The Real Movement

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Tag: depression

Growth, Stagnation or Collapse: A short comment on Anwar Shaikh’s new book

Here is a quote from Anwar Shaikh in the lecture series based on his new book:

“Capitalism is a growing system. Any analysis of capitalism must build into it from the start that it is growing.”

Shaikh’s statement is really rather incomprehensible given what he says is his starting point for analysis of the capitalist mode of production: the framework provided by classical theorists and Keynes.

How can he claim to base his argument on the classical economists and Keynes when, contrary to both of those schools, he characterizes capitalism as a growing system? In Keynesian theory the system tends toward stagnation; while in classical theory, the mode of production tends toward conditions that must lead to collapse, a falling rate of profit. Read the rest of this entry »

Why Marxist can’t explain the collapse of Keynesian economic policies

Part Three

“Instead of understanding so-called ‘labour values’ as ontologically prior to money prices, the position adopted here is that order and regularity in the inter-relations of units of capitalist production is possible only because there is a form of value, namely money, as a precondition for it. Only once this form of commensurating products obtains is there any meaning to the supposition of a law of value rooted in labour time and appearing as price. The money-form structures such determinations as socially necessary labour time, deciding to what degree actual labour times are socially validated, or replaced by socially imputed amounts of labour.” –Chris Arthur, Value and Money

The collapse of Keynesian state management of the economy has never been explained by Marxists. Instead we have witnessed one Marxist scholar after another suggesting a return to Keynesian policies is both possible and necessary. In this part of the series, I will show why Keynesian policies ultimately collapsed. And, moreover, all talk of a return to the so-called Keynesian social state is a fantasy.

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Why Marxists can’t explain how Keynesian policies work

(And they can’t explain why Keynesianism collapsed either)

Part Two

This is part two of the series, “How fiat currency killed Marxism”. Part one is here.

YoungstownPlantAt the high level of abstraction of Capital, money has to be a commodity, because Capital presents a theory of a “pure” capitalist economy, without state intervention. And in the 19th century laissez-faire capitalism (without state intervention) that Marx was analyzing, money was a commodity and money had to be a commodity in its functions of measure of value and store of value. However, in the post-1973 contemporary capitalism, money is no longer a commodity (i.e. is no longer convertible into gold at a fixed exchange rate), and money does not have to be a commodity in Marx’s theory. The state-guaranteed fiat money serves the same purpose as gold under the gold standard – it provides an observable, homogeneous, quantitative, and socially valid expression of abstract labor.  —Fred Moseley, Money has no price

If Keynesian currency devaluation allows the state to maintain production for profit by reducing the real value of wages, why were Keynesian policies abandoned in the late 1970s for neoliberalism? To explain why this happened, requires some discussion of the problem with simple Keynesian “full employment” policies.

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You can’t understand the state if you don’t understand capital

One of the fundamental problems of Marxism’s explanation of the role of the state is its rather weak grasp of capital itself.

Richard NixonIn my last post I argued there was nothing extraordinary about the failure of social democracy in the 1970s, nor its success in the 1960s. Even if we leave politics out of the equation altogether, we would expect wages to rise during booms and fall during busts. This is pretty much what occurred in fact according to Simon Clarke. Clarke attributes the cause to the success or failure of social democracy, when in fact, social democracy had no real impact on wages.

Where Keynesian policies did seem to work, however, is during the depression of the 1970s. During the 1970s, the depression never led to the fall in output and employment that was seen in the Great Depression. While social democracy is not necessary to explain the rise and fall of wages, it does seem to have an effect on output and employment. In the depression, we should have seen output collapse severely and a population of excess workers to form up in all advanced countries.

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A Brief Note on Simon Clarke’s “The State Debate”

I have been reading the introduction to Simon Clarke’s, 1991 book “The State Debate”. The book is an interesting collection of paper produced by writers in the 1970s trying to come to grips with the fascist state. It does not appear any of them are directly trying to grapple with fascism; rather they seem to grappling with the previous formulations of the problem of the state and society.

Clarke makes this interesting statement:

“There was no way in which economic issues could be isolated from political questions in the atmosphere of growing economic crisis and sharpening political and ideological conflict through the 1970s.”

Yet, most of the authors referred to in this book are attempting just this: to isolate economic issues from political questions. As Clarke describes it, at the outset there were two poles in the debate: The first pole proposed “an immediate identification of the state with the interests of capital”. The second pole proposed, “institutional separation of the state from the economy, and so stressed the autonomy of the state as a political institution.”

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Are state deficits “necessary”?

how-john-boehner-is-secretly-winning-the-war-in-the-government-shutdown-fightThe intense fear expressed in Washington and in financial markets around the world of simply balancing a fucking budget should grab your attention. It’s not like the capitalists are being asked to commit suicide as a class. So why the profound resistance to simply balancing Washington’s budget? If the state is running a deficit, it is spending more than it is directly extracting from the economy, i.e., from the total output of the capital. A balanced budget means the fascist state can spend no more than it directly extracts from the economy through taxes and other revenue.

So what is all the fuss about and how can we determine whether this deficit spending is necessary?

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Thinking the Unthinkable on the Shutdown

There is a recurrent theme in this shutdown. Let’s see if you are perceptive enough to pick up on it (courtesy Zero Hedge blog):

#6 Richard Bove, VP of research at Rafferty Capital Markets: “If they seriously default on the debt, what we’re really talking about is a depression”#7 Chinese vice finance minister Zhu Guangyao: “The U.S. is clearly aware of China’s concerns about the financial stalemate [in Washington] and China’s request for the US to ensure the safety of Chinese investments.”

#8 The U.S. Treasury Department: “A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse”

#9 Goldman Sachs: “We estimate that the fiscal pull-back would amount to 9pc of GDP. If this were allowed to occur, it could lead to a rapid downturn in economic activity if not reversed quickly”

#10 Simon Johnson, former chief economist for the IMF: “It would be insane to default, but it’s no longer a zero-percent probability”

#11 Warren Buffett about the potential of a debt default: “It should be like nuclear bombs, basically too horrible to use”

#12 Bloomberg: “Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.”

If the shutdown is not ended soon and the debt ceiling raised, all hell is going to break loose. These seem to be shared assumptions of both Democrats and GOP, hence public debate (propaganda) takes place within their parameters. The crisis as a mere political event begins with the assumption that any reduction in the debt must end in default, which is predicted to unleash such calamitous events as to be unthinkable.

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Harvard Business Review: The ‘liars can figure’ edition

According to Justin Fox, a paid apologist for capital at the Harvard Business Review, the difference between the Great Recession and the Great Depression can be summarized in a single chart. Fox explains his perverse reasoning:

“Basically, if you think this downturn was comparable in origin and inherent severity to the other recessions since World War II, then we’ve been the victims of economic-policy bungling of epic proportions. If, on the other hand, you think the proper comparison is the Great Depression, the last U.S. downturn brought on by a severe financial crisis, you’d have to say the White House, Congress, and most of all the Federal Reserve have done an absolutely brilliant job relative to their early-1930s counterparts. I’d lean toward explanation No. 2 — we did actually learn something from the Great Depression, although probably not enough.”

recessiondepressionSo, apparently, we have a choice of standards by which to measure the severity of the present crisis: the official unemployment data provided by the Bureau of Labor Statistics. Unemployment during the Great Depression, which involved a greater percentage of the wage labor population than the present depression. Or the level of unemployment in the post-war period, including the depression of the 1970s, when employment actually increased over the whole of the depression.

Guess which one Justin Fox, of the capitalist mouthpiece the Harvard Business Review, wants to use.

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