[OPE] Chris Harman on the spectre of Keynesianism

From: Jurriaan Bendien (adsl675281@telfort.nl)
Date: Sat May 10 2008 - 08:04:23 EDT

Hi Jerry, 

By pump-priming I mean that the state injects extra demand into the economy, primarily via monetary or fiscal policy or possibly through direct purchases. 

I do not deny that such measures can have "some" economic effect and that the beneficiaries will be very grateful for this state handout, but the dispute is whether this injection of extra demand can nowadays increase the growth rate of the productive base of the economy, so that you get a "cumulative growth dynamic" of the type analyzed by Edward Nell. I've been skeptical of that idea since I was 25 years old and studied the break-up of the long boom 1947-1973. 

My analysis is I suppose similar to Toporowski's (in terms of the economic implications of "capital market inflation", which acquires an autonomous dynamic) but additionally I connect the sources of capital market inflation to the tendency of the industrial rate of profit to fall and to the saturation/monopolisation of markets, and, I try to show the effect of international capital transfers on the domestic economy. As I emphasized in my RRPE piece, "Keynesian policy, based on state intervention, assumed a national framework for policy". 

The classic Keynesian idea was that output growth (and therefore jobs growth) slowed down, because there was insufficient buying power, and so if you injected some additional buying power, then output growth would increase again. But - leaving aside the theoretical problems for the theory created by stagflation and jobless growth - if there really is a longterm "savings glut" (or "excess liquidity") then the very meaning of this is, that there is no lack of buying power, it is just that this unused buying power is not spent on purchasing additional goods and services. Plenty surplus capital exists, as I have noted again and again, but it is neither productively invested, nor spent on additional consumption. That is a reality which Keynesianism cannot explain in a non-ad hoc way. Harman proves by what he says that he cannot explain it either.

What is scientifically unique about the era in which we live, is that all the bourgeois theoretical paradigms of how the economy works have now been empirically falsified - what they said could not happen, did happen, and what they said would happen, did not happen. Bourgeois theoretical development is therefore irrational, it is just a fashion or flavour-of-the-month phenomenon (intellectuals hold their mouth according to who has the money - you never bite the hand that feeds). So instead of pursuing economic science, you get little playgames called "behavioural economics" where you study investor and consumer psychology in order to find a logic in their motivation.


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