Paul Krugman: “Oh no! I said too much.”
Help me here: Did Paul Krugman just call for the end to wage labor?
I am not sure how to take Krugman saying, essentially, post-war fascist state economic policy is dead. Krugman’s stated reason for deserting from the side of fascist state “expansionary” policies to the side of regulations and taxes designed to limit the risk of crisis is that “the political economy of policy turns out to make an effective fiscal response to depression very difficult.” Which is to say, Krugman thought the fascist state was interested in maximizing output and employment in the face of a “shock to demand”, when it is actually only interested in maximizing the production of surplus value.
So here is the gist of Paul Krugman’s confession: Fascist state economic policy has only ever been aimed at saving capitalism. Fascist state economic policy is not interested in full employment, it is not interested in trickledown economics, nor improving wages, but capital’s own self-expansion:
“In today’s column I described Friedman as a man trying to save free-market ideology from itself. What I think one has to say, in fairness, is that he wasn’t alone in that project. Paul Samuelson’s “neoclassical synthesis”, as described in a nice survey by Olivier Blanchard (pdf), was the notion that monetary and fiscal policy could be used to solve the problem of recessions and depressions, and that once you did that, conventional microeconomics … could go back to its old self.”
Which is to say, the aim of Krugman’s Keynesian prescription was never anything but to save capitalism from itself, but it seems, much to Krugman’s dismay, that capitalism doesn’t wish to be saved.
“First of all, the liquidity trap is real; conventional monetary policy, it turns out, can’t deal with really large negative shocks to demand. We can argue endlessly about whether unconventional monetary policy could do the trick, if only the Fed did it on a truly huge scale; but the fact is that the Fed hasn’t ever been willing, or felt that it had sufficient political room, to do that experiment.”
“Second, while the evidence from austerity programs strongly suggests that fiscal policy does in fact work, with multipliers well above one, the political economy of policy turns out to make an effective fiscal response to depression very difficult.”
What does Krugman mean by this last statement — that political economy makes effective fiscal policy difficult?
The problem posed by the sort of depression we are experiencing is not that demand is too low, but that accumulation is too high. The “neoclassical synthesis”, so-called by Krugman, suggests this overaccumulation can be addressed by wasting the excess surplus value or by increasing the wages of the working class, directly or indirectly.
Despite the “impeccable logic” of this solution for the Krugmans and stagnation theorists like the “demand side” theorists of the Monthly Review school, the political economy of capital doesn’t allow for an increase in the wages of the working class in a depression.
As Foster shows, the capitalist crisis presents innocently enough as “a lack of demand” for commodities. This, however, is completely misleading: the lack of demand in this case is not demand for commodities in general, but for labor power only. In the crisis the expansion of employment of labor power is hampered by an already existing overaccumulation of capital. Since the aim of employing labor power is to add to the accumulation of capital, this additional employment runs into the problem that capital is already overaccumulated. The solution to this crisis supported by “the political economy of capital” is to further devalue wages.
However since Keynesians and stagnation theorists think the problem is excess commodities and lack of demand, they propose to increase wages. As a practical matter, the crisis is resolved by expansion into the less developed regions of the world market and by concentration and centralization of capitals — not by an increase in wages. The excess commodities in a crisis are not merely excess commodities, but excess capital in the form of commodities.
Increasing wages in a crisis does nothing to address the problem of a falling rate of profit. Such an increase in wages only makes sense from the perspective of expropriating the capitalist class, and even this is economically insufficient, since any effect it has to increase the employment of labor power only add to the excessive accumulation of capital. The political economy of capital is, therefore, the same as the logic of capital: the drive to continuously reduce wages and increase profits.
This shows why capital is not an absolute form of production of wealth, but only a relative, historical limited form of production. It runs into its own barrier: that it is capital, that it seeks only the self-expansion of capital, not the production of wealth. If capital aimed at the production of wealth, the solution to the crisis would be simple and straightforward: in a crisis increase wages and reduce hours of labor. But capital aims only at its own self-expansion and this self-expansion is premised on the continuous reduction of wages.
As Krugman says, practical experience has proved,
“the neoclassical synthesis — the idea that we can use monetary and fiscal policy to make the world safe for laissez-faire everywhere else — has failed the test.”
It failed this test, because it proceeds on the basis of assumptions that form no part of mode of production. I would expect Krugman will distance himself from this conclusion, because it has truly revolutionary implications. Essentially, he is arguing for the end of the fascist state itself, although he does not realize this. This is already clear when he argues for us to turn out attention to the problem of regulating finance capital:
“At the very least it means that we need “macroprudential” policies — regulations and taxes designed to limit the risk of crisis — even during good years, because we now know that we can’t count on an effective cleanup when crisis strikes. And I don’t just mean banking regulation; as the authors of the linked paper say, the logic of this argument calls for policies that discourage leverage in general, capital controls to limit foreign borrowing, and more.
This must be done, he argues, because we cannot depend on the fascist state and its countercyclical policies in a crisis. But without the accumulation of fascist state debt and the continuous inflows of foreign capital into the United States, Washington will have no choice but to reduce hours of labor. Essentially and without realizing it, Paul Krugman yesterday called for the end of wage labor itself. To tell you the truth, I am completely astonished by this Krugman blog post — something has changed.
Of course, if you are of the opinion that this very odd blog by Krugman isn’t going anywhere, you have reason to be. So there is that too.