Rakesh asks: >Mat, >(1) what happens if govt deficits in the pursuit of full employment >have arresting effects on private investments; could this happen? why >or why not?
If you are talking about some kind of "crowding out" then, first, I think that many of the arguments for crowding out are theoretically flawed and not supported by empirical evidence, and second, that crowding out is not necessarily a 'bad' thing. It may be that certain public investments, social services, etc. are more desirable than having a little more private expenditure. >(2) what happens if in running deficits, the US sucks up global >capital, raises interest rates, and visits catastrophe on poorer >nations? is this possible? The argument that deficits cause high interest rates is also theoretically and empirically questionable. More often the causation goes the other way--high interest rates mean higher interest payments on the public debt which cet par mean larger deficits. The impact on poorer nations is a greater concern, not necessarily from deficits, but in general. The argument can be made that a weak U.S. economy also has a negative impact on poorer nations, but the more important point I think is to focus on what kinds of policies those nations can use themselves to increase the living standards of its citizens and also to protect itself from vulnerability to global economic changes and econ developments in nations like the U.S. >do you support deficit financing by the US govt to create jobs at all >times? can it ever be counter productive in effect both on a national >and global scale? I think my answer here is that of course it *can* be counter-productive, but that it *needn't* be counter-productive if designed right and accompanied by complementary policies. But I think these are certainly important issues to be carefully considered. What would an argument be that public job creation would necessarily be counter-productive (in other words, no matter how designed, etc) under certain conditions (and what are those conditions)? >> >>Of course, there can be a problem that we spend all our time supporting >>the safety net instead of throwing over capitalism. But there can >>equally be the problem that we spend all the time thinking about >>throwing over capitalism instead of making sure there is a safety net. >This is not the problem that Mattick and presumably Shaikh are >getting at, right? Right. >>So there needs to be the short term reforms that make a difference >>immediately and the long term solutions as well. >Will the reforms reform? Could the reforms not only not stop but >also exacerbate a retrenchment in private investment that the >Keynesians want to leave in private hands?Will the reforms push >problems elsewhere? What is Shaikh saying here? I think your statement below about short-term band-aids potentially exacerbating long term problems is pretty accurate, but it is also the case that Shaikh at least believes that fiscal and monetary policies can have some effect, but there are limits. >> There will be some >>division of labor--some will concentrate only on one or the other. Some >>will do both. Both projects are important. >> >>I can't think of anyone on this list that believes Keynesian demand >>management can eliminate the contradictions of capitalism. I don't >>believe traditional Keynesian demand management can even achieve true >>full employment! >Again the reasoning behind your conclusion matters. Because, traditional Keynesian demand management 1) only looks at aggregate proportionality and balance and not intersectoral disproportionalities and imbalances; 2) does not recognize the functionality of unemployment (and excess capacity generally) in capitalism; 3) does not recognize or downplays technological and structural unemployment. There are more problems but these are the ones that I would emphasize off the top of my head. <snip> gotta run, try to finish later. But Sidney Coontz is one of the people was thinking of. Thanks! These are very important issues you are raising and I find this discussion extremely helpful. Mat
