From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Mon Nov 08 2004 - 01:24:29 EST
I think Andrew T would agree with what Crotty says here (I quoted
this passage before); I of course disagree with the very first claim.
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.
Journal of Post Keynesian Economics, Summer 1990, p.530
This paragraph reads to me as an admission of failure ("...can find
no impediments..in the real sector...") But in support of Crotty's
first claim, Andrew has attempted an immanent critique of Grossmann
from a Kaleckian perspective.
I would say that another problem with Keynesian or Kaleckian
framework is that it very easily lends itself to right wing
appropriation: there is no inherent reason why it could not be
deployed to justify a Bush tax regressive, militarist stimulus over a
Swedish type corporatism. In fact it leaves one defenseless if in
fact the former is more likely in a given conjuncture to be
stimulative in a formalisitc logico-positivist sense.
The problem was recognized by Paul Crosser, State Capitalism in the
Economy of the United States (New York: Bookman, 1960):
"The problem whether the flow of money for the stimulation of the
economy is to be channeled into the production of nonwar goods or war
goods does not enter the analytical pricture which Keynes offers: nor
does Keynes tackle the problem whether the money is to be spent on
labor-intensive or capital-intensive industries. Keynes's theoretical
position can therefore be invoked in regard to any aspect of
spending which is undertaken wth the direct or implied purpose of
stimulating production and employment. Those
who prefer government spending for public works can cite Keynes in
their favor, as can those who point to the greater economic
effectiveness of government spending for war goods production.
"Keynes's analysis is a purely formalistic logico-postivistic one
which is stripped of social economic content. His analytical
framework is therefore
of little help in a tract such as this which strives to assess the
impact of government spending and the resultant changes in the
structure of the economy and society of a given country." (p.36)
In his brilliant early reaction to Keynesian economics Erich Roll
(1938) emphasized that social democratic or corporatist, left wing or
fascist policy could be justified from within the Keynesian
framework: To Keynes and his followers "the state is a mechanism
which can be used to influence the economic system according to one's
ideals. One can readily grant that the ideals of Mr. Keynes and his
followers are noble. But can their analysis offer an effective
opposition to those whose ideals are less exalted and whose policies
are abhorrent? It is clear that they cannot. Their approach uses
abstract categories which demagogy can use and fill with its own real
content. Sismondi and Proudhon used an analysis somewhat similar to
that of Mr. Keynes for Utopian, quasi-socialist purposes. Malthus
used it to defend the remnants of feudalism against capitalist
revolution. A progressive and reactionary purpose can find
support--or at least indifference--in an economic theory that is
confined to the sphere of circulation and that operates with
psychological concepts." p. 88
Grossmann's theory on the other hand clarified that the inevitable
descent into international conflict and regression in the conditions
of work could only be prevented by a change in the relations of
production, in the emancipation from exploitation.
rb
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