[OPE-L:7219] Re: Re: Re: Re: Re: fundamentalism

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Sun May 19 2002 - 14:19:31 EDT

David and Paul B,
let me reiterate: I am not saying that I find your responses to Fine 
and Harris unpersuasive. In fact I find very much of what you both 
say quite persuasive, though I am not clear as to why David thinks 
Sweezy mishandled the treatment of money in his reconstruction of the 
Bortkiewicz critique.

  It is just that Fine raises a complicated set of criticisms which 
may indeed have been indeed already been answered implicitly or 
explicitly in your writings. But there seems to me no reason not to 
repeat oneself and hone one's own perspective, given the complexity 
of the issues.

Paul B writes:

>The article we wrote clearly spells out how the contradictory nature 
>of the commodity develops into  an inflationary crisis. It was not 
>necessary for us to go, writer by writer, through the efforts of 
>others since the differences should be clear to the normally 
>interested  reader.

Now let me requote what Fine says:

>>In addition, a *monetarist theory
>>of inflation* has been utilized with the (false) presumption that
>>the state predominantly appropriates resources through
>>over-expansion of the money supply"

Let's forget the label monetarist theory of inflation. Do you deny 
that the state did in fact appropriate resources through the 
over-expansion of the money supply? Do you deny that the Central Bank 
accomodated the issuance of govt debt by pumping liquidity into the 
system in order to stave off a crowd out effect yet ending up 
engendering runaway inflation that indeed did have  redistributional 

For example, couldn't one read the same point on p. 31 of Inflation, 
the Crisis and the Post War Boom in the section on the State and 

"The State is forced to play a role in production (nationalised 
industries), as well as maintaining labor power and guaranteeing 
employment. It plays a major role in deficit financing, in expanding 
the credit base of the banks and so the SUPPLY OF MONEY. This gives 
impetus to the process which we have already discussed, enabling the 
products of private capital to be sold at those prices set by the 
capitalists, in an attempt to maintain their profits in the face of a 
declining rate of profit."

So  in putting the emphasis on how the state expands the credit base 
and allows price levels to be maintained, you do not seem to be 
proponents of the endogeneous theory of credit which theory developed 
as a critique of monetarism.

>We were not willing, in any case, to shout into the ears of those 
>who feigned deafness.
>1)    What do you mean by 'capital saving innovation'  ? Is this 
>negative accumulation? or a purely use value approach?

What I mean is that if the means of production are getting cheaper, 
even an increase in the physical mass of means of production to the 
workers which they absorb need not mean an increase in the VCC and 
thus downward pressure on the rate of profit.

>2)    The difference between ourselves and monetarism is simple in 
>essence, for us commodities circulate money... for the monetarists 
>helicopters do... or perhaps if I restrain myself , ... for 
>monetarists, money circulates commodities.

Well no you do have the state itself as the active agent in the 
expansion of the credit base. The state is for you like a helicopter 
which drops money into the economy.

But I don't think this takes away from the most persuasive point of 
your critique: the so called over expansion of the state was not the 
cause but the result of a downturn in the real economy.

>This is absolutely clear in the article and certainly needs no 
>repetition. Of course the argument is expanded through the analysis 
>of the use of credit  ...already.... and seems to me quite clear.
>3)    what is a short term keynesian? someone who isn't dead? or 
>someone who becomes a Marxist after being a schoolboy?  To point out 
>that the UK Government extended unproductive employment ( eventually 
>only to a predictably capitalistically constrained limit ) hardly 
>makes one a 'Keynsian'.

No but the idea that the govt can at least in the short term increase 
the level of employment by borrowing and spending does make one 
something of a short term Keynesian. Mattick's point was the govt 
debt was an illusory solution. There is first a juxtaposition of idle 
people and idle capital. The state borrows and finances projects 
which put people to work. Employment is indeed increased. However, 
the state now owes interest on its debt, but the money which the 
state has borrowed and spent has been expended. How will the state 
pay its debt? It can monetize it and thus risk inflation; it can 
increase taxes and thus compound the problem of profitability if the 
problem of profitability which had led to the initial juxtaposition 
of idle capital and idle people has worsened over time as a result of 
a rising OCC and (Fred adds) a rising U/P labor ratio.

   So as I understand Mattick Keynesianism was partly effective 
because it did indeed solve immediate problems, yet it did so by 
compounding contradictions in the long term. It was exactly because 
Keynesianism was a short term solution that Mattick attempted to 
explain both the post war boom and its dissolution.  Why would you 
not agree with Mattick on this point?

So did you mean to deny that Keynesian policies could at some point 
increase the level of employment and allow otherwise idle money to 
function as if it were capital?

Since I speak to David Y's analytical points here, I won't respond to 
his post as well.

Again: let me be clear--I am not disagreeing with you. I just don't 
see what is lost in continuing the discussion with Fine who is a 
serious, extremely stimulating theorist and empirical analyst.. I 
certainly don't think his previous political affiliation is good 
reason not to respond to him as I do not think your politics give 
critics any excuse to ignore you.

All the best, Rakesh

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