The Real Movement

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Tag: hours of labor reduction

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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First we get the power, then we get … Oops!

Okay, now what?

scarface_17Citizen CoKane always has relevant comments to my blog that put me on the spot:

His question this time is what are workers in Greece supposed to do when their counterparts in Germany appear to be complacent, even indifferent to their plight? The workers of Greece clearly can’t overthrow capitalism worldwide all by themselves and the rest of Europe seems paralyzed at best. I reproduce his comment in its entirety:

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SYRIZA’s capitulation and the art of class war

According to Panitch and Gindin, it turns out that Syriza’s room for maneuver was less than we hoped:

“Of course, the room for manoeuvre was much narrower than the leadership hoped, not least because of the incapacity of the left in Northern and Central Europe to shift the balance of forces in their own countries in even a minimal way. On the other hand, Syriza would never have been elected on the basis of a call for leaving the eurozone, nor would it have won the recent referendum. Those in and out of the party who have always called for an immediate Grexit never were persuasive on the necessary political conditions for this. Given the limits imposed by the unfavourable international balance of forces, those of us who argued that the room for manoeuvre inside the EU was a lot narrower than the Syriza leadership hoped, and therefore favoured connecting a socialist strategy to Grexit – and always made this view clear to our Syriza comrades – could not, however, help but be sympathetic to the dilemmas they faced. Not to have been would have been churlish beyond measure, especially given the socialist left’s own political weakness in our own countries.”

Which begs the question: Who is we? Most Leftists I follow were highly skeptical of SYRIZA’s prospects, and even its commitment to radical change, from the first.

suntzuUnlike Panitch and Gindin, most of us knew already from the very first that SYRIZA’s space for maneuver was critically compromised and it did not take five months of frustrating negotiations to arrive at this conclusion. In the United States, all you had to do is look at the history of recent labor negotiations at Boeing and GM, where labor was forced to concede terrible losses simply so workers could keep their jobs. Was this not enough to conclude labor’s bargaining position had been critically undermined by four decades of neoliberalism? If not, could we not extend this to the abandonment of the working class by the labor and social democratic parties of the world market? Finally, when even the Soviet Union and China together went all in for capitalism wasn’t this clue enough?

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To confront Washington, China should cut hours of labor now

From FT Economics today, China is dangerously flirting with deflation:“PBoC admits defeat in war on deflation.”

“China’s central bank this week faced reality and revised down its inflation estimate to half the level targeted by Beijing, implying it is failing — as global peers have before — to combat the threat of deflation.

That is not only bad news for a country struggling to stimulate growth, it also threatens a ripple effect around the world: cheap made-in-China goods contained price rises around the world when that was a force for good.”

China needs a plan B just about now and I think they should revisit the debate between Mao and Deng over China’s path for the most rapid development path.HKG105:CHINA-DENG:SHANDONG,CHINA,13OCT94-FILE PHOTO 03MAR59- Chinese leader     Deng Xiaoping (L), is seen confering with the late Chinese Chairman Mao Tse-tung [Mao Zedong] in Shandong province March 3, 1959. B/W ONLY

Maoists will know I am referring to the debate of the 1960 and 1970s over the path for China’s development. The two sides of the debate is pretty simple to describe. The Dengists raised the slogan: “Black cat or white cat; the cat that catches the mouse is a good cat.” Essentially, their pragmatic argument was that it did not matter which measures the state employed, so long as those measures sped the development of the productive forces. This attitude, of course, horrified the Maoists who rightly saw in it the formula for unbalanced growth, rising inequality and,  eventually, full capitalist restoration. This debate shaped China history for most of the latter part of the 20th century and played a significant role in the Great Proletarian Cultural Revolution, which shook China and the world for more than a decade. In the end, Deng and the Dengists won, in large part simply by outliving Mao.

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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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Why reduction of labor hours cannot work as a ‘policy tool’

I have been rereading the paper by Kallis, Kalush, O’Flynn, Rossiter and Ashford, “Friday off”: Reducing Working Hours in Europe. I first learned of the paper when it was tweeted by Alex Tsipras on the night SYRIZA was elected to lead No_Known_Restrictions_A_little_spinner_in_Globe_Cotton_Mill._Augusta,_Ga.,_by_Lewis_W._Hine,_1909_(LOC)the government of Greece. I found it remarkable that this paper, which calls for a reduction of labor time, was being distributed by the head of that radical party on the eve of its victory. Did it signal his intention to pursue a new, radical, approach to the crisis in the European Union?

After that initial reaction, I’m now beginning to understand how the argument of Kallis, et al. was limited by a flawed approach to labor hours reduction in which labor hours reduction is essentially treated as just another tool of fascist state management of the economy. Many of the flaws relate to their poor (perhaps, non-existent) grasp of the basics of labor theory and reliance on neoclassical theory to make their argument. Those flaws can be broken down into three questions:

  1. Is labor hours reduction a policy tool?
  2. Can reducing hours of labor fix social ills created by capitalism?
  3. Is a reduction of hours of labor compatible with capitalism?

The following is my take on their approach.

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A dagger aimed at the heart of capitalism

The beauty of reducing hours of labor is that it appears to be an insignificant reform, when, in fact, it has the potential both to lay the foundation for communism and destroy capitalism. The significance of the conflict over hours of labor is as deeply obscured by capitalist relations of production as the role labor plays in the production of surplus value. However, anyone familiar with Marx’s reasoning, would understand why he called the struggle for reduction of hours of labor, “the modest Magna Carta of a legally limited working day.”

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