[OPE] Chris Harman on the spectre of Keynesianism

From: Jurriaan Bendien (adsl675281@telfort.nl)
Date: Sun May 11 2008 - 05:32:45 EDT


I refer to a short book review I did of Nell/Forstater eds, Reinventing Functional Finance, Review of Radical Political Economics, 2006; 38 (3) pp. 445-447. At the time Dave Barkin was looking for reviewers and this was one of the books I said I would be interested in reviewing. However, I was very much mistaken about what I thought would be the content of the book, I thought it was a critical-empirical analysis of investment patterns and capital finance in the USA. Instead, it was a symposium of papers on Abba Lerner's "functional finance" theory. But I wrote the review anyway as I said I would do it.

Here's an excerpt taken from my review, about the criticisms I had of the book (obviously I could not go into much more detail at that point):

"If there are theoretical weaknesses in the argument of Re-inventing Functional Finance, I think they fall mainly in three areas. Firstly, insufficient attention is paid to the overall pattern of investment activity by type. Thereby a crucial problem is evaded, namely that in a private enterprise economy one cannot force investors to invest where they do not want to invest, nor, ultimately, prevent them from investing where they do want to invest. There is a "carrot" here perhaps, but no "stick". Secondly, Keynesian policy, based on state intervention, assumed a national framework for policy. But the growth of foreign trade and the deregulation of international capital markets creates a very different ballgame - as should be obvious from the fact that far more US dollars are now held overseas, than within the USA itself. The buoyancy of the US economy nowadays depends to a large extent on foreign capital, and the federal government has been promoting new credit money at a spectacular rate to keep the economy levitated - though, as Lerner-the-socialist would presumably have argued, not with the aims that he had in mind. Lastly, although the goal of full employment through "transformational growth" sounds very desirable, what is being overlooked is the nature of the jobs and the contracts themselves. Jobs are being created and disappearing all the time, but one ought to consider critically what kind of jobs are being created, i.e. the changing occupational division of labor. If "full employment" just means a lot of low-paid, meaningless and alienating jobs (or "contingent labor"), is the general employment level really an indicator of progress at all?"  

Jan Toporowski does not really tell the full story about asset speculation and rentier capitalism in his book, because his focus is primarily on capital finance, and not on the total pattern of investment. In the analysis I have developed since the 1980s, it is the "total structure of the accumulation process" which has to be looked at empirically. This is a strongly pro-Marx, but strongly anti-Marxist perspective, insofar as Marxists think that accumulation means simply "extracting surplus from production". From the point of view of economic theory and history, or from the point of view of what Marx actually says himself, I think this Marxist idea is obviously false. 

Marxists criticize Keynes because Keynes is "bourgeois reformist". But I have a quite different reason to criticize Keynes, namely I think he is wrong about many foundational questions of economic thought. It is not that Keynes has the wrong "ideological flavour", but that I think in substance many of his arguments and concepts about how capitalism works are in truth wrong. But that is not something you can really discuss within Marxist circles, because as soon as you try to do real justice to Keynes's argument, you get labelled "reformist". 

Keynesianism came up again because of Hillel Ticktin's "Keynesian revival" thesis and I tried to find out some more about what that could mean. But like I say it doesn't make much sense to me. It seems to have more to do with the ideological flavours being used in rationalizing state policy than the actual content of state policy.


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