Many liberal economists envisioned a new dawn of Keynesianism in the 2008 financial meltdown. Nearly six years later, it is clear that the much-hoped-for Keynesian prescriptions are completely ignored. Why? Keynesian economists’ answer: “neoliberal ideology,” which they trace back to President Reagan.
This study argues, by contrast, that the transition from Keynesian to neoliberal economics has much deeper roots than pure ideology; that the transition started long before Reagan was elected President; that the Keynesian reliance on the ability of the government to re-regulate and revive the economy through policies of demand management rests on a hopeful perception that the state can control capitalism; and that, contrary to such wishful perceptions, public policies are more than simply administrative or technical matters of choice—more importantly, they are class policies.
The study further argues that the Marxian theory of unemployment, based on his theory of the reserve army of labor, provides a much robust explanation of the protracted high levels of unemployment than the Keynesian view, which attributes the plague of unemployment to the “misguided policies of neoliberalism.” Likewise, the Marxian theory of subsistence or near-poverty wages provides a more cogent account of how or why such poverty levels of wages, as well as a generalized predominance of misery, can go hand-in-hand with high levels of profits and concentrated wealth than the Keynesian perceptions, which view high levels of employment and wages as necessary conditions for an expansionary economic cycle.…
The claim that the abandonment of Keynesian policies in favor of neoliberal ones began with the 1980 arrival of Ronald Reagan in the White House is factually false. Indisputable evidence shows that the date on the Keynesian prescriptions expired at least a dozen years earlier. Keynesian policies of economic expansion through demand management had run out of steam (i.e., reached their systemic limits) by the late 1960s and early 1970s; they did not come to a sudden, screeching halt the moment Reagan sat at the helm.
As Professor Alan Nasser of Evergreen State College points out, arguments that “policies of economic equity represented costly trade-offs in terms of efficiency” were made by economic advisors of the Democratic administrations long before Reaganomics solemnized such arguments. Arthur Okun and Charles Schultze had each served as chair of the Council of Economic Advisors to Democratic presidents. In his Equality and Efficiency: The Big Tradeoff, Okun (1975) argued that “the interventionist goal of greater equality had inefficiency costs that injured the private economy.” Schultze (1977) likewise claimed that “government policies which impact markets in the name of fairness and equality are necessarily inefficient,” and that such policies were “bound to disadvantage the very people policymakers intended to protect, and to destabilize the private economy in the process."
Jerome Kalur also points out, “Chamber of Commerce and Business Roundtable efforts to gain control of government regulatory decision-making were initiated at least nine years before” the election of Ronald Reagan to presidency, “when corporate attorney Lewis Powell submitted to the Chamber his now well-known memorandum ‘Attack of American Free Enterprise System’” [7]. In concert with Powel’s legal offensive against labor and regulatory standards, big business moved swiftly to “impede union organizing” and “to eliminate regulatory controls via streams of think-tank propaganda from the likes of The American Enterprise Institute (1972), The Heritage Foundation (1973), and the Cato Institute (1977).…”
While theoretical turnaround from New Deal–Keynesian economics by the luminaries of the Democratic Party pre-dated President Carter, policy implementation of such theories began under the Carter administration. Reagan picked up the Democrat’s copy of gradual agenda of neoliberalism and ran with it, replacing the rhetoric of capitalism-with-a-human-face with the imperious, self-righteous rhetoric of rugged individualism that greed and self-interest are virtues to be nurtured. Neither President Clinton eased the supply-side economic policies of the Reagan years, nor is President Obama hesitating to carry out such policies.
The Keynesian view that the government can fine-tune the economy through fiscal and monetary policies to maintain continuous growth is based on the idea that capitalism can be controlled or manipulated by the state and managed by professional economists from government departments in the interest of all. The effectiveness of the Keynesian model is, therefore, based largely on a hope, or illusion; since in reality the power relation between the state and the market/capitalism is usually the other way around. Contrary to the Keynesian perception, economic policy making is more than simply an administrative or technical matter of choice; more importantly, it is a deeply socio-political matter that is organically intertwined with the class nature of the state and the policy making apparatus.…
At the heart of Keynesian economists’ frustration or disappointment is the unrealistic perception that economic policies are intellectual products, and that policy making is primarily a matter of technical expertise and personal preferences. What these economists overlook is the fact that economic policy making is not simply a matter of choice, that is, of “good” vs. “bad” policy. More importantly, it is a matter of class policy.…Enter Karl Marx.
Not only is the liberal economists’ account of the actual developments that led to the demise of Keynesianism and the rise of neoliberalism inaccurate, so is their explanation of the ongoing problems of unemployment and economic stagnation. By blaming the persistently high rates of unemployment on “neoliberal capitalism,” instead of capitalism per se, proponents of Keynesian economics tend to lose sight of the structural or systemic causes of unemployment: the secular and/or systemic tendency of capitalist production to constantly replace labor with machine, and to thereby create a sizeable pool of the unemployed, or a “reserve army of labor,” as Karl Marx put it.
The fundamental laws of demand and supply of labor under capitalism are heavily influenced, Marx argued, by the market’s ability to regularly produce a reserve army of labor, or a “surplus population.” The reserve army of labor is therefore as important to capitalist production as is the active (or actually employed) army of labor. Just as a regular and timely adjustment of the level of a body of water behind an irrigation dam is crucial to a smooth or stable use of water, so is an “appropriate” size of a pool of the unemployed critical to the profitability of capitalist production…Recall Michal Kalecki, Political Aspects of Full Employment
…the Marxian view that meaningful, lasting economic safety-net programs can be carried out only through overwhelming pressure from the masses—and only on a coordinated global scale—provides a more logical and promising solution to the problem of economic hardship for the overwhelming majority of the world population than the neat, purely academic and essentially apolitical Keynesian stimulus packages on a national level. No matter how long or loud or passionately the good-hearted Keynesians beg for jobs and other New Deal-type reform programs, their pleas for the implementation of such programs are bound to be ignored by governments that are elected and controlled by powerful moneyed interests. The fundamental flaw of the Keynesian demand-management prescription is that it consists of a set of populist proposals that are devoid of class politics, that is, of political mechanisms that would be necessary to carry them out. Only by mobilizing the masses of workers (and other grassroots) and fighting, instead of begging, for an equitable share of what is truly the product of their labor can the working majority achieve economic security and human dignity.Counterpunch
The Death Grip of Neoliberalism — Keynes is Dead; Long Live Marx!
Ismael Hossein-Zadeh | Professor Emeritus of Economics, Drake University
At this point, I'm pretty much down on most "isms". The world is hugely freaking complicated, and there is no theortetical ism that has it all figured out, or knows how to get it all sorted out. It's always going to contain a certain amount of very bad shit. Human beings are mortal, and they have the curse of knowing it, so human life is inherently unsatisfactory to human beings themselves. They get sick a lot, angry a lot, depressed and dismayed and dispirted a lot. They are full of resentments and vengeful urges, but also fantastical fairy images of dreamlands that are barely sane, not to say entirely remote from anything approaching sensible. They want to get stuff to fill up their short, sucky lives with some enjoyable episodes of fun, pleasure or beauty, and when they get stuff they don't like to give it up or have it taken away. The interests of humans inevitably conflict, sometimes in profound and disturbing ways that can't reconciled. And every so often people slaughter each other in large numbers because they can't contain all of the pent-up rage and hatred. This isn't some kind of curable mental illness I'm describing. This is life as we know it and is revealed through the history of all ages.
ReplyDeleteWe can definitely do things better and make things better. We can make it more equal so that we're at least all in the same boat, and also more fair within the limits of what is practical. We can even carry out major projects of reform that sometimes work in something reasonably close to the way they were originally intended. But there is never going to be some awesome final answer.
"The idea that ’economic science’ as a special science completely separate from sociology, history, anthropology etc. cannot exist, underlies most of his economic analysis. Indeed, historical materialism is an attempt at unifying all social sciences, if not all sciences about humankind, into a single ’science of society’. For sure, within the framework of this general ’science of society’, economic phenomena could and should be submitted to analysis as specific phenomena. So economic theory, economical science, has a definite autonomy after all; but it is only a partial and relative one.
ReplyDeleteProbably the best formula for characterising Marx’s economic theory would be to call it an endeavour to explain the social economy. This would be true in a double sense. For Marx, there are no eternal economic laws, valid in every epoch of human prehistory and history. Each mode of production has its own specific economic laws, which lose their relevance once the general social framework has fundamentally changed. For Marx likewise, there are no economic laws separate and apart from specific relations between human beings, in the primary (but not only, as already summarised) social relations of production. All attempts to reduce economic problems to purely material, objective ones, to relations between things, or between things and human beings, would be considered by Marx as manifestations of mystification, of false consciousness, expressing itself through the attempted relocation of human relations. Behind relations between things, economic science should try to discover the specific relations between human beings which they hide. Real economic science has therefore also a demystifying function compared to vulgar ’economics’, which takes a certain number of ’things’ for granted without asking the questions: Are they really only what they appear to be? From where do they originate? What explains these appearances? What lies behind them? Where do they lead? How could they (will they) disappear? Problemblindheit, the refusal to see that facts are generally more problematic than they appear at first sight, is certainly not a reproach one could address to Marx’s economic thought.
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ReplyDelete"Marx’s economic analysis is therefore characterised by a strong ground current of historical relativism, with a strong recourse to the genetical and evolutionary method of thinking (that is why the parallel with Darwin has often been made, sometimes in an excessive way). The formula ’genetic structuralism’ has also been used in relation to Marx’s general approach to economic analysis. Be that as it may, one could state that Marx’s economic theory is essentially geared to the discovery of specific ’laws of motion’ for successive modes of production. While his theoretical effort has been mainly centred around the discovery of these laws of motion for capitalist society, his work contains indications of such laws - different ones, to be sure - for pre-capitalist and post-capitalist social formations too.
The main link between Marx’s sociology and anthropology on the one hand, and his economic analysis on the other, lies in the key role of social labour as the basic anthropological feature underlying all forms of social organisation. Social labour can be organised in quite different forms, thereby giving rise to quite different economic phenomena (’facts’). Basically different forms of social labour organisation lead to basically different sets of economic institutions and dynamics, following basically different logics (obeying basically different ’laws of motion’).
All human societies must assure the satisfaction of a certain number of basic needs, in order to survive and reproduce themselves. This leads to the necessity of establishing some sort of equilibrium between social recognised needs, i.e. current consumption and current production. But this abstract banality does not tell us anything about the concrete way in which social labour is organised in order to achieve that goal."
Marx’s Economic Theory - General approach and influence
KARL MARX - PART 3
Tuesday 30 December 2003, by Ernest Mandel
"Human beings are mortal, and they have the curse of knowing it, so human life is inherently unsatisfactory to human beings themselves. They get sick a lot, angry a lot, depressed and dismayed and dispirted a lot. They are full of resentments and vengeful urges, but also fantastical fairy images of dreamlands that are barely sane, not to say entirely remote from anything approaching sensible. They want to get stuff to fill up their short, sucky lives with some enjoyable episodes of fun, pleasure or beauty, and when they get stuff they don't like to give it up or have it taken away. The interests of humans inevitably conflict, sometimes in profound and disturbing ways that can't reconciled. And every so often people slaughter each other in large numbers because they can't contain all of the pent-up rage and hatred. This isn't some kind of curable mental illness I'm describing. This is life as we know it and is revealed through the history of all ages."
ReplyDeleteMy son echoed this sentiment last week when we dropped him off at college in Florida. His shorter version was that life is always filled with uncertainty. Death, sickness, failure, violence, societal complexity and broken love is always lurking to mess life up. "Happy" people(some might say, light thinkers) seem to have a better way of ignoring the inevitable (living in denial thereof). Drugs (legal and illegal) and booze help many accomplish this pie in the sky mindset.
Economic and or political ideology do no work as sufficient bromides to remove all our pain. They can help, but being that they operate in a competitive way against each other, many times they (the people implementing them) do more harm than good (my way or the highway mentality). At best (pie-in-the-sky on my part probably), all I can hope for is a synthesis of the best ideas coming together to make our journey here optimal. That's not a given, however.
Re: "The fundamental flaw of the Keynesian demand-management prescription is that it consists of a set of populist proposals that are devoid of class politics, that is, of political mechanisms that would be necessary to carry them out."
ReplyDeleteI agree with the author on that point, and suggest that it also applies to MMT and Functional Finance as a whole (with exceptions for some of the more thoughtful MMTer's like Tom Hickey). MMT claims that its policies serve the "public purpose" but its never been satisfactorily explained to me WHO DECIDES exactly what this public purpose is?
Politics and economics are intertwined -- it's unlikely that we'll solve our economic problems without fixing our political problems, and it's unlikely that we'll solve our political problems without also solving our economic problems. You have to address both economics and politics simultaneously.
Agree with Dan Kervick about "isms." I sometimes joke that the only "ism" I believe in is pragmatism.
I recall an existentialist philosopher saying to a yogi that life is absurd since everything is always changing, dying.
ReplyDeleteThe yogi responded, yes, but what is this "always" ? Find that which is continuous and unchanging in experience. That is yoga.
See Patanjali Yoga Sutras, I, 2: "[The state of] yoga is the cessation of mental activity."
"Yoga" comes from the root meaning to yoke or join. Yoga is the state of unity of subject and object — non-duality — in which pure consciousness knows itself in its own nature without mediation. (YS, I, 3)
What impedes that? Heaps (vasana) of latent impressions (sanskara) that result in the veil of limited mind that conceals pure consciousness in ordinary experience, These impressions result in the rising of desire that impels thought and action, which deepen the impressions and thickens the veil of limited mind.
Roast these seeds in the fire of spiritual practice (sadhana). This is the practice of yoga that leads to inner peace and fulfillment.
This is the peace that "the world cannot give."
This is maximum utility, and the only thing worthy of rational pursuit. This does not preclude living an otherwise "normal life," since the requirement is being in the world by not of it.
This teaching underlies all spiritual and wisdom teachings and traditions.
"MMT claims that its policies serve the "public purpose" but its never been satisfactorily explained to me WHO DECIDES exactly what this public purpose is?"
ReplyDeleteThat's what democracy is supposed to do.
Which as we know is a terrible representative system - except for all the others.
Somebody has to be given the job of deciding what happens. Because we know the fantasy of things just arising is precisely that - a fantasy. One shared by both left and right.
You either choose to have somebody decide, or somebody will come along and do the deciding without your choice.
Because there will always be a big man in human society. So you either choose the big man, or it gets chosen for you.
I see two big problems with Marx:
ReplyDeleteHe absorbed from Hegel the stupid, pseudo-scientific idea that underlying human history is some kind of deep and uniform dialectical process that pushes everything in a more-or-less deterministic direction with definable stages of evolution. The upshot is that Marxists are constantly looking at the complex, evolving and largely unpredicatable world and attempting to fit everything into a bunch of mentally canned evolutionary laws, and determine where things are in the dialectic.
Along the same lines, he also absorbed from Hegel the latter's horrible irrationalism about logic and "contradictions." Faced with a social system that seems to be based on processes and institutional forces are are in internal conflict and are even self-undermining or self-destructive, Hegelians are wont to describe that internal instability, which is simply a contingent feature of human nature and human institutions, as some kind of logical contradiction and the working out of the "dialectic."
The other main problem in Marx was that he allowed himself to be seduced by the ridiculous romatic utopianism that was floating in the air in his time, and gave too much ground to anarchists and other suchlike fools. So all of his careful sociological and economic analysis and observations, which should have been the foundation for some hard practical thinking about ways of remaking economic institutions, is undermined by positing some heaven-on-earth dreamworld at the end of history, a world where there is no longer any "alienation", no exchanging, no coercive authority, no state, no private property and no state property, but where everything just magically works out.
In a world of relative knowledge and experience, nothing is perfect, or if something is at any point in time, then it loses this perfection in successive time periods due to ever-changing context.
ReplyDeleteThis is why context and adaptation are fundamental. The challenge is to integrate the better and jettison the worse. Of course, the actual result is usually somewhere in the middle of the range.
We stand on shoulders of giants but that doesn't mean we should mimic them. They were products of their time, just as we are products of our time.
Marxists, humanists, and sages are in aggreement that the sine qua non of lasting social improvement is "raising consciousness." However, they disagree over the means.
ReplyDeleteMarx recommended educating workers about how the system works to their disadvantage and how to change to one that works to their advantage.
Humanists like Bucky Fuller recommend amping up the general level of education.
Both of these are rational means.
Sages recommend non-rational means based on removal of ignorance of one's own true nature.
Attributed to Jesus in The Gospel of Thomas, saying 3: "If you do not know who you are, you live in poverty and you are that poverty."
These means are not mutually exclusive but rather complementary.
That’s an interesting conversation going on above.
ReplyDeletePrem Rawat used an analogy once: - we live in a house and we look out at the world through its windows. If we look out one window and there happens to be a garbage dump next door, then that is what we will see. If we look out another window and see a beautiful park, beautiful trees and garden, then that is what we will see. This underlies Tom’s point that it is where the consciousness is at (the window it is viewing the world through, and mistaking that window for the entire reality) where meaning is derived. I am sure Dan Kervick was in a particular mood and looking out through a particular window when he penned the note above about ‘isms’; because I am sure that he also sees the great beauty in humankind, “in the work of creative artists, the intuitive perception of scientific investigators, the inspired imaginations of the poets of the world and the vision of the illumined idealists …. great artists, musicians, dramatists, writers and many other types of creative workers” [DK] – not to mention a little bewilderment with human history and psychics, and Tom’s beloved sages and the wisdom religion. Is all of human history to be consigned to bones and dust?
So, this is a point I often try to pass on: even the same consciousness has many different windows. We all look at the world through our own and find it very difficult to understand when somebody sees the world through their own. It is a matter of Being (consciousness, awareness) choosing a window – so all are describing accurately what they see.
There is an answer but it is within the human being. It is not in the province of mind or it would have been documented long ago. It is found through the heart. A human being is a door. Can you imagine a place inside of you, an ‘inner window’, where on looking through you see more answers than questions? Mind only see questions. I know the world outside is challenging, but the greatest challenge in your life still remains You (and I).
Human beings do not respect each other because they do not know who they are. If they knew who and what they were, even those with the coarsest nature would respect each other; because they would know the source of something that is their source, and is ultimately Respectable! And beautiful - full of intelligence, power and love. And more …..
The more window curtains we open, the better it is for all of us. The mind (like a parachute) is of little use to anybody unless it is open. If we sit inside our houses and draw all of the curtains, then imagination (mind) is going to lead us into hell. Mind by itself is not enough. It is the human heart that contains the true organ of vision, and our true potential. It is the human heart that will bring us home. Mind I find, is a secondary, intermediate partner. The true use of the mind comes once again from Patanjali and a Tibetan llama DK:
"... mind - as interpreter of states of consciousness, transmitter of egoic intent, window through which the ego looks out upon vast and (to the majority) unknown fields of knowledge"
It also reflects that which is above even better than it reflects that which is below. The heart has no curiosity; the heart wants to know!
Good discussion.
ReplyDeleteI think Dan K said it best. I am also at the point of accepting the world as it is and looking for incremental, and therefore practical, improvements. And that is the beauty of MMT (c: