The Real Movement

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Tag: Great Depression

Endnotes 4: Trying to dazzle us with bullshit

I have been reading Endnotes 4, when I came across an argument by the collective in Part 3 on why the industrial working class never became the majority of society and how this led to the failure of the working class movement. The argument the collective makes has my mind twisting:

“Revolutionaries’ belief that trends would continue to move in their favour was enshrined in the policy of abstentionism. Social Democratic parties became the largest factions in parliaments, even if they remained in the minority; but those parties abstained from participating in government. They refused to rule alongside their enemies, choosing instead to wait patiently for their majority to arrive: ‘This policy of abstention implied enormous confidence in the future, a steadfast belief in the inevitable working-class majority and the ever-expanding power of socialism’s working-class support.’ But that inevitability never came to pass.”

industrial_revolutionSo, the workers’ parties expected that a working class majority would soon arrive and produce a majority in favor of socialism. Is this the argument the Endnotes collective is trying to make? If true, where did this belief in inevitability go wrong?

What happened, according to the Endnotes collective, is that the working class met its external limit of growth long before it became a majority of society:

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Schrödinger’s Capital: Value theory and economic depressions

NOTE 16: Who are you going to believe? Your lying eyes or the BLS?

If not all labor creates value, how can we distinguish labor that creates value from labor that does not create value. Marx proposed that labor that creates value must be expressed as exchange value; which is to say, value producing labor contained in one commodity must be expressed in the bodily form of another commodity having value for which the first product of value creating labor is exchanged.

Marx’s definition provides a testable statement regarding value:

If a product of labor has value, this value must be expressed as exchange value.

An important caveat to Marx’s theory must be stated here: while the value of a product of labor must be expressed as exchange value, the converse statement will not necessarily be true: the value of a product of labor will be expressed in the form of exchange value, but not every object with exchange value actually has value.

The value-form school’s definition of value directly contradicts Marx’s argument in that, for value-form theory, value does not necessarily take the form of exchange value, but only some definite quantity of the material of a “value-form” (i.e., a money), irrespective of whether this material itself has value or not. Thus the value-form school also produces a testable statement:

If a product of labor has value, it will have a price denominated in some material granted forced circulation by the State, and having the key determination of immediate exchangeability. (Arthur, 2003.)

According to Heinrich in his Introduction to the three volumes of Capital, there is no reason to prove value exists. However, the problem we face is not whether we need prove value itself exists, but which of these two distinct and incompatible definitions of value is accurate.

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Schrödinger’s Capital: Money, “technological unemployment” and the cold war

NOTE 13: Historical materialism minus the history part

I have been reading, “Marx and Monetary Theory”, by Matthijs Krul. At the outset, Krul makes this statement:

“In the context of the current crisis, with ‘quantitative easing’ to the tune of hundreds of billions of dollars on the one hand and the rush to liquidity that accompanies financial crises on the other, it may be useful to take a look at how Marx’s economic theory relate to issues of money and monetary policy. The aim here is to provide a clear and understandable overview of what Marx’s theory of money was, how it relates to our current-day monetary system internationally, and how this relates to his value analysis generally.”

image-A699_4D98869BAccording to Krul in this 2010 essay, the financial crisis makes it useful to compare Marx’s approach to money (and, by implication, value and exchange value) with bourgeois monetary theory. The problem, however, is that in Marx’s theory money is the expression of the values of commodities. By contrast, bourgeois theory lacks a theory of money and treats money as a mere system for counting up incommensurable use values.

Since the commodities themselves are incommensurable, what else the prices might represent is unclear from Krul’s discussion — he never mentions the word, value, until he discusses Marx. It is possible that bourgeois economics believes money is a system for counting itself. As Arthur puts, money is both the form and measure of value.

In any case, bourgeois theory bounces between two poles: in times of relative calm it adheres more closely to the Austrian theory. During times of crisis, it suddenly declares, in the words of Milton Friedman, “We are all Keynesians now.”

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The hidden conflict within the fascist state for control of economic policy (5)

I have been going through this process in order to clarify for myself the logic of the current discussion of so-called negative interest rates — an oxymoron if ever there was one. This is part five of the series; part one, part two,  part three and part four can be found here. I hope it also will have some use to readers.

Part Five: The dollar and the increasing possibility of 21st Century Currency Warfare

Can monetary policy be rescued from oblivion? Probably not. There are just too many difficulties with the idea of negative interest rates on currency.

As I explained in part four of this series, Haldane proposes that the way around the zero lower bound on monetary policy may be to impose a negative interest rate on the holders of state issued currency. If a way could be found to force the holders of currency to pay interest on the currency in their bank accounts, wallets, pockets — and even in their mattresses — the distinction between credit money and currency could be forcibly imposed on society by the state despite a zero interest rate environment.

Once stripped of its deceptive wrapping as mere monetary policy, what Haldane is proposing is the outright expropriation of your savings account, your checking account and even the currency in your wallet and cookie jar. This goes well beyond monetary policy and begins to encroach on the limits of national economic policy itself. Under the most charitable interpretation, his proposal is well into the sphere of fiscal, even currency, policy despite the attempt to conceal it behind protective coloration as a negative interest rate on currency.

For the moment, however, let’s ignore this potential objection to his proposal. Instead, let’s treat it as a proposal for a measure similar to what FDR did in 1933: pure and simple devaluation of the currency.

What are the difficulties to be considered?

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The hidden conflict within the fascist state for control of economic policy (4)

I have been going through this process in order to clarify for myself the logic of the current discussion of so-called negative interest rates — an oxymoron if ever there was one. This is part four of the series; part one, part two and part three can be found here. I hope it also will have some use to readers.

Part Four: The desperate search for an exit from failed monetary policy

“I think we got the Recovery Act right. The primary objective of our policy is having more work done, more product produced and more people earning more income. It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.” Larry Summers, Washington Post, November 8, 2009

“We didn’t think it would take that long.” Ben Bernanke, USA Today, October 5, 2015

The disappointment with the weak impact of counterfeiting the currency was admitted by Bernanke in a recent interview. This was not supposed to happen according to the dominant monetary theory, and Ben Bernanke in particular, where the prices of commodities are a function of the supply of currency in circulation. According to Bernanke’s “quantity theory of money”, the government had this technology, the printing press, which it could use to manage the US national capital. In fact, following the financial crisis, the policy rate went to zero without providing any real stimulus at all.

The chief economist of the Bank of England, Andrew Haldane, gave a speech in September on the problems faced by monetary policy. Although Haldane never mentions Larry Summers, his speech addresses the same concerns Summers raised in his own November 2013 “secular stagnation” speech. The problem is that monetary policy, on which the United States has relied since 1979, has run into a dead end, the zero lower bound. Had Washington not stepped in and provided a multi-year, multi-trillion dollar fiscal stimulus, capitalism likely would have collapsed. No one will admit it, but this is in fact what has happened after the 2008-2009 financial crisis.

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The hidden conflict within the fascist state for control of economic policy (3)

Part Three: The Zero Lower Bound and the Collapse of Neoliberal Monetary Policy

I have been going through this process in order to clarify for myself the logic of the current discussion of so-called negative interest rates — an oxymoron if ever there was one. This is part three of the series; part one and part two can be found here. I hope it also will have some use to readers.

To recap my argument so far:

Keynes in his 1930 essay, Economic Possibilities for Our Children, diagnosed the cause of the Great Depression as the improvement in the productivity of labor. Although at first admitting this improved productivity must sooner or later require reduction of hours of labor, in his 1933 essay, The Means to Prosperity, he ultimately proposed to fix it by a two-fold strategy: First, the state should maintain abundant credit at very low interest rates to facilitate private investment; second, the state had to lift total spending on commodities through deficit spending.

By the 1970s, however, this strategy — basically a strategy to avoid reducing hours of labor — ran into the twin economic maladies of stagnation and borderline hyperinflation — sometimes called stagflation in the popular press — leading to the political movement to get rid of state management of the economy entirely. In turn, this effort to get rid of state management is more popularly referred to by the name, neoliberalism, on the Left.

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The hidden conflict within the fascist state for control of economic policy (2)

Part Two: The collapse of the Keynesian policy consensus

As I stated in my previous post, the conflict over control of state economic policy can be traced to the Great Depression. Keynes set the state economic policy framework for this conflict by tracing the cause of the Great Depression to the improvement in labor productivity. According to Keynes in 1930, the depression was caused by capital reducing the need for labor faster than it could find new uses for labor. Of course, capital only has one use for labor: the production of surplus value, production of profit. Keynes was essentially confirming Marx’s prediction that the diminishing need for labor would lead to the collapse of commodity production.

Paul_VolckerAccording to Marx’s labor theory the price of a commodity is only the expression of the “socially necessary labor time” required for production of commodities. This implied that as the labor required for production of commodities fell, so would their prices. When the Great Depression hit, the problem pointed out by Keynes, that the reduction of labor was outrunning the pace at which capital could find new uses for labor, was expressed in deflation, i.e., generally falling prices.

Marx’s argument that the prices of commodities were tied to their labor value carried deadly implications for capitalism. Since prices paid for commodities was the only way the capitalists could recover their investment. Falling prices implies growing pressure on profit. If the capitalists could not sell their commodities at prices to cover their investment plus profit, capitalist production for profit would come to a standstill.

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The hidden conflict within the fascist state for control of economic policy

This article, Devaluations didn’t work, points to what I think is the real reason the Federal Reserve is desperate to raise its policy rate some time this year. It is becoming increasingly obvious monetary policy hasn’t delivered and the bankers are in danger of losing their control of economic policy.

According to the Economist: “Devaluations today haven’t had the positive impacts the end of Gold Standard did in the 1930s”. In the aftermath of the financial crisis of 2008-2009, bourgeois simpletons are deeply divided over how to replace the extraordinary measures taken to prevent collapse of capitalism with a set of policy tools that can be used to manage the crisis long-term. At the heart of this struggle is the question,

“Why aren’t currency devaluation policies creating inflation?”

To answer this question will require a little bit of economic history.

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The Myth of Secular Stagnation, Part Two

In part one of my blog post, The Myth of Secular Stagnation, I explained the background to the debate among bourgeois simpleton economists. The stagnation debate among bourgeois economists begins with the Great Depression and Keynes’ characterization of the problem of the Great Depression as “technological unemployment”. The source of the technological unemployment was the improvement in the productivity of labor, the industrial revolution wrought by capital. For Keynes in 1930, this was not necessarily a malady in and of itself, it promised a future where labor itself would be abolished. The transition to a society of less work might be very painful, but the distress was only temporary.

By 1933, however, Keynes’ argument had changed: although he continued to insist that, technically, the “economic problem” had been solved he now focused on the problem of restoring capitalist profit. The Great Depression was no longer caused by the lack of investment opportunities, instead there was a lack of sufficient state deficit spending. The Great Depression, now having lasted 3 years, required state intervention; “a blend of economic theory with the art of statesmanship”.

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Even 80 years later the Left has learned nothing: A reply to Rschard1

I received a very welcome and interesting comment on my blog post, “Deficit reduction is not austerity; it kills capitalism”, from Rschard1. The commenter argues that my own argument is technically correct but ignores the messiness of historical contingency. I am, the commenter states,

“glossing over the uncomfortable truth that recessions caused by voluntary deflation have, without any exception I know of, led to horrid consequences for the working class.”

“Der Kampf gegen die Arbeitslosigkeit”

As support for his/her view, the commenter presents the classical case of fascist full employment policies of the German Nazi party. While the German Marxists followed what the commenter argues is essentially my solution for the Great Depression, the fascist introduced a series of measures to create jobs by rearming Germany and preparing it for World War II. These policies rapidly brought Germany to full employment, just as Keynes predicted they could and aided the fascist rise to power. Austerity, as the commenter argues, is great for the more advanced countries, but terrible for countries like Greece.

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