From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Fri Dec 19 2003 - 14:56:36 EST
> Rakesh: > > >As for inflationary monetary policy, it may well reignite >accumulation as a result of a higher rate of exploitation-- wages lag >behind the general price level (see Mattick on Samuelson, 1981). But >again a rising rate of exploitation cannot always neutralize FROP >from rising OCC. >Paul: > >Keynesian policies worked for 30 years then new contradictions >associated as you suggest with the falling rate of profit meant >that prohibitive rates of inflation were required to sustain >accumulation in the face of low rates of profit. If inflation was prohibitive, then how did it sustain accumulation? Did not Keynesian policies actually come to compound the problem that they were supposed to remedy? >The next stage of reformism would have been to see a progressive >shift from private capital to state capital, with the state directing >investment. This would have been a progressive restructuring in >the context of the crisis of the 1970s just as the new deal was >progressive in the 30s. Perhaps the state can carry out investment projects that private actors are not likely to attempt; perhaps a deep recession is the best time for the state to finance such projects through deficit financing. But I see no reason why such state investments whatever their multipliers would have lifted the economy out of a so called unemployment unequilibrium. > >To have achieved the progressive restructuring an appropriate >political balance of forces was required. I know that in the >UK the left of social democracy associated with Tony Benn had >some approximation to such a policy (The alternative economic >strategy ). Why? The Kaleckian theory tells capitalists that expansive fiscal policy will increase the mass of profits. Why should they be politically opposed to such policies as long as real wage gains are kept within bounds as the power of sack diminishes with the reduction of unemployment? Pollin says that the Swedish social democrats were able to do this. But he gives a rose tinted view of the Swedish social democratic project. >I had considerable misgivings about the details >of their policy but the crucial point was that it addressed >historically necessary problems. As it turned out the social >democratic left lost out in the political struggle here, >where the crisis of profitability was more severe than in >other capitalist countries. Yes but Kaleckian theory tells us that the crisis of profitability does not arise out of difficulties in production. It is a collective action problem. If no one invests, then no profits. All the state has to do is lead private investors with a heavy does of its own investment and regulate the financial sector. That should solve the problem. As James Crotty has noted: Minsky is quite emphatic...(an) investment decline can never be initiated by a prior decline in the expected profitability of investment; rather, it takes an initial drop in investment to induce a subsequent decline in profits. Investment and profits are not mutually codetermining: investment spending calls the tune and profits dance accordingly. As Minsky puts it: 'In the simplest Kalecki case, where aggregate profit equals aggregate investment, the shortfall of realized profits below anticipated profits requires a logically prior shortfall of investment. This leaves the question of...crises..and...depressions unexplained, for it is the decline of investment that has to be explained.' Minsky's view on this point is also summarized in the following quotation: 'The profitability of existing capital--and profit expectations-can only change if investment and expected investment [first]decline. Thus we have took elsewhere--to arguments other than those derived from assumed properties of production functions and hand waves with regard to over-investment--to explain why the marginal efficiency of investment falls. The natural place to look within the Schumpeter-Keynes-Kalecki vision is in the impact of financing relations.' Thus, Minsky, can find no impediments to perpetual balanced growth in the real sector of the economy. The roots of instability are to be found in the financial markets." >This opened the way for the >neo-liberal restructuring carried out in the 80s. Here we agree > >But my point is that a theory of political economy should >not be judged on whether it is revolutionary or reformist. I absolutely agree. But theories have implications. And where private interests rage, we cannot rule out the possibility that some theories are preferred over others for extra-scientific reasons. > > >By the way you seriously misrepresent Kalecki by presenting >him as a left populariser of Keynes, his theory actually came >out before Keynes and its theoretical roots are clearly in >Marx and Luxembourg. The roots of Luxemburg's theory are in a total misunderstanding of Marx's reproduction schema. Rakesh
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