Charles B. writes:
What is Marx's view of fiscal policy? and in the eyes of Marxism how would
he fix the Macroeconomic policy?
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......
[This come from a Yahoo groups question no?]
This is one of those "big questions". Since there are (and have always
been) many flavors of Marxism there are flavors of "legitimate"
answers. Here is my understanding of a fair consensus today -- but not a
universal one (and a bit different than say 70 years ago). Would be
interested to hear if others would summarize it differently.
1) Marx's biggest goal is to get people inspired to thinking of a
system past Capitalism and he felt some of Capitalism's problems, including
macro economic problems, couldn't be fixed within the current system.
2) Marxists support progressive reforms within Capitalism that help
workers and the disadvantaged. That includes demanding policies to
increase employment and reduce the waste and suffering of
recessions/depressions. Marxists recognize that, in some cases, fiscal
stabilization policies can help the overall "macro economy" *in the short
run* (mostly these are the passive "automatic stabilizers" provided by
income support programs, national pensions, guaranteed social benefits,
etc). {Side note: Statistically, the assistance going to working class
people from these programs is basically financed from working class people.}
Despite all the talk, truly pro-active "Keynesian" fiscal
policies have largely never been tried on a scale and speed that would mean
a lot (mostly monetary policy has been used and there are divergent
estimates about its impact). Making use of fiscal policies on a large
scale would require large political changes (c.f. Abba Lerner and so-called
"functional finance").
3) But the short run improvements through "Keynesian" policies have
their limits *in the long run*, as well as their costs. In the long run
capitalists invest for profit - that is what drives capitalism. When you
try to push the economy past what capitalists would "normally" do to
maximize their profits you start to hit offsetting effects over a period of
years. If pushed far enough this could even *lower* long term growth. For
example, if you raise workers' salaries you are stimulating the economy in
the short run, but you are also increasing capitalists costs thereby
reducing their profits. So in the long run you may decrease
investment. The same holds true for fiscal policy although there are
different variant cases (depending on how the fiscal stimulus is financed
and whether you are trying to push capitalists above the level of their
"normal rate" of profit).
4) Both the short run "Keynesian" effects and long run "classical"
effects are happening at the same time (they really should be called "quick
adjusting" and "slow adjusting" effects). So exactly how you believe they
interact depends on your model of the relative strength and duration of the
two effects as well as where we are in the current situation (above or
below capitalists' "normal" line). IMO, when study of Marxist economics
revives I expect the politically different flavors of Marxism will have
different models of these effects and often produce different estimates of
the current starting point. Some will be more skeptical of the short run
measures than others. Anyway, Marxism is really about the big picture.
Paul
[Some references: "On Being Keynesian in the Short Run and Marxian in the
Long Run" Dumenil & Levy; "Wandering Around the Warranted Path" Shaikh;
"The Social Wage, Welfare Policy, and the Phases of Capital Accumulation"
Moudud & Zacharias]
