Re: zero average profit

From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Tue Jun 10 2003 - 09:37:06 EDT

Allin wrote:

>That's too facile.

Well, well...let me quote the entire of my own paragraph then!

>It is certainly not obviously true that if the govt pulls on the
>levers of fiscal and monetary policy full employment can and will
>obtain. Such hydraulic Keynesianism already went up in stagflationary
>ashes in the 70s (even Bill Gerrard recognizes limits of mechanical
>Keynesianism). And that course of events was predicted by Mattick, Sr
>and--to some extent--Sydney Coontz. Of course there was Robert
>Eisner's econometric arguments in defense of Keynesianism, yet
>deficits, however measured, were even larger in the 80s even as
>unemployment remained high.  The apparent failure of Keynesianism in
>Japan today raises questions as well.

Now you wrote in response to only the first sentences:

>  The price shocks of the 70s made governments
>unwilling to apply expansionary fiscal policy even when unemployment
>rose, for fear of worsening inflation.  The price shocks also tended
>to reduce aggregate demand in real terms.  The claim that expansionary
>fiscal policy will move the economy towards full employment is, of
>course, ceteris paribus.  (And the expansionary or contractionary
>stance of fiscal policy is measured by the full-employment deficit,
>not the actual deficit.)

Yes this is why I referred to Eisner's work which attempted to
explain why large nominal deficits did not prove more stimulative in
the 70s. So I think that I anticipated the point that you make here.
Eisner argued that the inflation-adjusted, full employment deficit
was not as high as people thought in the 70s. But as I already
pointed out (drawing from Daniel Shaviro's book which was
surprisingly glowingly reviewed by Eisner),  Eisner's rescue
operation raises the problem of why the 80s which had higher deficits
than the two preceding decades even on an inflation-adjusted, high
employment basis should have featured higher unemployment and slower
growth than the 1960s.

I also asked what we are to make of Japan's Keynesian experiment.

You also write:

>I think you underestimate the effect of high employment.  In the
>absence of thorough-going repression of the workers movement (cf Nazi
>Germany) high employment necessarily tips the balance in favor of the
>working class.  The question then is what form this advantage takes --
>gains in wages, or a trade-off of wage gains versus achievement of
>political objectives.  If high employment is sustained, the govt and
>unions can't "limit real wage gains" for long without offering
>something real in exchange.

Well the govt and unions would be offering the promise of full
employment; they would be reducing the risk of being unemployed. And
presumably not only would they not have to ask for a cut in the real
wage rate, they would allow for some gain as the economy approached
full employment. What's there not to love!

  The Nazis attempted to cut the real wage and sweat more labor from
the working class even as it was made to endure wage cuts. That is,
the Nazis did not attempt a social democratic program for full
employment. They attempted to build an empire partially on the back
of the German working class. For this dollops of repression were
required. (I shall have to consult again the work of Tim Mason)

Kalecki's theory however argues that full employment, modest real
wage gains and higher profits can all be had from debt financed govt
expenditures. For this Nazi repression would not have to be used; the
unions and the state would only have to ensure that real wage gains
remain modest in the approach to full employment (the justice of such
use of expansionary fiscal policy, coupled with containment of wage
gains, could probably be defended in a Rawlsian framework as the
worst off would gain employment while only rentiers would suffer
small losses from a possible mild inflation?).

Social control would still be required for a true social democratic
program but not Nazi repression. In short, Kalecki's theory holds out
the promise of social democratic advance. Gosh, it would be wonderful
if his theory is true!

I think Sweezy recognized that this was all implicit. That is why as
a revolutionary he insisted that the capitalist class would only
tolerate "military Keynesianism" which while threatening to integrate
one dimensional men into a monstrous totality could still be
critiqued from the external point of view of socialist reason
embodied in students, unemployed minorities, third world peasants and
bohemians. Of course even with socialist or (better yet) dialectical
reason on their side, it's hard to see how anyone could have thought
they wouldn't be slaughtered by capital.

>>  I think people are led to Kalecki's theory because it implies that
>>  solutions are possible through rational class compromise.
>I suppose that is one reading, though I doubt whether it is one
>Kalecki would recognize.  The point of his "Political aspects of full
>employment", as I read it, is that full employment, while it is
>"technically" achievable via the lever of fiscal policy, will not in
>fact be sustainable so long as the class contradictions of capitalism
>are operative.

Kalecki's theory does not imply that (I read this short essay a few
years ago). It implies (even if Kalecki himself does not recognize
this) the need for corporatist arrangements by which working class
demands can be moderated while holding out the promise of gains in
profit for the capitalist class. Kaleckian theory may also imply the
need for skilled politicians who can explain to businessmen that they
have more to gain than lose from full employment as long as the
unions and the state are given the power to keep a lid on real wage

The vision  of the left (such that it is) today remains one of big
government, big corporatist union and social control. Think for
example of Todd Gitlin. Compare him to John Holloway.

The left in this country is left Keynesian, not Marxist. And so are
quite a few of the Marxists!

Since the Democratic Party is less Keynesian than the Republican, the
American left (again such that it is) suffers in guilty silence a
preference for the virulently right wing party.

Yours, Rakesh

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