Wednesday, July 5, 2017

Mohamed Obaidy — Toward an Economic Theory of Imperialism?

This is a good summary of the historical debate, and I suggest reading it. It's short. It's mostly about theories of the value of money as they relate to capitalism. "Imperialism" means economic imperialism in this context rather than political imperialism.

Developing Economics
Toward an Economic Theory of Imperialism?
Mohamed Obaidy

1 comment:

peterc said...

Interesting post. Thanks for the link.

I tend basically to agree with Kalecki and Luxemburg that capitalism is pretty much dependent on "external markets", if this is taken to mean external sources of demand, whether government spending, periphery/pre-capitalist areas (within both capitalist and pre-capitalist countries) or, for open economies, export markets.

I think part of the confusion over capitalism (though not in the post linked to) is that it is somehow separate from government. In reality, capitalism cannot exist without government. For starters, government enforces private property. To do so, it needs to move resources to the public domain. Hence fiat currency, etc.

Here is one way I think (hypothetically) about capitalism in the absence of government spending, a periphery, or export demand. Kalecki's profit equation says, under such circumstances, that realized profit would reduce to the sum of capitalist consumption plus investment minus worker saving. It might seem, then, that capitalists will spend in order to profit. But, of course, while the capitalists' spending generates monetary profit for the capitalist class as a whole, it does not create profit for the individual capitalist doing the spending. So, an individual capitalist can attempt to profit if some other capitalist is willing to spend first. But there would be a kind of free-rider problem in which it was in every capitalist's interest to wait and hope that somebody else committed to spending so that there was actually some monetary profit to compete over.

As a matter of logic, I think it is government that gets the capitalist ball rolling. The government spends and there is then some monetary profit up for grabs. Government hires some staff, who now have wages to spend if anybody is willing to supply them with stuff, and government also orders some goods and services from the private sector, which will mean some firms now have actual orders to meet that promise a monetary payment. In meeting these orders, they in turn will need to hire workers and pay them wages, etc. This productive activity in the private sector, initiated by prior government spending, then has its own flow-on effects, inducing other firms to produce to meet orders and/or compete for the realizable monetary profit.

It does not necessarily require a government deficit. It just requires that government spending, as an initiator, induces capitalists to spend as a means of getting a piece of the action. Even if government then taxes away what it has spent, capitalists will have engaged in spending of their own in the meantime and, as a class, profited to the tune of their own expenditure minus worker saving.