Re: what makes a theory 'social democratic'?

From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Fri Dec 12 2003 - 09:59:20 EST

>  Only the falling rate and mass of profit theory makes sense of
>protracted crises in which there must be a general devaluation of
>capital, new political means have to be used to break labor (rather
>than merely contain wage increases so that there is no wage-price
>inflation) and the fraternity of capital breaks down into fraticidal
>competition. This is not to say that any crisis is permanent; it is
>only to say that protracted and deep crises are inevitable. To be
>sure, they can be deferred through the geo-temporal displacements
>that Harvey describes, but they can't *always* be solved even in
>theory by the simple redistribution of capital or government deficit
>What do you make of Keynes advocate of low interest rates and the
>euthanasia of the rentier class in this context?

There is a nice section "Was Keynes a Socialist" in Galbraith and Darity's
textbook Macroeconomics (Houghton/Mifflin, 1994):

"Keynes immediately added that such a socialization of investment 'need not
exclude all manner of comporomises and of devices by which public authority
will cooperate with private initiative.' Moreover, only investment planning
was involved : 'Beyond this no obvious case is made out for a system of
State Socialism which would embrace most of the economic life of the
community.' After all, argued Keynes, 'It is not the ownership of the means
of production which is important for the State to assume. If the State is
able to determine the aggregate amount of resources devoted to augmenting
teh instruments and the basic rate of reward to those own them, it will
have accomplished all that is necessary.' [same as John Roemer?rb]

"Keynes was serious then when he expressed enthusiasm for the social
philosophy of the idiosyncratic Argentinean emigre Silvio Gesell, whom
Keynes described as a 'strange and unduly neglected prophet" albeit a
'crank.' Gesell had striven to construct, quite explicitly, what Keynes
corrected described as an 'anti Marxian socialism.' And Keynes himself,
while contemplating a 'somewhat comprehensive socialization of investment,'
was insistent that his own scheme would avoid authoritarianism while
'preserving' the desirable aspects of 'present day capitalistic
individualism,' namely the twin goods of 'efficiency and freedom.' However
unless steps were taken to end the unemployment crisis, Keynes feared, few
would continue to put up with the ills of 'present day capitalistic

Keynes' concepts are indeed quite slippery, e.g., the marginal efficiency
of capital (an objective or subjective concept?) and the euthansia of the
rentier or elimination of the functionless investor. What for example did
Keynes mean by the abolition of interest through the elimination of the
functionless investor? An elimination of the price paid to commercial
banks for creating media of payment/high power money or the elimination of
property income as such? The disappearance of *interest* need not mean the
euthanasia of the rentier of course since the functionless investor would
merely old other assets (e.g. stocks) instead of holding debts (bonds). And
what would it mean for the banks to get no reward for creating media of
payment if this is what Keynes meant by the elimination of the functionless
investor? Since the commercial banks are indispensible in a capitalist
system, Keynes would have to propose a complete socialisation of the banks
since if their services were to be offered gratis their costs would have to
be covered out of general taxes. but this is not what Keynes meant by a
somewhat comprehensive socialisation of investment, yet that would be the
only way to abolish interest as a cost on firms.
And if Keynes meant to abolish the rentier class, he should have advocated
100% tax on all income from property, or nationalisation and socialisation
of all income yielding property. But this he did not do either.
So it seems that no meaning can be derived from his famous call for
euthanasia of the rentier or a somewhat comprehensive socialisation or (one
could argue) the marginal efficiency of capital.
Keynes seems to have been a confused and confusing man, perhaps a first
rate intellect who became so mentally unsettled and unstable by his
catastrophic times that he descended into the true underworld of demagogues
and cranks.

This archive was generated by hypermail 2.1.5 : Tue Dec 16 2003 - 00:00:00 EST