Re: zero average profit

From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Thu Jun 12 2003 - 18:42:55 EDT

>I'm not making a general argument for the effectiveness of
>Keynesianism.  I'm making the more specific point that a high level of
>government deficit spending can be expected to lower unemployment.
>Whether the reduced unemployment is sustainable is a broader
>social-political issue.
>The average unemployment rate in the U.S. from 1960:01 to 1969:12 was
>4.78 percent, not so different from that at the end of the Reagan
>deficit-spending episode.

Yet the lowest unemployment fell to was 5%--and what was the average
during these huge deficit years...6%, right?--despite massive props
to effective demand: enormous unsustainable deficits which were
higher even on an inflation-adjusted, full employment basis than the
two previous decades; exports as stimulated by a steep competitive
devaluation (that is, unemployment was exported);  and consumption as
enabled by  mortgage refinancing from reduced interest rates.

Here was demand side economics, and it failed even to allow an
approach towards full employment. And we are underestimating
unemployment, I am sure: unemployment was probably more narrowly
defined (the rising prison population was not counted and Reagan
played some games with the numbers. I think), bouts between jobs were
probably longer in the 80s than the 60s (I think Richard Freeman has
shown this), and the exported unemployment of course does not appear
in the national statistics.

In all honesty, I don't understand the theoretical and empirical
basis for continued belief in the possibilities of demand side
economics other than the comforting illusion of a cooperative
capitalism which it fosters.
At any rate, the social democratic Keynesians long ago lost out to
those who argued that effective demand was best increased not through
debt financed govt expenditures and redistribution but through a
revival of investment demand which in turn required the state to
promote the conditions of profitability through regressive tax breaks
and union busting.  After all, Kalecki himself implies that profits
in the preceding period are probably the most important determinant
of investment which (as Keynes showed) is the key variable in the
determination of the level of effective demand.

  So, as Amit Bhaduri has argued,  "a politically conservative style
of demand management based on a profit-led and private investment
driven economic expansion"  can be made within the
Keynesian-Kaleckian tradition.

The prominent Marxist state theorist Bob Jessop has been speaking for
the last decade of a transition from a Keynesian welfare state (KWS)
to the Schumpeterian workfare state (SWS). That transition would be
made was long ago predicted by Mattick Sr (Marx and Keynes was
written in the early 60s). But the point (and Jessop does not make
it) is that the transition can be intellectually defended within the
same theoretical framework.

The world in which we now live gives us Marx vs.  Hayek or
Schumpeter. This too (unfortunately for the spokespersons for
bourgeois society) is an empirical and intellectual battle which the
Marxists can win. I am much less sanguine about a political victory

Yours, Rakesh

ps article on pA2 of today's WSJ on need for upward revaluation of
yuan makes reference to MacKinnon's work on US opposition to
devaluation of yen.

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