When Keynesians talk about managing effective demand, they usually mean "aggregate demand". Aggregate demand could be stimulated in various ways, for example by giving more money to the poor through tax cuts or employment schemes (Left-Keynesianism), or, by depreciation and tax incentives to business (right-Keynesianism). But aggregate demand is itself increasingly a problematic notion.
(1) Increasingly, the bland concept of aggregate demand is itself questionable, because of a very strong stratification of income levels among the adult population, and as a corollary, a strong stratification/segmentation of consumer markets and labour markets. For a quarter or a third of the population, the crisis doesn't really exist. The differentiation effect becomes stronger and stronger in the measure that the national economy is integrated in the world economy. The USA actually has a worse gini coefficient than Egypt has, because the US wealthy are astronomically richer. The impact of the crisis is not the capitalism collapses, but merely that there is "no lifeboat" for about one-sixth of the workers and a similar fraction of businesses. But the calamity for a fraction of individuals does not necessarily mean a calamity for the whole working population. (2) Market sales of final goods and services are not the only, or even the most crucial factor for economic recovery. In addition, the comparative returns of alternative placements of capital is a factor. Keynesians + Marxists often write as though expenditure on GDP denotes the "whole economy" but it doesn't, and not only because there is also intermediate expenditure; most economists simply neglect that external to the circuit of current output there exists another very large circuit of transactions, namely a trade in already existing assets (physical assets and financial assets) which is increasingly international in scope. Attempts to stimulate final demand may only alter the (speculative) trade in already existing assets, but nothing much more. If physical means of production are only perhaps one-eighth of the total capital assets held, real wages are structurally stagnant, and the financial economy dominates the real economy, the Keynesian economy is a thing of the past. (3) A large chunk of what is called "stimulus" nowadays isn't a direct stimulus of final sales in the real economy at all. It is simply a financial guarantee, or a temporary piece of financial insurance offered by the state to banks and businesses. It merely aims to make the process of debt rescheduling and deleveraging less painful, sudden and damaging to the economy as a whole. Insofar as the stimulus in large part protects the position of rentiers, it cannot even be legitimately described as "Keynesian". Keynes argued for the "euthanasia of the rentier", not handouts to the rentier. Substantively the argument is that in the 1930s, the state initially failed to provide the necessary backing for the financial system, which aggravated the crisis. But that is not a specifically "Keynesian" argument. The Keynesian argument is a state-led crisis-recovery strategy based on deficit-spending. The presumption of "managing demand" is, that the state knows better how to allocate capital than businesses do themselves, and that if there is a slump, the response by businesses must be complemented by state intervention. Since however the global operations of MNC's are largely self-financed, a more severe regulation of financial institutions doesn't affect them much, and financial regulation mainly has the effect of (a) raising the cost of loan capital to small and medium-size business, (b) imposing stricter criteria of creditworthiness for consumer credit. It is not clear however that this is at all compatible with a strategy of boosting final demand. Jurriaan
_______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
