[OPE] "an immense accumulation of factors": Rick Wolff's partial list of causes of the economic crisis

From: Jurriaan Bendien <adsl675281@tiscali.nl>
Date: Tue Nov 18 2008 - 15:47:46 EST

Jerry, you asked:

What, then, do you view as specifically Keynesian fiscal and monetary policies for closing a
contractionary (recessionary) gap?

Well, that is a long story I'm afraid. But at present I'm still doubtful about whether I have it really correct, have to study more yet. You have to read people like Randall Wray and Allin Cottrell on this. I am not confident about my understanding of monetary theory, and debate it yet in a classic Marxian way, I keep changing my mind about it, and meanwhile life goes on. I was sitting in a cafe last week with a couple of girls who said they were nurses from Sheffield, while I was thinking rather fatiguedly about inflation and deflation, but thinking about it drove me crazy, and I didn't get a result, had had to shelve the issue again. It's a bit like a John Cleese movie. You can think about these things too much at the wrong moment, or in the wrong situation, have to curb that.

As Geert Reuten emphasized, Keynes was in favour of the "euthanasia (painless death) of the rentier" - basically Keynes's problem was, how do I get idle capital (in the sense of interest & rent-seeking capital) transferred to investment in job-creating production, and make sure that it keeps investing there, short of abolishing capitalism? He thought that the state should in principle use ANY carrots & sticks reasonable or necessary to serve this imperative, up to and including a programme of public works, even if it meant so to speak that workers were digging holes and filling them up again (though he did not recommend it as far as I know). In addition, Keynes was an egalitarian in a Rawlsian sort of way, he thought that great disparities of income & wealth were a bad thing, you should counteract that with conscious policy. In essence, the neoliberals whittled away social security for the workers in favour of more financial security for bourgeois wealth, but in the process they changed the modus operandi of capitalism. The snag is that the financial security is imploding, like most get-rich-quick games do eventually.

Formally, the US federal government is by its economic policy supposed to ensure "full employment and price stability", however nowadays they think that full employment can be "safely left to the worker's instincts of self-preservation and of propagation", as long as there is a middle class there, to give these things a civilized expression - you try for a civilized solution to the crisis, and there's debate about what that is. If you think that currently the policy mood is substantially "Keynesian", you've got to be kidding. They're not so far Left as Keynes was.

The whole economic environment, as Jan Toporowski also notes, is quite different from what it was in Keynes's time. The balance of forces within the world bourgeoisie has changed, money functions in a different way, it is difficult to escape from the international consequences of your national monetary and fiscal policy, the capacity of the state to intervene in the markets is (for the time being) reduced, the proportions of the problem are vastly different, and so on. If workers want more jobs, they're basically going to have to fight for them (though hopefully not against each other), because economics is just concluding mainly that "it now takes more unemployed people to keep prices stable" (to borrow an ironic phrase from my RRPE piece). A popular idea is that after we've deleveraged, the problem will just blow away.

I realise that Chris Harman might regard current action by the Western states as "Keynesian pump-priming" but a Marxian scholar would argue that is technically speaking not so, or only in a very minor sort of way. You shouldn't confuse the language of "stimulus" with what's actually happening. There's the rhetorics and then there's the real story. You can earn hoards of money from the crisis, though if you are an ordinary wage-earner without that capital available, things don't look so rosy. As regards Post-Keynesianism,

"In reality, as Post Keynesians point out, government borrowing does not cause a rise in interest rates. Rather it allows the private sector to earn interest on hoards. The sale of government bonds ("borrowing") does not fund government expenditures; rather it offers an interest-bearing alternative to holders of non-interest bearing government money. Government borrowing therefore can be thought of as an interest rate maintenance operation." http://cas.umkc.edu/econ/Oeconomicus/VolumeIV/Winter2001/Tcherneva.pdf

I think that what is billed as "the worst economic crisis in a hundred years" is technically not difficult to solve, if you are prepared to do what it takes. It's really much more a political crisis than an economic crisis, since for every solution there's winners and losers, and it's difficult to unify the people in that sense. A lot of effort goes into finding out how power relations stack up. The main reason why a majority of people were happy with Mr Obama's win is, that they think he can unify the people and inspire market confidence, making people accept they're going to have to take losses, while offering a real prospect of better times in the future. It's a question of maintaining or restoring moral elan. If I was being a bit banale, I would phrase the Zeitgeist like this: "we may be in the financial poo, but ain't life wonderful".


I dont need a whole lots of money,
I dont need a big fine car.
I got everything that a man could want,
I got more than I could ask for.
I dont have to run around,
I dont have to stay out all night.
cause I got me a sweet ... a sweet, lovin woman,
And she knows just how to treat me right.
Well my baby, shes alright,
Well my baby, shes clean out-of-sight.
Dont you know that shes ... shes some kind of wonderful.

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Received on Tue Nov 18 15:53:01 2008

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