCING. THE SECTION YOU QUOTE BELOW IS A DESCRIPTION THAT SUMMARISES THE ANALYTICAL PARTS OF THE LONG ARTICLE.
For example, couldn't one read the same point on p. 31 of Inflation, the Crisis and the Post War Boom in the section on the State and Inflation.
"The State is forced to play a role in production (nationalised industries), as well as maintaining labor power and guaranteeing employment. It plays a major role in deficit financing, in expanding the credit base of the banks and so the SUPPLY OF MONEY. This gives impetus to the process which we have already discussed, enabling the products of private capital to be sold at those prices set by the capitalists, in an attempt to maintain their profits in the face of a declining rate of profit."
So in putting the emphasis ( THE EMPHASIS IS NOT ON THE STATE , WE ARE TRYING TO RELATE THE STATE TO THE CREDIT EXPANSION PROCESS) on how the state expands the credit base and allows price levels to be maintained, you do not seem to be proponents of the endogeneous theory of credit which theory developed as a critique of monetarism. (PERSONALLY, I THINK THAT THE HUGE EFFECT OF 'KEYNESIAN' TYPE THINKING AND THE FETISH THE 'LEFT' MADE OF THE STATE , A HYPNOTIC FOCUS, HAS AFFECTED THE INTERPRETATION OF WHAT WE SAID)
We were not willing, in any case, to shout into the ears of those who feigned deafness.
1) What do you mean by 'capital saving innovation' ? Is this negative accumulation? or a purely use value approach?
What I mean is that if the means of production are getting cheaper, even an increase in the physical mass of means of production to (?) the workers which they absorb (?) ( CONSUME? OR REPRODUCE) need not mean an increase in the VCC and thus downward pressure on the rate of profit. (RAKESH, THIS SENTENCE IS VERY UNCLEAR TO ME.)
RAKESH, YOU MEAN TO SAY, I HOPE, THE CHEAPENING OF INDIVIDUAL ITEMS OF THE MEANS OF PRODUCTION... WHICH IS THE SAME FOR ALL COMMODITIES AS ACCUMULATION PROCEEDS, AT THE GENERAL LEVEL OF ANALYSIS. HOWEVER THIS CHEAPENING IS ONLY POSSIBLE BECAUSE LIVING LABOUR IS BEING REPLACED BY DEAD LABOUR, AND THIS MEANS THAT THE RELATIVE VALUE OF THE MASS OF DEAD LABOUR RISES, IE THE CAPITAL RELATION EXPANDS.
THE USE OF THE IDEA OF 'CAPITAL SAVING' HAS GENERALLY BEEN USED MISTAKENLY TO SUGGEST THAT THE ORGANIC COMPOSITION OF CAPITAL IS PREVENTED FROM GROWING OR INDEED IS REVERSED(!). THIS CONFUSES THE VALUE OF THE INDIVIDUAL PRODUCT OF CAPITAL WITH THE VALUE OF THE TOTAL MASS OF CONSTANT CAPITAL, WHILST AT THE SAME TIME CONFUSING THE TECHNICAL AND THE ORGANIC COMPOSITION OF CAPITAL.
2) The difference between ourselves and monetarism is simple in essence, for us commodities circulate money... for the monetarists helicopters do... or perhaps if I restrain myself , ... for monetarists, money circulates commodities.
Well no you do have the state itself as the active agent in the expansion of the credit base. The state is for you like a helicopter which drops money into the economy. THIS IS NOT AT ALL TRUE. THE STATE USES ITS ABILITY TO TAX - CREATE A FUTURE CASH FLOW - TO OFFER AN INTEREST BEARING ASSET TO CAPITALISTS WHO DEAL IN MONEY OR HAVE MONEY TO SPARE FOR THE MOMENT. MONEY IS EXCHANGED FOR PROMISES. THE ACTUAL MONEY FACTORIES ARE THE BANKS THEMSELVES.
IF THE BANKS ACCEPT POOR/ RISKY BILLS / BUSINESS, THEN IT IS THEY THAT ARE CREATING A MONEY SUPPLY (CREDIT) THAT ALLOWS HIGHER HOPED FOR 'NOMINAL' PRICES OF LOW PROFIT FIRMS TO BECOME REAL, INFLATED , PRICES.
NOW, EVEN IF THEY ARE 'FORCED' (ACTUALLY THEY RESPOND TO HIGHLY ATTRACTIVE OFFERS TO BORROW BY THE STATE) TO ACCEPT STATE DEBT ,THERE ARE LIMITS TO THE EXTENT THAT THEY CAN THEN REDISCOUNT BILLS AT THE CENTRAL BANK TO MAINTAIN THEIR OWN LIQUIDITY... THE AVAILABLE GOOD QUALITY BILLS/BONDS ARE IN SHORT SUPPLY BECAUSE THE PROFITABLE CORPORATIONS ARE FEWER AND FAR BETWEEN.
IF , FURTHER AGAIN, THE STATE BECOMES SO IRRESPONSIBLE THAT IT REDISCOUNTS THESE 'JUNK' BONDS THEN OF COURSE THE STATE REALLY IS FACILITATING INFLATION. AT SOME POINT POLICY HAS TO BE DECIDED UPON. THE POINT IS THAT THE DRIVER HERE IS THE FALL IN THE RATE OF PROFIT THAT INDUCES THE SUBSEQUENT STATE AND COMMERCIAL POLICIES TOWARDS CREDIT. THE STATE IS STILL ONLY A 'BIG CUSTOMER' AS FAR AS DEBT IS CONCERNED, NOT THE LEADING SOCIAL FORCE. THE LEADING SOCIAL FORCE IS THE STRUGGLE OVER THE RATE OF EXPLOITATION.
But I don't think this takes away from the most persuasive point of your critique: the so called over expansion of the state was not the cause but the result of a downturn in the real economy.
This is absolutely clear in the article and certainly needs no repetition. Of course the argument is expanded through the analysis of the use of credit ...already.... and seems to me quite clear.
3) what is a short term keynesian? someone who isn't dead? or someone who becomes a Marxist after being a schoolboy? To point out that the UK Government extended unproductive employment ( eventually only to a predictably capitalistically constrained limit ) hardly makes one a 'Keynsian'.
No but the idea that the govt can at least in the short term increase the level of employment by borrowing and spending does make one something of a short term Keynesian.( WE CLEARLY DISTINGUISH BETWEEN THE TYPE OF EMPLOYMENT USUALLY GENERATED BY SUCH - REVENUE -SPENDING AND CAPITALISTIC INVESTMENT SPENDING.. THIS IS CERTAINLY DIFFERENT FROM KEYNES'S THEORETICAL INDIFFERENCE TO THE TYPE OF 'DEMAND' ... AND IN ANY CASE THE THEORETICAL FRAMEWORK IS ENTIRELY DIFFERENT SO I CAN'T SEE HOW YOU CAN SAY WE ARE MIXING IT!)
Mattick's point was the govt debt was an illusory solution. There is first a juxtaposition of idle people and idle capital. The state borrows and finances projects which put people to work. Employment is indeed increased. However, the state now owes interest on its debt, but the money which the state has borrowed and spent has been expended. How will the state pay its debt? It can monetize it and thus risk inflation; it can increase taxes and thus compound the problem of profitability if the problem of profitability which had led to the initial juxtaposition of idle capital and idle people has worsened over time as a result of a rising OCC and (Fred adds) a rising U/P labor ratio.
So as I understand Mattick Keynesianism was partly effective because it did indeed solve immediate problems, yet it did so by compounding contradictions in the long term. It was exactly because Keynesianism was a short term solution that Mattick attempted to explain both the post war boom and its dissolution. Why would you not agree with Mattick on this point?
So did you mean to deny that Keynesian policies could at some point increase the level of employment and allow otherwise idle money to function as if it were capital? (IN THE UK THE INCREASE STATE EMPLOYMENT , OFFSET BUT NEVER OVERCAME THE GENERAL INCREASE IN THE LEVEL OF UNEMPLOYMENT, KEYNESIANISM WAS PROVED IN PRACTICE TO FAIL ITS SPONSORS, THERE IS NO NEED FOR US TO 'DENY' THAT 'AT SOME POINT'..ETC ETC. ....IN ANY CASE IT WAS NOT 'IDLE MONEY CAPITAL', OTHERWISE THERE WOULD HAVE BEEN NO PALAVER ABOUT 'SQUEEZIING OUT' THE BUSINESSMAN..... CREDIT WAS EXPANDED AS STATE DEBT NOTES WERE ISSUED ON THE BASIS OF FUTURE TAXATION..... AND A SHORT WHILE AFTER THE SALE OF STATE ASSETS... SO THAT THE 'CONTRADICTION' - THAT THE STATE IS NOT THE CAPITALIST ENTERPRISE, NOR A BANK, OR THE SOURCE OF ALL PEACE AND HARMONY- IS 'RESOLVED' IN THE DISSOLUTION OFF STATE PROPERTY! - PRIVATISATION - TO PAY BACK THOSE DEBTS )
Since I speak to David Y's analytical points here, I won't respond to his post as well.
Again: let me be clear--I am not disagreeing with you. I just don't see what is lost in continuing the discussion with Fine who is a serious, extremely stimulating theorist and empirical analyst.. I certainly don't think his previous political affiliation is good reason not to respond to him as I do not think your politics give critics any excuse to ignore you.
YOU MISS THE POINT, WE ARE NOT INTERESTED IN BEN'S POLITICAL PREVIOUS AFFILIATION PER SE, BUT WHETHER THE EFFORT OF AN EXCHANGE WOULD BE OF VALUE NOW.
CHEERS
PAUL
All the best, Rakesh
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