The Real Movement

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Tag: John Maynard Keynes

Labor Theory for (Marxist) Dummies: Part 4

Is a fully developed communist society possible right now?

047I want to illustrate my point from the last post that to bring the labor reserve into production and so reduce hours to a minimum for everyone in society requires a much larger reduction than may be generally assumed in the literature on the subject. To do this, I will be using actual data drawn on the United States. As I will show, under present conditions in the United States the reduction of hours of labor now required to absorb the labor reserve into production may be so large as to effectively bring us to the threshold of a fully developed communist society.

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Why Thatcher’s neoliberalism was the continuation of Keynesianism

I received this question on my page:

“I’ve noticed that you hold a quite controversial position regarding Thatcher, when you say she was right. Do you mean that you endorse her policies? Wouldn’t it be insane for communists endorsing or proposing extreme Thatcherite policies? If not, would you mind explaining it a little better please?”

Not a problem, let me give some context for why in a certain sense, I argue Thatcher was correct about TINA:

In 1980, Margaret Thatcher argued “There is no alternative” to the policies she was pursuing. In the 36 years since she made her TINA speech, those words have been repeated on the Left as a declaration of class war. While the Left has been rightly outraged by her speech, assuming, as it does, that her neoliberal policies were a historical necessity, little or no context for her words have ever been provided by her Left opponents.

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Keynes and the myth of the Reagan administration’s neoliberalism

Robert Skildelsky, biographer of John Keynes, has written an essay written an essay on the 80 year legacy of the General Theory in which he credits Keynes with inventing macroeconomic policy and for showing how government could employ means at its disposal to offset economic depressions.

For all the genius of Keynes’ General Theory, its importance has not always been acknowledged by mainstream economics. By the 1980s, according to Skidelsky, most of mainstream economics came to reject many of the ideas first proposed by Keynes, particularly his argument capitalist economies were inherently prone to chronic underutilization of both capital and labor.

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Schrödinger’s Capital: Heinrich’s hilarious ‘refutation’ of Marx on the falling rate of profit


NOTE 22: The falling rate of profit and the collapse of production on the basis of exchange value

In part 2 of his 2013 essay, Crisis Theory, the Law of the Tendency of the Profit Rate to Fall, and Marx’s Studies in the 1870s, Heinrich argues Marx  makes a far-reaching assertion that is impossible to demonstrate empirically: in the long term the rate of profit must fall.  As Heinrich points out the very nature of the law — that it only points to a tendency — implies past historical data cannot simply be projected indefinitely into the future. The rate of profit may well have fallen in the past or it may have risen, but this does not mean a given historical trend will continue in the future.

The argument Heinrich makes in this section appears to challenge a long-standing Marxist assumption that there is at least an indirect link between capitalist crisis and social revolution. For some Marxists — notably, Andrew Kliman and company — the crisis produced by the falling rate of profit is a theoretically necessary assumption, because such a crisis is thought to be the material force that ultimately triggers a working class social revolution. Without the crisis, and the deepening poverty and political discontent it creates, many Marxists have no ready explanation for why the working class would overthrow capital. Thus, if we accept Heinrich’s argument about the falling rate of profit, what are we left with as a trigger for the social revolution?

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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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