Modern monetary theory—pandemic edition — David F. Ruccio

David Ruccio compares MMT with Marxian economics.

Occasional Links & Commentary

Modern monetary theory—pandemic edition
David F. Ruccio | Professor of Economics, University of Notre Dame

Productivity, Labor Complexity, and Wage Determination Procedures — Peter Cooper

This post concerns an implication of Marx’s treatment of productivity and labor complexity for the appropriateness of alternative processes of wage determination. For simplicity, it is assumed that all activity is productive in Marx’s sense (that is, productive of surplus value) and that conditions are competitive in the Marxian (and classical) sense that investment is free to flow in and out of sectors in search of the highest return. Introducing unproductive labor, including a substantial role for public sector and not-for-profit activity, and non-competitive elements would considerably complicate the analysis. The point of the exercise is to consider the incentive effects of alternative wage-determination procedures, from the perspective of Marx’s theory. It is suggested that Marx’s distinction between abstract and concrete labor implies that centralized wage determination, more than alternative wage-setting approaches, will be conducive to productivity growth....

heteconomist
Productivity, Labor Complexity, and Wage Determination Procedures
Peter Cooper

Michael Roberts – Marx’s double-edge law

For those interested in Marx and Marxian economics.

Michael Roberts Blog — blogging from a marxist economist
HM1 – Marx’s double-edge law
Michael Roberts

Bill Mitchell — Spending equals income whether it comes from government or non-government

It is now clear that to most observers that the use of monetary policy to stimulate major changes in economic activity in either direction is fraught. Central bankers in many nations have been pulling all sorts of policy ‘rabbits’ out of the hat over the last decade or more and their targets have not moved as much or in many cases in the direction they had hoped. Not only has this shown up the lack of credibility of mainstream macroeconomics but it is now leading to a major shift in policy thinking, which will tear down the neoliberal shibboleths that the use of fiscal policy as a counter-stabilisation tool is undesirable and ineffective. In effect, there is a realignment going on between policy responsibility and democratic accountability, something that the neoliberal forces worked hard to breach by placing primary responsibility onto the decisions of unelected and unaccountable monetary policy committees. And this shift is bringing new players to the fore who are intent on denying that even fiscal policy can stave off major downturns in non-government spending. These sort of attacks from a mainstream are unsurprising given its credibility is in tatters. But they are also coming from the self-proclaimed Left, who seem opposed to a reliance on nation states, and in the British context, this debate is caught up in the Brexit matter, where the Europhile Left are pulling any argument they can write down quickly enough to try to prevent Britain leaving the EU, as it appears it now will (and that couldn’t come quickly enough).

Bill addresses the charge from the Left that MMT is not Marxian enough.

I would also say that my career in economics has been inspired by the basic insights about Capitalism provided by Karl Marx (and Friedrich Engels) and the writers that followed in that tradition.

But I would also be sure to disagree with Michael Roberts assertion that “MMTers deny the validity and relevance of Marx’s key contribution to understanding the capitalist system: that is it is a system of production for profit; and profits emerge from the exploitation of labour power – where value and surplus value arises” (Source).

As one of the developers of MMT, I have always made it explicit that Marx’s ideas on class and exploitation lie at the basis of Capitalist dynamics and should be the starting point for a progressive understanding.

So it is hard at times to know what being ‘Marxist’ means, which is especially the case when we consider the post-modern distractions that made ‘Marxism’ appear recondite, to say the least....

Longish and detailed, but one of Bill most significant posts on political economy. Necessary to understand nuances of MMT from a left perspective, and MMT is now being attacked from both right and left.

Bill Mitchell – billy blog
Spending equals income whether it comes from government or non-government
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Review of Money and Totality by Fred Moseley — The Internationalists

This is a substantial book which the author admits has been 20 years in the making. [1] It deals primarily with Moseley’s own “Macro-Monetary” interpretation of Marx’s economic writings and takes up and rebuts criticisms of this interpretation. However, the book also looks critically at the major interpretations of Marx’s economic work, by Marxist academic economists, which have emerged in the last 100 years, giving a brief description of them and critically examining their failings. Many people may not realise this, but for the greater part of the twentieth century the accepted view among academic Marxist economists, which was generally known as the Standard Interpretation (SI), was that Marx made a fundamental mistake in his economic analysis which needed to be corrected. The key issue behind this is the so-called “transformation” problem, namely the transformation of values into prices of production. The SI and its offshoots claim that Marx failed to do this correctly and his work needs to be corrected. A number of corrections have been proposed and a further number of variations of these corrections themselves put forward in ever greater complexity. Moseley shows how these criticisms and corrections are founded on a misinterpretation of Marx’s work; and that the corrections each violate some other key aspect of Marx’s work. Moseley argues that Marx did not make a mistake and there is no transformation problem whatsoever....

Important if at all interested in Marx and Marxist/Marxian economics.

Monthly Review
Review of Money and Totality by Fred Moseley

Originally published: The Internationalists (August 22, 2019)

Labor Power as the ‘Money Commodity’ — Peter Cooper

For Marx and many Marxists, money is based in a commodity; in Modern Monetary Theory (MMT), it is not, being based instead in a social relationship that holds more generally than just to commodity production and exchange. Even so, to the extent that commodity production and exchange are given sway within ‘modern money’ economies, operation of the Marxian ‘law of value’ appears to be compatible with MMT. It is just that, from an MMT perspective, private for-profit market-based activity will be embedded within, and delimited by, a broader social and legal framework that is – or at least can be – decisively shaped by currency-issuing government. Therefore, even though in MMT money is not regarded as a commodity, it seems that a commodity theory of money can be reconciled with MMT provided, first of all, that the connection between a money commodity and currency is understood to apply only to the sphere of commodities and, secondly, that it is legitimate to regard labor power as the ‘money commodity’. An earlier post gave some consideration to the social embeddedness of commodity production and exchange. The present focus is on the notion of labor power as money commodity. On this point, MMT can be understood as directly linking currency to labor power, which, as Marx demonstrated, is a commodity under capitalism. This raises the question of whether labor power can serve the role of money commodity in Marx’s theory.For Marx and many Marxists, money is based in a commodity; in Modern Monetary Theory (MMT), it is not, being based instead in a social relationship that holds more generally than just to commodity production and exchange. Even so, to the extent that commodity production and exchange are given sway within ‘modern money’ economies, operation of the Marxian ‘law of value’ appears to be compatible with MMT. It is just that, from an MMT perspective, private for-profit market-based activity will be embedded within, and delimited by, a broader social and legal framework that is – or at least can be – decisively shaped by currency-issuing government. Therefore, even though in MMT money is not regarded as a commodity, it seems that a commodity theory of money can be reconciled with MMT provided, first of all, that the connection between a money commodity and currency is understood to apply only to the sphere of commodities and, secondly, that it is legitimate to regard labor power as the ‘money commodity’. An earlier post gave some consideration to the social embeddedness of commodity production and exchange. The present focus is on the notion of labor power as money commodity. On this point, MMT can be understood as directly linking currency to labor power, which, as Marx demonstrated, is a commodity under capitalism. This raises the question of whether labor power can serve the role of money commodity in Marx’s theory....

Interesting post. It brings to mind the notion that if labor power is the "money commodity," then "money," which in modern time is government currency, has "commodity power." In mercantilist times, the basic "money commodity" was gold or gold and silver, or silver, depending the historical period. However, Marx's analysis of the extraction of surplus value by the ownership (rentier) class from the working class — farmers in a (feudal) agricultural society and factory workers in a (capitalist) industrial society shows that labor (time and power) are fundamental. The factory workers that dominate the "working class" in numbers are subject to expropriation of property similar to that of serfs and peasants under feudalism. Under capitalism the managerial class has greater bargaining power than the working class since their quality of labor power is scarcer, being more highly skill and specialized. So the rate of expropriation may be less and at the upper levels top management has managed to "split the profits" with the owners.

A monetary system that is based on precious metals or other objects of barter conceals that labor power is foundational. A state money system makes it clear that the "money commodity" is actually labor power. This somewhat obscured in a fixed rate convertible monetary system in which "money" is anchored to a commodity other than labor power, especially when the "money thing" is a natural commodity like stamped coins minted from precious metals. But the reality is that all monetary exchange is based on labor power as the "money commodity" since it is not "money" that creates commodities but rather labor power.

I am not sure to what degree labor power is correctly categorized as a commodity, however. At the very least, labor power is not a naturally existing commodity since labor power other than unskilled labor is a function of time and ability and specialized ability has to be acquired. Nothing similar to this pertains to commodities defined as goods produced for exchange rather than use, which equates to good produced for sale in a monetary production economy.

As a philosopher, I am skeptical about "commoditizing" humans, which, of course, is what the institution of slavery does. The deep ethical question is whether there is a progression from slavery to serfdom to work for hire in which workers are income dependent. Some serious thinker posit that there is such a connection.

This seems to me to be fundamental to the thinking of Marx. Labor is not a natural commodity for Marx, but only becomes a commodity in a monetary production economy. His analysis of capitalist production shows how work for hire is another from of expropriation of real value from workers through the equation of value with price in a market-based capitalist society whose foundation is a monetary production economy. His solution is to change that foundation for one that supports real freedom rather than the illusion of freedom characteristic of 18th century bourgeois liberalism, a foundation that persists today.

As a philosopher, it strikes me that the fundamental issue in economics is value theory. The equation of value with price is based on either assumption or handwaving. Marx got this. He realized that there is much more to economic value than can be captured by price in markets, and also that that markets are not necessarily reflective of true cost where cost includes real resources.

A good example of this is the present existential crisis presented by climate change, which can be trace in part at least to negative externality, where gain is capitalized while part of the cost is socialized through the false assumption that the "the solution to pollution is dilution." Similarly, for Marx, extraction of surplus value is also a negative externality that workers "pay for" through labor that is not justly compensated for it full contribution. This is concealed by the conventional economic theory of reward being determined on the basis of marginal product.

Forced unpaid work is a form of slavery. In a monetary production economy where income from work is a vital necessity, the extraction of surplus value from workers that have insufficient bargaining power to exact just compensation for the contribution of their labor time and power is forced unpaid work.

The MMT job guarantee (JG or ELR) is a step toward connecting "the commodity power of money" directly with labor power through a living wage. However, this just returns workers under capitalism to the position of serfs and peasants that were self-sufficient in terms of their own production and limited needs in agricultural societies. With the advent of the industrial age and the mass moving, often forced, of former agricultural workers to factories that all changed as urban workers became income-dependent, forced to "work for a living" by bidding their labor power in markets at the going offers.

heteconomist
Labor Power as the ‘Money Commodity’
Peter Cooper

Michael Roberts — A profits recession?

Falling aggregate profit rate?

As James Montier, the post-Keynesian economist at GMO, the large asset fund manager, points out, real earnings growth in the corporate sector has been below the rate of real GDP growth even after the significant boost from the financial engineering from share buybacks. According to Montier, when you dig down into the market you find that a staggering 25-30 per cent of firms are actually making a loss.

In Montier’s view, “the US is witnessing the rise of the “dual economy” — where productivity growth is reasonable in some sectors, and totally absent in others. Even in the sectors with good productivity growth, real wages are lagging (wage suppression is occurring). All the employment growth we are seeing is coming from the low productivity sectors. On top of this, the paltry gains in income that are being made are all going to the top 10%. This is not what a booming economy should feel like.”...

Looks like yet another manifestation of the uneven lackluster recovery from the financial crisis that has favored mostly a few.

Michael Roberts Blog — blogging from a marxist economist
A profits recession?
Michael Roberts

Imperialism and profitability at Lille — Michael Roberts

G Carchedi and I are working on a paper on the economics of imperialism that covers measuring unequal exchange in trade, factor income flows on the current account; and foreign investment on the capital account. We reach similar conclusions to Ricci in that imperialism is alive and well and inequality between the imperialist economies and the rest is just as wide as it was 100 years go. Value produced in the dominated countries get appropriated and transferred to the imperialist economies in ever-increasing amounts...

Michael Roberts Blog
Imperialism and profitability at Lille
Michael Roberts

Labor Complexity in Relation to Aggregate Marxian Value — Peter Cooper

Classical economics, including Marx, focused on economic value in real terms, i.e., a non-monetary ground for economic value expressed in markets in nominal terms as prices. That recognized that value is based on some "good" that is actual rather than nominal.

One way to do this is through a numéraire, such as gold or silver. A problem here is that monetary metals don't have actual economic value in real terms that isa determinative in production. Rather, their nominal value is depending on the cost of production. 

Marx choose labor time, following Smith and Ricardo. He expanded on their ideas, which he regarded as inadequate to the task. This is now called "the labor theory of value" (LTV), although Marx never labeled it that way. This is a bit confusing now, since "the labor theory of value" is almost automatically associated with Marx's version of it, even though it was a concept of classical economics, to which Marx was a late comer. Incidentally, while Smith and Ricardo are credited with it in the West, an LTV was first proposed by Tunisian Ibn Khaldun in the 14 century.

Neoclassical economics explains economic value in terms of marginal utility and price theory.  "Utility" purported to account for the good at the basis of value. Economic  value is determined based on opportunity cost, what has to be sacrificed in an environment where scarcity prevails to access a particular good. In nominal terms, the economic value of a good is not the market price, but rather the maximum that one is willing to pay to obtain it rather than choosing something else.

Both the labor theory of value and the marginal theory have been criticized for various reasons. And there are some other theories of economic value as well. See also Theories of Value.

The major issue now is modeling and formalization. The neoclassical theory of value based on marginalism can be formalized, although not without issues. The classical economists did not go this route, which is somewhat surprising in that Newton's work had become the paradigm of doing science. So they are not considered to be doing "economic science."

So a challenge for the labor theory of value is "doing the math."

Since value is so fundamental to economics, getting the theory right is a big deal. So far there is no universal agreement on this issue.

heteconomist

Labor Complexity in Relation to Aggregate Marxian Value
Peter Cooper

Michael Roberts — Modern monetary theory – part 1: Chartalism and Marx

Modern monetary theory (MMT) has become flavour of the time among many leftist economic views in recent years. The new left-wing Democrat Alexandria Ocasio-Cortez is apparently a supporter; and a leading MMT exponent recently discussed the theory and its policy implications with UK Labour’s left-wing economics and finance leader, John McDonnell.

MMT has some traction in the left as it appears to offer theoretical support for policies of fiscal spending funded by central bank money and running up budget deficits and public debt without fear of crises – and thus backing policies of government spending on infrastructure projects, job creation and industry in direct contrast to neoliberal mainstream policies of austerity and minimal government intervention.

So, in this post and in other posts to follow, I shall offer my view on the worth of MMT and its policy implications for the labour movement. First, I’ll try and give broad outline to bring out the similarities and difference with Marx’s monetary theory....

Can the Chartalist/Modern Monetary Theory (MMT) and Marxist theory of money be made compatible or complementary or is one of them wrong? My short answers would be: 1) money predates capitalism but not because of the state; 2) yes, the state can create money but it does not control its price. So confidence in its money can disappear; and 3) a strict Chartalist position is not compatible with Marxist money theory, but MMT has complementary features.

Let me now try to expand those arguments....

If you are already interested in MMT and Marx, this is obviously a should read. But if you are just getting interested, I can recommend London based Marxist economist Michael Roberts as a good entry point. He works in finance, so "money" is his thing. However, one also needs to be aware that there are different interpretations of what Marx actually said and that no one speaks for Marx. Be aware that Michael Roberts is not an expert in MMT. For an economist that is deeply familiar with both MMT and Marx, and sympathetic to both, see the work of Peter Cooper at heteconomist.com. If you are seriously interested in MMT and Marx, Peter is the go-to guy in my view.

Michael Roberts Blog
Modern monetary theory – part 1: Chartalism and Marx
Michael Roberts

Andrew Kliman — Not by Politics Alone: Thinking Through a Post-Capitalist Future

I believe that the central problem faced by people struggling for freedom today is the widespread acceptance of Margaret Thatcher’s TINA – the belief that “there is no alternative.” The main things that have led to the acceptance of TINA are the collapse of the state-capitalist regimes that called themselves “Communist” and the widespread failures of social democracy to remake society.

The struggles for freedom do not stop because of this, of course. Yet the acceptance of TINA acts to confine the struggles. They become self-limiting. In the perceived absence of an alternative, it is perfectly sensible that social struggles stop short of even trying to remake society totally. As Bertell Ollman has argued, “Why bother to struggle for a change that cannot be? … people [need to] have a good reason for choosing one path into the future rather than another.”

People need to have a good reason. That’s because they are rational. It is rational to engage in struggles to change what can be changed, and it’s rational to refrain from struggling against what cannot be changed. People who do not want to hear about socialism because of the failures and horrors of what they believe to have been socialism are making perfect sense. On the other side, of course, is a new global justice movement, part of which identifies itself as anti-capitalist, and which has raised the slogan “Another World is Possible.” This slogan, too, is eminently rational, if one interprets it, as I do, as a call to think through the possibility of another world and to prefigure another world.

But ultimately, the rationality of struggles that are not only struggles against injustice and exploitation, but struggles for a completely different, non-capitalist, human society rests on whether another world is indeed possible. At the present moment, I believe, no activist or theorist can really answer with confidence that it is possible.

I do not think this is a reason to despair. The effort to work out how another world might be possible is really just beginning. This problem received almost no attention throughout most of the last century. Until the collapse of so-called communism and living proof that social democracy is a futile dream, almost everyone on the Left simply assumed that socialism was possible, because it actually existed. Some were willing to critique Russia, China, Cuba, etc., to varying degrees, but they too tended to think that the actual existence of these countries was proof that socialism was possible. As they saw it, the defects or evils in these countries didn’t flow out of their mode of production; they were essentially political. What was needed was political change – “socialism and democracy” instead of socialism without democracy, or “socialism from below” instead of socialism from above, etc. And other people were confident that effective political action would enable the achievements of social democracy to be sustained and gradually extended to encompass more and more aspects of social and economic existence.

So it is only in recent years that any significant theoretical attention has been paid to whether another world is possible. I believe that this is the central problem of revolutionary thought today. Exposing the evils of capitalism is an insufficient approach when the question being asked by tens of millions of people is whether there is any alternative. Nor is it sufficient to focus on organizing or movement building, or to leave everything up to spontaneous action alone. Freedom struggles will no doubt continue, because the impulse to change things, the felt need to change things, arises spontaneously out of the defects of existing society. But again, the struggles will not reach for a wholly different future as long as such as future is perceived as pie-in-the-sky....

The left has generally been either too pessimistic, and as a result, too willing to compromise, or else too utopian to be convincing. Moreover, diagnosis based on identifying and removing symptoms ad hoc is insufficient for a lasting cure. Cure requires diagnosis that identifies causes and treats the dysfunctionality by addressing causes.

And again, such perceptions have arisen for rational reasons, largely because of the failures and horror of the last century. So it is likewise insufficient to simply affirm that another world is possible, or to remain contented with an ungrounded hope that it is possible. The possibility of another world needs to be shown. And this can only be shown by showing how it is possible to break with capitalism and how such a break could be sustainable....

With Sober Senses

Not by Politics Alone: Thinking Through a Post-Capitalist Future

Andrew Kliman | Professor of Economics, Pace University, author of Reclaiming Marx’s “Capital,” defending the Temporal Single System Interpretation of Marx's labor theory

Editor’s note: This essay is a corrected and slightly revised version of the author’s presentation, entitled “Not by Politics Alone,” during a panel on “Thinking Through a Post-Capitalist Future” that took place at the Left Forum conference in New York City on March 11, 2006.

Michael Roberts — Back to Front

Marx's economic theory is based on his theory of the commodity and how profit is extracted as surplus value based on commodification. Thus, profit (along with profit rate) is the economic driver, which Marx expresses in the expression, M - C - M', meaning that financial investment of money–M–is used to produce commodities for consumption–C– that leads to return on investment as profit extracted as surplus value from the process–M'. Since this is not earned through productive work it is "economic rent" in the sense of classical economics, in which economic rent figured prominently. Marx did not come up with the idea. Rather, he sought to produce a more rigorous account of it.

Conventional monetary policy is based on keeping the interest rate lower than the profit rate, so as not create liquidity preference that overly encourages saving and stifles productive investment. While this may be a factor, it is not the factor, or even the most important factor, which is a reason that monetary policy doesn't work very well if relied on as a policy tool.

Michael Roberts argues that Keynesian fiscal policy that takes demand as the driver as is not necessarily successful either, since the driver isn't money rather than the interest rate. Rather, according to Marxian analysis, the issue is the inherent contradictions in the structure of capitalism as a modification of feudalism. Ownership of capital was substituted for, or melded with ownership of land as a source of rent extraction.

In this view, what is required is a entirely fresh approach based on removing the bias introduced by flawed institutional arrangements, especially bourgeois property ownership, that found the current system on expropriating surplus value as economic rent. 

Such a system is not only unfair to workers, but it is also dysfunctional as an economic system. This dysfunctionality leads to political problems, which Marx believed could only be addressed through revolution, since the ownership class as he knew it then would never acquiesce to reform through the political process. But not much has changed in this regard, other than the appearances. The system still depends on rent extraction. What's new is financialization, digitization, and some of the forms that monopolization takes.

While may have conditions have changed drastically since Marx wrote, his analysis of capitalism and its discontents still holds the day, since it is a work in political economy rather than economic theory.  Macroeconomics deals with socio-economic systems that involves much more than abstract economic relations since they are historical and dynamic. 

Marx and other classical economists like Smith understood this. But the other classical economists were products of their class and remains essentially true to it. Marx, however, broke the mold in claiming that class was the problem. He concluded that an inherently dysfunctional system would either change or be changed. He did not think that the owners of the system would be up for change it themselves, based on noblesse oblige, for example.

Interestingly, Marx lived shortly after the American and French revolutions, which were still lively in memory and certainly shaped his thinking, especially since he was historically inclined having been trained in Hegel. 

Now we see the uprising in France where La Marseillaise is again being sung in the streets, this time not against feudal rule but neoliberal.

Michael Roberts Blog
Back to Front
Michael Roberts

Peter Cooper — Productive and Unproductive Labor in a Macro Context

As is well known, Marx and the classical political economists before him made a distinction between productive and unproductive labor. Marx’s distinction is somewhat differed from Smith’s. For Marx, labor is productive when it is: (i) directly productive of surplus value; and (ii) exchanged directly against capital. I remain unsure how applicable the distinction is to a state money system. Some of my misgivings are explained in an earlier post. The uncertainty has held back an attempt to explore connections between Marx and Modern Monetary Theory (MMT). To get around this, here I proceed on an as if basis, by assuming for the sake of argument that the distinction is meaningful....

heteconomist
Productive and Unproductive Labor in a Macro Context
Peter Cooper

Nick Johnson — Modern Monetary Theory and Inflation – Anwar Shaikh’s Critique

This is a repost by Socialist Economist of an earlier article by Nick Johnson. If you didn't catch it here at MNE the first time, here it is again. If you did, well, it's more evidence of MMT getting media exposure.

Socialist Economist
Modern Monetary Theory and Inflation – Anwar Shaikh’s Critique

Nick Johnson, The Political Economy of Development

Richard D. Wolff — The Narrowness of Mainstream Economics Is About to Unravel

Recent extreme volatility and sharp drops in US stock markets underscore the instability of capitalism yet again. As many commentators now note, another economic downturn looms. We know that all the reforms and regulations imposed in the wake of the Great Depression of the 1930s failed to prevent both smaller downturns between 1941 and 2008 and then another big crash in 2008. Capitalism’s instability has, for centuries, resisted all efforts to overcome it with or without government interventions. Yet mainstream economics mostly evades an honest confrontation with the social costs of such economic instability. Worse, it evades a direct debate with the Marxian critique that links those costs to an argument that system change would be the best and most “efficient” solution....

Truthout
The Narrowness of Mainstream Economics Is About to Unravel

Richard D. Wolff | professor of economics emeritus at the University of Massachusetts, Amherst, and currently a visiting professor in the Graduate Program in International Affairs of the New School University, New York City

Michael Roberts — The state of capitalism at IIPPE

This year’s conference of the International Initiative for the Promotion of Political Economy (IIPPE) in Pula, Croatia had the theme of The State of Capitalism and the State of Political Economy. Most submissions concentrated on the first theme although the plenary presentations aimed at both....

Michael Roberts Blog
The state of capitalism at IIPPE
Michael Roberts

Michael Roberts — China’s ‘Keynesian’ policies

China’s policy in the Great Recession was not just ‘fiscal stimulus’ in the Keynesian sense, but outright government or state investment in the economy. It actually was ‘socialised investment’. Investment is the key here –as I have argued in many posts – not consumption or any form of spending by government.…

As John Ross said on his blog at the time, “China is evidently the mirror image of the US …If the Great Recession in the US was caused by a precipitate fall in fixed investment, China’s avoidance of recession, and its rapid economic growth, was driven by the rise in fixed investment. Given this contrast, the reason for the difference in performance between the US and Chinese economies during the financial crisis is evident.”...

I would argue that "Keynesianism" is not Keynes of the General Theory, the full tile of which is the The General Theory of Employment, Investment, and Money. Investment drives production, which produces not only goods but also employment, and investment in capital goods occurs owing to the flow of funding to firm investment in capital goods, both as fixed capital — plant and technology, and also human capital owing to augmented "labor power" as knowledge and skill though investment in training.

Regardless of economic system, real (firm) investment, in contrast to financial investment in saving vehicles, leads to real growth (a flow) and "real savings" (stocks of capital goods and quality of labor).

Keynes realized this and so-called paleo-Keyensianism was about public investment in addition to temporary stimulus to address economic contraction. Public investment is not only in infrastructure, R&D, and other economic factors that directly relate to firms, but also welfare investment that indirectly do so, in particular education and health services. Public investment need not be limited to addressing economic and financial crises, and should not be in a modern monetary production economies, where growth must keep pace with population growth and increased productivity is desirable.

The notion that Keynes was chiefly focus on welfare and stimulus is simplistic. He understood the primacy of investment in the production-distribution-consumption cycle and addressed it specifically, as shown in the title of his major work.

Addressing effective demand is key in addressing demand-leakage to saving is central for Keynes. Effective demand is important since without it, investment will fall. Moreover, when private investment slows, public investment needs to pick up the slack. Investment, both public and private, are key to economic performance and social wellbeing, which is the intended meaning of "welfare," rather than transfer payments as "welfare" has come to be interpreted.

China appears to understand this and increases the rate of public investment in addition to providing stimulus for welfare to address crises. This did not happen in the Western capitalist countries in the follow-up to the crisis and they suffered for it as a result.

While Michael Roberts is out of paradigm with MMT, he makes some points worth considering from the Marxian perspective, too.

Michael Roberts Blog
China’s ‘Keynesian’ policies
Michael Roberts

See also

Kaldor, the famous Hungarian economist of Cambridge University, claimed in 1978 that countries with the most dynamic economic growth tended to record the fastest growth in labor costs as well. The renown “Kaldor-paradox” may be confusing for policymakers influenced by the neoclassical mainstream. It tells us that keeping costs low may not lead to competitive advantages and faster economic growth. So let’s resurrect the Kaldorian ideas and see whether the relationship has changed at all (hint: it has not)....

Wages as dynamic investment.

Could the Kaldor-paradox imply that most of the examined countries are wage-led (or demand-led) economies?…

Economic Questions ± formerly The Minskys
There is no such thing as low-wage competitiveness
Daniel Olah, economics editor, writer and PhD student, and Viktor Varpalotaiis, Deputy Head of Macroeconomic Policy Department at Ministry for National Economy, Hungary

Tithi Bhattacharya and Susan Ferguson — Deepening our Understanding of Social Reproduction Theory

Probably not of interest to all but worth posting for those interested in a contemporary Marxian approach.

When we embarked on our project to explore Social Reproduction Theory (SRT), at the back of our mind was the phrase from the Marx and Engels’ German Ideology, ‘[human beings] must be in a position to live in order to be able to ‘make history’’. In class societies, since there lies between ‘living’ and ‘making history’ webs of social relations that enable and inhibit life, Marxism has always been about theorising both. Indeed, one can go as far as to say that historical materialism seeks to show how access, or lack thereof, to life-making resources in a class society shapes the making of history. SRT takes this question of life-making very seriously and that is, simply put, its specific inflection on Marxist theory as a whole.

But what is life-making exactly?

One way to answer that question is via the category of labour power, or the capacity to labour. Capitalism as a system is a unity of two kinds of social processes: the production of commodities and the production of workers who produce those commodities. Workers are ‘produced’ in a double sense, through biological reproduction and as bearers of labour power. SRT concerns itself with grasping the dynamics involved in both ‘productive’ processes....

Pluto Press
Deepening our Understanding of Social Reproduction Theory
Tithi Bhattacharya and Susan Ferguson

See also

Occasional Links & Commentary
Disappearing poverty
David F. Ruccio | Professor of Economics, University of Notre Dame

Michael Roberts — China workshop: challenging the misconceptions

Indeed, the real issue ahead is the battle for trade and investment globally between China and the US. The US is out to curb and control China’s ability to expand domestically and globally as an economic power. At the workshop, Jude Woodward, author of The US vs China: Asia’s new cold war?, outlined the desperate measures that the US is taking to try to isolate China, block its economic progress and surround it militarily. But this policy is failing. Trump may have launched his tariff hikes, but what really worries the Americans is China’s progress in technology. China, under Xi, aims not just to be the manufacturing centre of the global economy but also to take a lead in innovation and technology that will rival that of the US and other advanced capitalist economies within a generation.

China's options.

There was a theoretical debate at the workshop about whether China was heading towards capitalism (if not already there) or towards socialism (in a gradual way). Marx’s view of socialism and communism was cited (from Marx’s famous Critique of Gotha Programme) with different interpretations. For me, I reckon Marx’s view of socialism and/or communism starts from two realistic premises; 1) that communism as a society of super-abundance where toil, exploitation and class struggle have been eliminated to free the individual, is technically possible now – especially with the 21st technology of AI, robots, internet etc; and 2) socialism and/or any transition to communism cannot even start until the capitalist mode of production is no longer dominant globally and instead workers’ power and planned democratically-run (not dictatorships) economies dominate. That means China on its own cannot move (even gradually) to socialism (even as the first stage towards communism) unless the dominant power of imperialism is ended in the so-called West. Remember China may be the second-largest economy in the world in dollar terms but its labour productivity is less than one-third of the US.

In my view, Michael Roberts gets both of these issues right and together they from the basis of the geopolitical dynamic that is driving geopolitics at this stage of the great game.

His conclusion.

There is a (permanent) struggle going on within the political elite in China over which way to go – towards the Western capitalist model; or to sustain “socialism with Chinese characteristics”. After the experience of the Great Recession and the ensuing Long Depression in the West, the pro-capitalist factions have been partially discredited for now. President for Life Xi now looks to promote ‘Marxism’ and says state control (through party control) is here to stay. But the only real way to guarantee China’s progress, to reduce the growing inequalities and to avoid the risk of a swing to capitalism in the future will be to establish working class control over Chinese political and economic institutions and adopt an internationalist policy a la Marx. That is something that Xi and the current political elite will not do.

Time will tell.

China faces a dilemma. It needs the capitalist means of production to grow commensurably with capitalist countries and capitalism entails imperialism (think China's BRI). But for a peaceful transition to socialism when capitalism runs its course, China has to moderate its level of capitalism, while maintaining a balancing level of socialism. This is the aim of socialism with Chinese characteristics as it stands, and one can expect a flexible approach in the face of change.

A fundamental 19th century point of Marx & Engels is that societies are complex adaptive systems subject to reflexivity and emergence, which implies that economies are dynamic and subject to the historical dialectic. This stands in contrast to to the 18th century bourgeois liberalism based on static "natural law" that Marx criticized but which is held as convention in the West. So it is more likely that the Chinese leadership can be more agile and adaptive than Western leaders. Whether they will be able to rise to the occasion is another question. Moreover, there is a strong possibility that if Western leaders perceive that the West is falling behind, they will initiate war (think Thucydides trap).

Michael Roberts Blog
China workshop: challenging the misconceptions
Michael Roberts

See also

China: three models of development

David F. Ruccio — Marx ratio

First there was the Great Gatsby curve. Then there was the Proust index. Now, thanks to Neil Irwin, we have the Marx ratio.

Each, in their different way, attempts to capture the ravages of contemporary capitalism. But the Marx ratio is a bit different. It was published in the New York Times. Its aim is to capture one of the underlying determinants of the obscene levels of inequality in the United States today—not class mobility or the number of years of national income growth lost to the global financial crash. And, of course, it takes its name from that ruthless nineteenth-century critic of mainstream economics and capitalism itself....

Occasional Links & Commentary
Marx ratio
David F. Ruccio | Professor of Economics, University of Notre Dame

See also

Putting aside this rich line-up of events, what has caught our attention is the equal proliferation of pieces celebrating Marx’s birthday, for the better or for the worse. From misleading and derogatory articles such as the Rulers of the world: read Karl Marx! published by The Economist to educational short pieces such as Cooper’s It’s time to normalize Karl Marx, it is difficult to not wonder about the reasons behind such opposing views. Similarly, it is difficult to resist the temptation to add a little contribution to the debate. So here we are.…

Developing Economics
Marx’s Birthday and the Dismal Science: A Few Observations

Carolina Alves and Ingrid H. Kvangraven