Thanks, Paul.
Here's an example for the US. Keynesian fiscal policy was applied --
without any progressive intent -- during the 1960s, as part of the
Vietnam war buildup. The average aggregate unemployment rate fell to
3.5% in 1969, as low as its been since 1929 (when these stats start).
Profit rates fell, starting in about 1965. I interpret this relatively
short-term trend as being due to persistently low unemployment, which
increased labor's bargaining power (and back then there were unions)
and hurt profitability. In the classical story told by Marx in
CAPITAL, this should have caused accumulation to slow, causing a
recession.
But the Keynesian expansion prevented this recession. The urban
disorders of circa 1968 also encouraged LBJ to avoid too much fiscal
contraction (which would have led to a recession). So the conditions
of low overall unemployment persisted, squeezing profits.
(Where was monetary policy (the Fed) in this mix? it was too busy
trying to keep the dollar fixed in the Bretton Woods fixed exchange
rate system that prevailed at the time.)
The standard response of capitalists to squeezed profits when
recession is prevented is inflation: each raises prices to try to
solve the profitability situation. They can do this when demand is
abundant, as during the period 1965-69. This meant a big upsurge of
inflation, one that persisted into the early 1970s. It didn't solve
the profitability problem right away, however.
So the short-term stimulus of Keynesian policy was connected
relatively quickly with longer-term results, causing an inflationary
hangover, which lasted into the next decade.
Nixon later used recession to fight inflation -- along with wage
controls. In addition, he freed the Federal Reserve of its
exchange-rate responsibilities. This eventually meant that fiscal
policy was largely downgraded in importance and the domestic HQ of
Finance Capital (the Federal Reserve) took over policy.
On 5/24/07, Paul <[EMAIL PROTECTED]> wrote:
Charles B. writes:
>What is Marx's view of fiscal policy? and in the eyes of Marxism how would
>he fix the Macroeconomic policy?
>Best Answer - Chosen By Voters
>......
[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).
--
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your
own way and let people talk.) -- Karl, paraphrasing Dante.
