In honor of Larry Summers’ likely failed attempt to be the first in line to sniff Ben Bernanke’s chairman’s seat at the Federal Reserve Bank, I am going to look at his paper on Gibson’s Paradox. If he is successful in replacing Bernanke as head counterfeiter at the Fed, the paper might hold some clues to his future policy actions. Or, at least that is my theory — we will see what develops.
So what is Gibson’s paradox, and why was Larry Summers interested in it in the 1980s? According to Wiki:
“Gibson’s Paradox is the observation that the rate of interest and the general level of prices are positively correlated”
The alleged paradox at the heart of the positive correlation between prices and interest under a commodity money regime is simple, but has far reaching implications: Unlike the predictions of mainstream economics, the empirical evidence shows that as prices increase, so does the rate of interest; and as they decrease, so does the rate of interest. As Sam Williams explains in a blog post,
Continue reading “How Larry Summers proved Marx was right about everything — (And why this is not necessarily good news)”
Ben Blumberg of Platypus makes this argument on ‘pre-politics’:
“We think that there needs to be recognition of what is absent in our historical moment. We are in a “pre-political moment” because of the absence of consciousness that once existed.”
The argument is simply crafted: Once there was something that could be called ‘consciousness’ that now no longer exists. Our historical moment is the absence of this consciousness. Platypus think (or imagines) such a consciousness will return. This places us in a period which might be called “pre-political” or between phases of political consciousness. According to Platypus, “historical conditions have changed, particularly in terms of the possibility for consciousness.”
How the conditions have changed is unclear, except this:
Continue reading “Platypus and the “Pre-Political absence of Consciousness””
3. Finance capital and the disconnection of profits from production
To return to Paul Krugman’s question in which he asks:
“So what’s really different about America in the 21st century?”
He gives the following answer:
“The most significant answer, I’d suggest, is the growing importance of monopoly rents: profits that don’t represent returns on investment, but instead reflect the value of market dominance.”
The term ‘monopoly rents’ employed here is a poor choice, since it makes it appear as if ‘rents’ are obtained when a company acquires a monopoly position in some area of production. The profits generated by the monopoly are said to be similar to the rent a class of landowners might obtained on land. The landowners do not produce the land, nor do they necessarily do anything to improve it or exploit it, they simply collect rent on the employment of the land by others owing to their title to it. The term ‘monopoly rent’ when applied to capital is a misleading or, at best, an ambiguous analogy. At worst, it proposes that profits can be created by selling commodities above their values, which is nonsense.
Continue reading “Marx proven wrong by Progressives and Liberals once again (Part 3)”
2. Why Michael Hudson’s rejection of Marx put him on very dangerous ground
While having decided Marx screwed up in his analysis of the relation between industrial capital and finance capital, Hudson offers no real explanation of his own for where so-called ‘rentier capitalism’ comes from. Historically speaking, finance capital just appears on the scene and rises up to confront and dominate industrial capital sometime between the end of World War II and the time of his book in 1998 – roughly 50 years or so. I want to suggest this lack of a definite and clear argument for the emergence of finance capital is a dangerous and unacceptable defect in Hudson’s analysis.
Continue reading “Marx proven wrong by Progressives and Liberals once again (Part 2)”
1. How to create 2014 talking points in four easy to follow steps
File this under, “Marx Proven Wrong By Progressives and Liberals Once Again”.
The question this time is the relation between industrial capital and finance capital. According to DSWright (whoever the fuck she/he is) Michael Hudson, a heterodox economist,
“has long claimed that Marx’s contention that ultimately industrial capitalism would triumph over finance capitalism was wrong.”
In fact, according to DSWright, bankers now dominate the economy and subject productive employment to the “rent-seeking” priorities of finance capital. Says Hudson, in 1998,
“Whereas the old industrial capitalism sought profits, the new finance capitalism seeks capital gains mainly in the form of higher land prices and prices for other rent-yielding assets.”
Industrial capital, in other words, only engages in healthy, wholesome profit-making, while finance capital seeks debt slavery and constantly rising physical and financial asset prices.
DSWright is happy to report Hudson’s correction of Marx has now been adopted into the arguments both of Joseph Stiglitz and of Paul Krugman. According to Stiglitz much of what goes on in the financial sector is unhealthy, vile rent seeking, not healthy, wholesome profit-making. Paul Krugman has recently declared America in the 21st century is now seeing “the growing importance of monopoly rents: profits that don’t represent returns on investment”. Krugman argues these monopoly rentiers with their market dominance actually may be prolonging the depression. The unprecedented duration of this depression is, “no puzzle here if rising profits reflect rents, not returns on investment.”
Continue reading “Marx proven wrong by Progressives and Liberals once again”
Gugliemo Carchedi’s paper shows what I think are three fundamental flaws with the mainstream Marxist critique of Keynesian policies that must be addressed by labor theory scholars.
Continue reading “Three fundamental errors in the Marxist critique of Keynesian economic policy”
And neither does John Bellamy Foster…
Gugliemo Carchedi divides Keynesian policies into two categories: capital financed and labor financed redistribution or investment. Labor financed state policies are, in his words, neoliberal; while capital financed state policies are Keynesian.
How does Carchedi arrive at these definitions of Keynesianism and neoliberalism?
According to John Bellamy Foster, who Carchedi uses as a reference in his paper, “Keynes advocated expansive fiscal policy and deficit financing in a depression”. According to Foster then, Keynesian policies are not financed by ‘labor’ or ‘capital’, but by debt. Carchedi’s definition of “Keynesian” and “neoliberal” is problematic because it appears to state, and seems to be interpreted as, ‘financed at the expense of capital’ or ‘financed at the expense of labor’. Carchedi’s argument seems to hang on a very slippery employment of the term, ‘financed’.
The problem with Carchedi’s use of the term ‘finance’ in his statement is that this could be taken to mean the state expropriates the capital of the capitalist class or the wages of the working class and redistributes the proceeds between the two classes or invests it.
Continue reading “Seriously, Gugliemo Carchedi doesn’t know jack-shit about Keynesian economic policy (2)”
Here is how Gugliemo Carchedi defines Keynesian policies:
“To begin with, what are Keynesian policies? First, they are state-induced economic policies. Second, they can be redistribution policies or investments policies. Third, they should be capital financed and not labour financed. If labour-financed, they are neoliberal policies. Fourth, in the case of state-induced investment policies, they can be either civilian … or military. “
According to Carchedi then Keynesian policies are state induced, capital funded, civilian sector, redistribution and investment policies. Neoliberal policies differ from Keynesian policies only in that they are ‘labour-financed’, rather than ‘capital-financed’. Of course, this is not at all what Keynesian policies are and Carchedi should know it. Keynesian policies are a set of state economic policies designed to reduce the real wages of workers below the value of labor power. I am not sure why Carchedi defines Keynesian policies the way he does, but he is completely wrong.
Why do Keynesian policies aim to reduce the wages of the working class below the value of labor power? To prop up profits, of course. The argument Carchedi makes in his paper is that Keynesian policies do not and cannot restore profitability is, therefore, interesting. He demonstrates rather convincingly that Keynesian policies do not work through income redistribution or investment policies. Essentially, the distribution of the social product and the uses to which the social product is put no longer have any effect on profits.
Continue reading “Seriously, Gugliemo Carchedi doesn’t know jack-shit about Keynesian economic policy”
It is curious how Marx phrased this:
“Suppose then, that by some inexplicable privilege, the seller is enabled to sell his commodities above their value, what is worth 100 for 110, in which case the price is nominally raised 10%. The seller therefore pockets a surplus-value of 10. But after he has sold he becomes a buyer. A third owner of commodities comes to him now as seller, who in this capacity also enjoys the privilege of selling his commodities 10% too dear. Our friend gained 10 as a seller only to lose it again as a buyer. The net result is, that all owners of commodities sell their goods to one another at 10% above their value, which comes precisely to the same as if they sold them at their true value. Such a general and nominal rise of prices has the same effect as if the values had been expressed in weight of silver instead of in weight of gold. The nominal prices of commodities would rise, but the real relation between their values would remain unchanged.
If I ever write a book on the political economy of barbarism, I am going to call it “Inexplicable Privilege: The Political Economy of Barbarism” and cite this passage.
Continue reading “Inexplicable Privilege: Guglielmo Carchedi and the creation of money out of nothing”
I was reading Chris Cutrone’s “Class consciousness (from a Marxist perspective) today”, when some thoughts occurred to me that I feel necessary to outline. Although this might appear to be polemical that is not my intent. I want to outline my understanding of the subject of class consciousness based on the text, The German Ideology, in hopes of getting some feedback.
In the piece, Cutrone states:
“The difference between Marx’s time and ours is not in the essential problem of society, its self-contradictory form of value between wages and capital, but rather in the social and political conflicts, which no longer take the form primarily, as in Marx’s time, of the “class struggle” between workers and capitalists.”
Class, argues Cutrone, is no longer the active expression of the contradictions in bourgeois society that it was in Marx’s day. “Class consciousness” as Marxists define it, “is no more.”
I found this to be a very peculiar argument, since, so far as historical materialism is concerned there is not and never was such a thing as a working class consciousness. Engels and Marx do reference a consciousness in the German Ideology, where they first outline the materialist conception of history, but this consciousness is most decidedly not a class consciousness.
Continue reading “Proletarian consciousness can only be global: a reply to Chris Cutrone”