Young social democrats show up to acquire some familiarity with the Old
Mole. Later on, they preach reform of markets, showing they are better
defenders of markets than the Establishment itself. --Charles Andrews
-------- Original Message --------
Subject: [csgboston] U.S. economiist on Marx in Chinese newspaper
Date: Fri, 01 Feb 2008 03:18:11 +0000
From: Albert Sargis
To:
[EMAIL PROTECTED]
Shanghai Daily (2/1/08)
Would Marx say rising tide today lifts all boats?
By: J. Bradford DeLong
A century and a half ago, Karl Marx both gloomily and exuberantly
predicted that the modern capitalism he saw evolving would prove
incapable of producing an acceptable distribution of income.
Wealth would grow, Marx argued, but would benefit the few, not the many:
the forest of upraised arms looking for work would grow thicker and
thicker, while the arms themselves would grow thinner and thinner.
Ever since, mainstream economists (in the West) have earned their bread
and butter patiently explaining why Marx was wrong. Yes, the initial
disequilibrium shock of the industrial revolution was and is associated
with rapidly rising inequality as opportunities are opened to
aggressiveness and enterprise, and as the market prices commanded by key
scarce skills rise sky-high. But this was - or was supposed to be -
transient.
A technologically stagnant agricultural society is bound to be an
extremely unequal one: by force and fraud, the upper c lass pushes the
peasants' standards of living down to subsistence and takes the surplus
as the rent on the land they control.
By contrast, mainstream economists argued, a technologically advancing
industrial society was bound to be different.
First, the key resources that command high prices and thus produce
wealth are not fixed, like land, but are variable: the skills of craft
workers and engineers, the energy and experience of entrepreneurs, and
machines and buildings are all things that can be multiplied.
As a result, high prices for scarce resources lead not to zero- or
negative-sum political games of transfer but to positive-sum economic
games of training more craft workers and engineers, mentoring more
entrepreneurs and managers, and investing in more machines and buildings.
Second, democratic politics balances the market. Government educates and
invests. It also provides social insurance by taxing the prosperous and
redistributing benefits to the less fortunate. Economist Simon Kuznets
proposed the existence of a sharp rise in inequality upon
industrialization, followed by a decline to social-democratic levels.
But, over the past generation, confidence in the "Kuznets curve" has
faded. Social-democratic governments have been on the defensive against
those who claim that redistributing wealth exacts too high a cost on
economic growth.
The consequence has been a loss of morale among those of us who trusted
market forces and social-democratic governments to prove Marx wrong
about income distribution in the long run - and a search for new and
different tools of economic management.
Increasingly, pillars of the establishment are sounding like shrill
critics. Consider Martin Wolf, a columnist at The Financial Times.
Wolf recently excoriated the world's big banks as an industry with an
extraordinary "talent for privatizing gains and socializing losses ...
(and) get(ting) ... self-righteously angry when public off icials ...
fail to come at once to their rescue when they get into (well-deserved)
trouble ... (T)he conflicts of interest created by large financial
institutions are far harder to manage than in any other industry."
For Wolf, the solution is to require that such bankers receive their pay
in installments over the decade after which they have done their work.
But Wolf's solution is not enough, for the problem is not confined to
high finance.
The problem is a broader failure of market competition to give rise to
alternative providers and underbid the fortunes demanded for their work
by our current generation of mercantile princes.
(The author is professor of economics at the University of California at
Berkeley and a former assistant US treasury secretary. Copyright:
Project Syndicate, 2008. www.project-syndicate.org.)
__._,_.___
__,_._,___
