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Tag: 2008 financial crisis

Why Keynes predicted a 15 hour workweek, but Marx did not

One final question raised by John Milios’ paper on crisis theory remains to be addressed.

I have shown that Keynes’ explanation of the Great Depression was identical to that underlying Marx’s prediction that commodity production would collapse, namely the constant reduction of the socially necessary labor time required for production of commodities.

3026617I have also shown that the Great Depression took the form predicted by Marx: a collapse of production on the basis of exchange value. If, as Marx’s theory asserts, exchange value must take the form of commodity money, we should expect the collapse of production on the basis of exchange value to express itself as a crisis of commodity money. The minutes of the Federal Reserve from the outbreak of the Great Depression does indeed indicate that commodity money stopped circulating in the “economy” after 1929.

Keynes failed prediction

Moreover, Keynes initially argued this crisis made necessary both the reduction of hours of labor as well as existing “social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties”. In other words, Keynes thought the Great Depression established the immanent economic necessity for an end to a society founded on wage slavery. If the critical question debated by the classical Marxists was whether or not Marx had established the immanent economic necessity for socialism, Keynes appears to suggest he did — although he never mentions Marx in his essay.

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That time when Ben Bernanke admitted Marx was right and John Milios was wrong

So what do we know regarding the validity of SYRIZA economist John Milios’ criticism of Marx’s alleged theory of crisis?

  • First, we know Marx never had a theory of crisis. This has long been acknowledged by almost all scholars of Marx’s theory.
  • Second, we know Marx predicted the collapse of production on the basis of exchange value. However, this fact is ignored by almost all scholars of Marx’s theory.
  • Third, we know Keynes agreed with Marx on what caused the Great Depression: the improvement in the productivity of labor.

ben-bernanke-goes-hardcore-doveKeynes hypothesis of the cause of the Great Depression, which is fully consistent with Marx’s theory, completely disagrees with the dominant explanations of crises advanced by the underconsumptionists, the falling rate of profit school and the “multi-causal” school of Milios, Harvey and Heinrich. Keynes, like Marx, locates the cause of crises in the constant reduction of socially necessary labor time required for production of commodities.

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How John Milios even screwed up Keynes’ argument

Mikhail_Ivanovich_Tugan-BaranovskijIt seems to me that for John Milios to be correct in his argument, the following must be true:

  1. Bernstein must be correct that Marx never demonstrated there was an immanent economic necessity for socialism.
  2. Tugan-Baranowsky must have proved a fully automated capitalist economy was possible without a necessary intervening collapse of capitalism that Marx himself predicted.
  3. Keynes must have corrected (or at least completed) Marx’s flawed analysis of the capitalist mode of production.

According to Milios, Tugan-Baranowsky’s analysis of Marx’s theory can be used as a point of departure to correct an apparent defect in Marx’s theory. Milios suggests the necessary connection between Marx and Keynes will be found by asking how investment can provide the demand that might be lost owing to the restriction on the consumption of the working class majority:

“What determines net investment and what dictates that it should occur to the extent required for unimpeded reproduction? And, by extension, what is it that, even if only temporarily, influences it in such a way as to generate disproportionality, and therefore crises? These questions open the way for creating a theoretical relation between Tugan-Baranowsky’s analysis and the Keynesian concept of effective demand.”

Thus, according to Milios, the problem Tugan-Baranowsky’s analysis uncovered is how to expand the net investment required for expanded reproduction. But is this actually the connection between Marx and Keynes? Drawing on Marx’s own argument on capitalist development in Capital and Keynes’ own discussion of the causes of the Great Depression, we find that what the two had much more in common than the alleged problem of managing net investment. What the two really had in common was an identical explanation for the Great Depression itself.

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How SYRIZA economist Milios deliberately distorted Marx’s theory to serve his own purposes

In my previous post, John Milios’s strange explanation of capitalist crises, I noted Marx did not have a theory of crisis. Mind you, everybody who has ever studied Marx’s theory knows this is true and there is not the slightest hint of disagreement about this. Since the lack of theory of crisis is alleged to have such far-reaching theoretical implications, you would think scholars of labor theory would devote at least a paragraph or two to speculating why Marx himself did not feel the need to develop a theory of crisis.

Instead, folks like the German theorist, Michael Heinrich, suggest Marx was so overwhelmed by his subject that he was unable to complete it. Heinrich argues capitalism was rewriting its own code faster than Marx could transcribe it into a finished work. This argument, although having a hint of credibility, is actually self-serving hogwash on the part of Heinrich. For Heinrich’s version of history to be correct, capitalism has to be fundamentally different than what Marx describes in Capital. How different? In the Grundrisse, Marx predicts a specific historical event he believed was inevitable: the complete collapse of commodity production, but Heinrich argues collapse was never inevitable:

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John Milios’s strange explanation of capitalist crises

I have been reading this paper by John Milios, a SYRIZA party economist, “Marxist approaches to economic crises”. The paper is interesting in that Milios is trying to advance an alternative hypothesis of the cause of capitalist crises that avoids both underconsumptionist explanations of crises and the argument that they are produced by the law of the tendency of the rate of profit to fall.

Among Marxists particularly those with only passing familiarity with Capital the underconsumptionist explanation for crises is quite popular. Of late that school has been challenged by folks like Andrew Kliman and others who claim crises are caused by the tendency of the rate of profit to fall. Milios is advancing what he says is a third explanation for capitalist crises in which the crisis may be caused by any number of situations.

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Kliman versus Harvey: Seven years later, another phony debate among Marxists

were-not-leaving-finance-and-the-ifsc-may-day-fest-2014-8-638One of the biggest influences on my study of labor theory in recent years was this short 2008 article: “The market no longer has all the answers” in, of all places, the Financial Times. In the article, Michael Skapinker announced, with just a hint of schadenfreude, that neoliberalism had finally fallen and couldn’t get up:

“One of the most arresting comments of the past week came from Josef Ackermann, chief executive of Deutsche Bank. ‘I no longer believe in the market’s self-healing power,’ he said in a speech in Frankfurt.

You may dismiss this as namby-pamby Euro-speak from the Swiss-born head of a German bank, except that no one, anywhere, appears to believe in the market’s self-healing power any more.”

That was the good news.

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The phony crisis debate between David Harvey and Michael Roberts

Have you ever watched a frustrating debate where you knew both sides were wrong? 2qixqxfYou have probably experienced this watching some neoliberal Democrat politician face off against some neoliberal Republican politician in a staged campaign ‘debate’. During these phony debates, you know both sides share the same assumptions about how to exit the crisis and only differ as to which party should be granted the control of the state machine to attack the working class. Their shared premises never enter into the debate and it inevitably circles around matters of style and smoke and mirrors. If so, you know how I feel watching the phony debate on the causes of the 2008 financial crisis now going on between David Harvey and Michael Roberts.

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