Rick Kuhn writes: >... Governments in the most prosperous countries in the world have been >providing tens and hundreds of billions of dollars to bail out private and >state banks. In the USA, Britain, Belgium, Luxembourg, the Netherlands and >Iceland, they have nationalised failing banks.
>Will these policies work? It's unlikely. >After the pit of the Depression of the early 1930s, the US economy stagnated >for a couple of years and then entered a new downturn. World War II not >President Franklin D. Roosevelt's 'New Deal" economic policies, really ended >the Depression.< Right, but "new Keynesians" such as Paulson and Bernanke and especially Krugman are talking about not waiting as long as FDR did. They claim to have learned the lessons of history. We'll see -- or maybe we won't, since there will be a lot of political opposition. FDR wasn't really a Keynesian until WW II. I'd say that the main contribution that FDR made during the 1930s was keeping the Depression from getting even worse. (BTW, Schumpeter argued that FDR made the Depression worse by hurting business expectations. But FDR _helped_ business expectations by assuring them that the Reds and fascists weren't going to take over.) >Hard-core Keynesian policies never had to be applied during the 1950s and >1960s because economies were chugging along nicely for other reasons. Instead >the concern of economists during that period was 'fine-tuning' or, more >accurately, tinkering with policy.< True Keynesian fiscal policies were pursued in the 1960s, at least in the US. JFK cut taxes (mostly for the rich, BTW) to fight a recession, while JFK raised taxes in 1968 to fight inflation. Maybe these can be dismissed as "fine-tuning," but they were seen as major at the time. Of course, the fiscal stabilization implied by the warfare/welfare state was more important. >When the long post-war boom ended in the mid 1970s and the Keynesian heavy >guns were rolled out their impact was more that of a fart than an explosion. >There was rising unemployment and inflation, which was supposed to be >impossible according to the Keynesian orthodoxy of the period.< I don't know what he's referring to here concerning "big guns." The problem of stagflation that he refers to was a hangover from the 1960s (a result of depressed profitability, at least in the US) and rising oil prices. That made it very difficult to fight unemployment without causing worse inflation. So the "big guns" weren't brought out. When they were, it was to create the "great recession" of the early 1980s (10% unemployment for two years, again in the US). > Already Republicans in the United States and conservatives elsewhere are > expressing concerns about creeping 'socialism', as governments take over some > banks and promise to regulate the rest much more closely. There is bound to > be even more overt state involvement in economic activity as the crisis > deepens. >Indeed, the famous social democratic economist Rudolf Hilferding believed that >it was possible for the working class to take state power by parliamentary >means and to overcome the pattern of booms and slumps on the road to >socialism. Twice during the 1920s, he was Germany's Finance Minister. He >argued that the growing domination of production by larger and larger >corporations meant that a government putting in place a forthright program of >reform could achieve this by managing the capitalist economy and particularly >through state control over the banking system.< boy, was Hilferding wrong. >It must be noted, however, that neo-liberal policies of liberating markets, >privatising, corporatising and contracting out state activities were >themselves state policies, mainly designed to put the pressure on workers who >actually produce the wealth on which profits are based. In Australia, the >conservative Howard Government's market-freeing activities went hand-in-hand >with a bigger role for government in policing the population in general and >unionists in particular.< ditto for the US. > Even heavy-duty state intervention is unlikely to solve the world's current > economic problems for two reasons. > First, the problems are not simply financial. [right!] As Henryk Grossman put > it in 1929, before the stock market crash, >> the very laws of capitalist accumulation impart to accumulation a cyclical form and this cyclical movement impinges on the sphere of circulation (money market and stock exchange). The former is the independent variable, the latter the dependent variable.<< > In other words, the way capitalist production is organised necessarily gives > rise to economic crises. Developments in production directly and indirectly > affect the financial system. >More 'transparency' and better regulation of banking won't deal with the >underlying issue which is low average rates of profit across the global >economy.< Heavy government regulation of finance prevented severe financial crises from the 1950s to the 1970s, at least in the US. The welfare-warfare state, the dominant role of the US in world capitalism, and a general orientation toward the domestic economy stabilized the US economy and helped other core capitalist countries, including Australia. >During the long boom after World War II, capital intensive investment meant >that outlays on employing workers declined compared to business spending on >machinery, equipment, buildings, raw materials and other goods used in >production. > Yet it is only the labour of workers that creates new value. The rate of > profit fell < this is a very one-sided interpretation. It ignores the fact that capital-intensive investment raises the ability of workers to create new value, along with the rise of less capital-intensive (but equally productive) sectors such as services. It's true that the rate of profit fell starting at the end of the 1960s. But it also rose a lot before that. And when it did fall, there was also a class component to it (something that Kuhn seems to miss): the data I've seen indicate that there was a rise in the organic composition of capital toward the end of the 1960s (fitting his argument), but there was also a profit squeeze due to rising wages relative to productivity -- and rising raw material costs. Also, the political economy that promoted stability in the 1950s and 1960s (the SSA, if you will) stopped working. > ... and the period between the mid 1970s and the early 1990s saw the deepest > global recessions since the 1930s. Profit rates have recovered somewhat, > largely thanks to neo-liberal policies that squeezed more work out of > employees and, especially in the United States, led to declining real wages. >Even so, the rate of profit did not recover to the levels of the long boom to >the early 1970s. >So those who own and manage corporations often prefer to invest in speculative >financial assets rather than activity that produces real goods that people >need. Most of the transactions on financial markets are a zero sum game: >players only gain at each other's expense. While the US finance sector only >realised 10 per cent of total corporate profits in 1980, the figure was 40 per >cent in 2007. > So developments in the real economy explain the speculative frenzy that led > to the credit crunch. Capital flocked to high-return, high-risk investments > in the unproductive financial sector because profit rate in the real economy > was low. The financial crisis is bringing that underlying problem of a low > profit rate to the surface. >Capitalism has a tendency to break down that is expressed in deep crises like >the current one. Grossman argued that >> capitalist production is characterized by insoluble conflicts. Irremediable systemic convulsions necessarily arise . . . from the immanent contradiction between value and use value, between profitability and productivity, between limited possibilities for valorisation and the unlimited development of the productive forces.<< >The fact that production is organised not to satisfy human needs but to make >profits for the capitalist class is the ultimate cause of the system's >recurrent crises. > Financial regulation and even an expansion of state ownership, which > conservatives and supporters of traditional social democracy label > 'socialism', cannot overcome this tendency. Governments will soon demand > that 'everyone' tighten their belts. Unemployment will rise, while employers > and governments try to boost profits by driving wages down.< if so, stagnation will worsen, because falling wages imply under-consumption, a phenomenon Kuhn ignores. > In Australia, this will be easier because Rudd has promised not to touch key > elements of John Howard's industrial relations laws. These include secret > ballots for strikes, restrictions on union officials' ability to talk to > their members at work, and the ban on 'pattern bargaining', that is, > industry-wide campaigns. As the crisis deepens the priority the Government > places on subsidising business will increase and it will be under pressure to > cut back the public services, and spending on health, education and welfare > that benefit the Australian working class which is roughly two thirds of the > population. >The alternative is a real socialism in which workers replace production for >profit with production to fulfill human needs and the despotic structures of >all corporations with democratic control over workplaces and society as a >whole. Now that neo-liberalism has ceased to be common sense, it is worth >considering.< as it always is. We shouldn't consider socialism only in crisis times. -- Jim Devine / "Nobody told me there'd be days like these / Strange days indeed -- most peculiar, mama." -- JL. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
