Seriously, Gugliemo Carchedi doesn’t know jack-shit about Keynesian economic policy (2)
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.
To give an example: In Carchedi’s scenario, it appears the state would impose a tax on capital of $100 and pay the unemployed worker $100 in unemployment compensation. But this is not what Foster describes at all. Instead, what Foster describes is this: the state borrows $100 from capital and pays the worker $100 in unemployment compensation, plus pays the capitalist $10 interest on his money capital.
How Carchedi arrived at the argument that somehow the state ‘expropriates capital’ rather than ‘borrows from the capitalist’ is unclear. Capital can indeed ‘finance’ the state’s deficits, but how is it possible for labor to ‘finance’ the state?
This is some pretty sloppy work on Carchedi’s part.
Since in any case the state’s deficits are ‘financed’ by money capital, and since in labor theory the worker has no means (no money capital) to provide such financing of the state’s deficits, I can only conclude Carchedi’s distinction between Keynesian versus neoliberal ‘redistribution’ and ‘investment’ must result not from the source of financing, but from its purpose. It is ‘capital financed’ when the deficits are employed to subsidize wages and ‘labor financed’ when employed to subsidize profits? Honestly, I am at a loss to see any other meaning in Carchedi’s premise.
Foster, in the text referenced by Carchedi, clearly argues the state finances its Keynesian policies by borrowing, i.e., by deficit spending. And the only source of finance available in the capitalist mode of production is the mass of idle or superfluous capital produced in the crisis. Says Foster:
“Keynes, as I explained in “A Failed System,” pinpointed what he called two ‘outstanding faults’ of capitalism: an enormously unequal division of income and persistent, built-in unemployment, tending toward what was to be called an ‘unemployment equilibrium.’ Orthodox economics was by nature blind to both of these flaws, and thus was, in his view, ‘incompetent to tackle the problems of unemployment and of the trade cycle.’ Keynes made it clear that he believed that the investment or accumulation function of the mature capitalist economy was systematically depressed over the long run. As Joan Robinson wrote in 1955 in a piece on Marx, Marshall, and Keynes, Keynes showed ‘that there is a natural tendency for an advanced capitalist economy to run into chronic stagnation, with permanent unemployment, and that it is by its very nature highly unstable.””
Clearly unemployed laborers cannot finance the state. The source of its deficit spending finance must come from an existing mass of idled, superfluous, capital produced by a falling rate of profit. Carchedi’s argument is that ‘redistribution’ or ‘investment’ by the fascist state of this superfluous capital cannot increase the profits of capital. But this overlooks an important point: the profits of capital are increased precisely by borrowing the idled capital from the capitalist and paying interest on it.
This has nothing to do with how the fascist state spends the money capital it borrows; it is the debt service4 on the borrowed money capital that increases profits. So, on what basis does Carchedi argue he has proved,
“how unrealistic is the call also by prominent Marxists for a massive wave of state-induced capital-financed redistribution and/or investment in the present economic predicament as a way out of the crisis.”
He has actually proved no such thing and the last eighty years demonstrates the state can avoid full blown unemployment by such policies. After the state has borrowed the superfluous capital of the capitalist class and begins paying interest (i.e., profits) on this capital, what the state then uses the capital for — investment or redistribution — is immaterial. The entire point of Keynes’s scheme was to turn superfluous capital into interest-bearing capital.
Which brings me to another point: Foster argues Keynesian policies were developed because,
“Keynesianism, classically, was concerned much more with what economists call the ‘real economy’ related to production of goods and services (as measured by GDP), than with the financial economy, geared to speculation in asset prices.”
This is fucking laughable and only proves Foster is as big an idiot as Carchedi. Keynes was concerned that money capital could not become real capital, i.e., could not be turned into labor power. Since money capital could not go through the process M ==> (C … C’) ==> M’, the circuit for all new capital had to be circumscribed to M ==> M’. Which is to say, it could only remain capital if it became finance capital. Keynesian policies are all about the ceaseless conversion of superfluous money capital into finance capital, i.e., financialization.