Gold! McKinley, campaigning on a Gold Standard. (Source.)
Amateur political ideology speculating and ranting time. Paul Krugman has been wondering about monetary morality lately, and more generally what is causing conservatives, Republicans and indifferent elites to believe Dark Age things about the economy. Some are Austrian economists who have their models and thoughts. But I think we see three general trends in thought that are going to be captured by three different comments: supply-side myopia, business leaders pleading for more control, and the ‘Natural’ part of money.
Irving Kristol, The Heat Death of Supply-Side Economics
Trying to explain that the new Reagan-era supply-side economics wasn’t voodoo to his fellow neoconservatives, Irving Kristol wrote a 1981 article “Ideology and Supply-Side Economics” in Commentary magazine. A quote:
…Clearly, a great many people are nervous about “supply-side” economics, and seem to have difficulty understanding its rationale….Indeed, the trouble with the thing we call supply-side economics is that it is just too simple, too easy to understand…
It originates in deliberate contrast to the prevailing Keynesian approach, which emphasizes the need for government to manage and manipulate, through fiscal and monetary policies, aggregate demand so as to maintain full employment. Supply-side economists say government cannot really do this, no matter how many clever economists it hires, but that if business enterprise is permitted to function with a minimum of interference, it will invest and innovate, so as to create the requisite demand for the goods it produces.
Here Kristol cleverly flips “full employment” arguments on their head by insisting that the natural result of a free market when government doesn’t step in and regulate, adjust demand, etc. is full employment. If we want to get unemployment down and create jobs, the best thing to do is for government to get out of the way. This ideology has captured the minds of most of our elites.
I realized that there was going to have to be an about-face on the part of economists, elites, opinion-leaders, etc. that the ideology of supply-side economics wasn’t relevant for this crisis. Yet opinion-leaders breath a deep sigh of relief when they learn of some contorted statistics that argues we have a structural problem. Thank God the government doesn’t have to act!
The constant digging for something the government is doing that is causing 15 million people to be unemployed is not just opinion-leaders. In our Survey of 30 Conservative Economists (Part One, Part Two), besides the Gold Bug tendencies, all the policy perscriptions were for tax cuts for the rich, ending unemployment insurance, and stopping “policy uncertainty.” “A tone and atmosphere of hostility from the government towards the general business community” scored high as a major factor in unemployment. Which leads me to…
Michal Kalecki, Our Narcissistic Business Elites
From time to time I get to meet people in what you would call the Professional Class. Lately I’ve noticed there’s a common critique of President Obama. Are you ready for it? It goes something like “He’s alienating business. No wonder employment is suffering if he’s done a terrible job with including the business community.” I wish I could tell you I say something clever in response, or drop a neat factoid or statistics, but normally I am just concentrating on keeping my head from exploding like in that movie Scanners.
Which reminded me I wanted to blog about Michal Kalecki’s indictment of the business community during the Great Depression in his masterful 1943 essay Political Aspects of Full Employment. Why doesn’t the business community step up and demand more investment? Kalecki:
We shall deal first with the reluctance of the ‘captains of industry’ to accept government intervention in the matter of employment. Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense. Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of ‘sound finance’ is to make the level of employment dependent on the state of confidence.
Like Brad Delong in another context with Kalecki, when I first read that I thought it was iffy. Now I don’t believe so.
It seems that there is an increasing sense among certain types of neoliberal business elite that Obama hasn’t been favorable enough to the business community, and that he needs to reconcile this fast in order to fix the economy. Look at Peter Baker’s article on Obama’s job’s programs, which doesn’t mention housing but does stop by the Chamber of Commerce to note: “But Obama’s periodic forays into populism made it personal. He couldn’t seem to decide whether he was going to take Wall Street to task for its irresponsible behavior or cajole it into freeing up money to get the economy moving. One day he derided “fat-cat bankers” who caused the recession; another day, he soothed them by saying that he and the American people “don’t begrudge” multimillion-dollar bonuses.”
Think about that. Why is Obama once calling members of the financial sector “fat-cat bankers” – while they were rolling the taxpayer, paying huge bonuses out of TARP and the Federal Reserve – important for an article about jobs? Is the idea that business leaders feel sad and offended important for why demand is down and unemployment is high? The government can act, through monetary and fiscal policy, to get jobs going again, but that leaves business elite not in charge of the economy.
Yet here we are, with the confidence of the business sector being the main anxiety of our recovery, reading article after article arguing that Obama needs to appoint more business leaders to key positions to make the business community feel included. We’ll discuss it more in 3 months when unemployment is still high and elites argue that President Obama should immediately replace Biden with a Xerox CEO.
To bring it back to conservatives, if you are the type who worries about (yet secretly hopes for) the time in which the business community leaves our country to create a gulch utopia, Obama saying very polite things about business leaders while letting them write regulatory rules is much more important than whether or not he gets people appointed to the Federal Reserve and draws lines in the sand over government stimulus.
A 19th Century Economist Defending Patriarchy
In 1889, Harvard economist Francis A. Walker wrote a book titled Money in Its Relation to Trade and Industry. Among many other things, he argued:
The social effects of a paper-money inflation are so fresh in the mind, through our recollections of our own Greenback Era, that I need not recall the wanton bravery of apparel and equipage; the creation of a countless host of artificial necessities in the family beyond the power of the husband and father to supply without a resort to questionable devices or reckless speculations, or to drafts on the proper business capital or the once sacred family reserve; the humiliating imitation of foreign habits of living, with but the faintest conception of the modes of thought and feeling and the customs of social intercourse which underlie them abroad; the loss of that fit and natural leadership of taste and fashion which is the best protection society can have against sordid material aims, and manners at once gross and effeminate, against democracy without equality or fraternity, and exclusiveness without nobility or pride of character.
Paper money decreases the power of the husband over his wife and the father over his family, loosens the natural leadership that serves as the best protection against “effeminate” manners, and gives us a democracy without nobility.
Which is to say, if you are a person who tends to use a capital N “Natural” to describe your political ideology (“I believe in a Natural Order with a Natural Hierarchy, which I get from my engagement with Natural Rights as observed through Natural Law….”), as many conservatives do, then you are going to be likely to think that the dollar is a Natural Thing too. Like women wearing pants and voting, any attempt to disrupt the Natural Order is going to be dangerous. That the value of a dollar is a social creation, and that if there is excessive demand for money the government should provide extra supply for money, isn’t going to be a convincing argument.
Michael O’Malley has written (h/t matthewstoller) some excellent stuff about this fight from a century ago (“Gold-standard arguments reflected a more generalized concern about and fascination with the insubstantiality of character, race, and value in labor…”).
So if you are a type who believes the government can only do bad, who believes that prosperity flows from how appreciated the business community feels, and who believes strongly in the Natural Order, then you are not going to be in favor of activist monetary and fiscal policy to fix the economy. You also won’t have any actual coherent view of what is wrong with the economy.
Accuracy, please! Walker was president of MIT from 1881 thru his death in 1897. He was a graduate of Amherst College and for some while a prefessor at Yale. Harvard has no claim to him.
Well, they say an image is worth a thousand words. So let me save my breath, just see the pictures in these two articles:
Resource magnates rally to their protest against tax
(1) Then PM Kevin Rudd was deposed in a Westminster-style legal coup de etat (very civilized, actually).
(2) Twiggy pockets $500 million in a day as Fortescue soars
To me, it gives a whole new meaning to the word “obscene”.
Gunnar Myrdal’s book, published in English in the 1950s, THE POLITICAL ELEMENT IN THE DEVELOPMENT OF ECONOMIC THEORY, makes many of the same points as you do in this post, especially on the role of “natural law” in the thinking of early economists, but also the notion of “freedom” and “collective housekeeping” (focusing on aggregate welfare instead of distribution). Excellent post.
There is some objective basis for the “business sector” concern, but it’s rooted in larger problems with aggregate and average economic data in an era of economic inequality. The average person’s fate does not matter all that much to GDP anymore. The top spenders are the real movers and shakers in GDP figures. If the media is going to use the stock market (where the richest 10% owned 85% of the shares in 2001), and per capita GDP, as the key gages of “recovery,” the Administration has no choice but to shift massive amounts of money to the very wealthiest.
For the mass media, recovery means accelerating inequality. (Hopelessness among the 99ers also helps, as they drop out of the labor force, “reducing unemployment.”)
As the first Citibank Plutonomy report put it:
“In a plutonomy there is no such animal as “the U.S. consumer” or “the UK
consumer”, or indeed the “Russian consumer”. There are rich consumers, few in
number, but disproportionate in the gigantic slice of income and consumption they take.
There are the rest, the “non-rich”, the multitudinous many, but only accounting for
surprisingly small bites of the national pie. Consensus analyses that do not tease out the
profound impact of the plutonomy on spending power, debt loads, savings rates (and
hence current account deficits), oil price impacts etc, i.e., focus on the “average”
consumer are flawed from the start. It is easy to drown in a lake with an average depth
of 4 feet, if one steps into its deeper extremes.”
“Feeling wealthier, the rich decide to consume a part of their capital gains right away. In other words, they save less from their income, the wellknown wealth effect. The key point though is that this new lower savings rate is applied to their newer massive income. . . . The consequent decline in absolute savings for them (and the country) is huge when this happens. They just account for too large a part of the national economy; even a small fall in their savings rate overwhelms the decisions of all the rest. Figure 15 provides a simple example of how this happens.”
“The very rich, the top 20%, had a savings rate of 8%, much higher than other less affluent groups in 1992. By 2000 this savings rate had
gone from 8%- to -2%! . . ..The Plutonomy Stock Basket outperformed MSCI AC World by 6.8% per year since 1985.”
This isn0t on topic, but, in the quoted passage, Baker propogated an urban myth when he claimed that Obama said that neither he nor the American people begrudge bankers’s bonuses.
His full answer to the question and the follow up question made it perfectly clear that he did begrudge those bonuses and supported legal reforms which would limit them, and, in particular, the requirement that shareholders approve bonuses in the annual meeting. Not an effective solution, but the claim that Obama said that there was no problem in that interview is absolutely totally false.
It has become an accepted truthy that two words accurately summarize Obama’s answer in that interview. I think this is as extreme as claiming that Gore said he invented the internet.
I don’t think anyone needs to look at what Obama says about the banksters and their infinite crimes (or corporate crimes in general) to know whether or not he supports those crimes.
His 100% pro-corporate, pro-criminal actions come through loud and clear.
And he obviously supports control fraud and Akerloff looting in the form of “bonuses”. Otherwise he wouldn’t have allowed them. We’d have seen many, many perp walks by now if we actually had a president who doesn’t despise the people.
You sound like a candidate for my challenge which not a single Obama hack has yet accepted – name a single, solitary, significant non-corporatist, directly pro-citizen (that is, not Reaganite trickle-down) policy he’s supported. Or for that matter name one he hasn’t opposed.
Obama’s nothing but a radical corporatist ideologue and status quo elitist. He’s made it clear that he hates the people.
name a single, solitary, significant non-corporatist, directly pro-citizen (that is, not Reaganite trickle-down) policy he’s supported. Or for that matter name one he hasn’t opposed.
He’s come out in favor of card-check legislation time and again:
I’ve accepted your challenge and answered it. Will you please shut up now?
No, you haven’t, and no I won’t. The Democrats could have passed card check at will, any time they wanted, for the last two years. The fact that they didn’t do so proves they never wanted to do it. Obama could have made that a centerpiece demand for Democratic policy, and it would’ve been passed. The fact that he didn’t do so proves he never wanted it to pass.
A few meaningless, empty words – that’s what you call an accomplishment? It’s pathetic what the hacks have been reduced to. Obama’s also “come out in favor” of net neutrality, many times. All legalities of the rule-making process were wrapped up last spring. Ever since then, and to this day, and for as long as he’s president, Obama can at will order Genachowski to hold a vote to enshrine net neutrality according to the principles proposed in 9/09. Two votes on the five-vote panel have sat waiting all this time. The only thing missing is for Genachowski to call a vote and then be that third vote. Obama can tell him to go ahead and do that, any time, at will.
So we see the real fact – Obama opposes net neutrality, in spite of his lies about supporting it. But I suppose to you the lies are the “accomplishment”.
So that’s a close parallel to Obama’s fraudulent “support” for card check. Even if he could order it at will by executive fiat, he wouldn’t do so. Because he really opposes it.
It sure is telling the way Democratic partisans and liberals in general, whenever they want to cite someone of whom they approve, are prone to cite what someone said rather than anything anyone did.
For two years Obama and the Democrats had total power to enact a policy agenda. Therefore, by definition whatever they did is exactly what they wanted to do, and whatever they didn’t do, they didn’t want to do.
If foot-stomping and breath holding was left wing activism, people like you would have overthrown capitalism and set up the socialist utopia already. Sadly, it’s just juvenile venting.
And if tepid passivity in the face of crimes and lies were “progressive” activism, people like you wouldn’t have let a handful of thugs completely destroy the New Deal state you once built. (You also wouldn’t have let them steal two elections from you.) And you wouldn’t still sit there in contemptible lassitude.
I think I’ll stick to a different path than your proven failed one.
But I do agree it’s pointless arguing with Democratic Party hacks, and I seldom do it anymore. But it was too funny here – two examples in a row of this business of citing an empty verbalization as a prime Obama “accomplishment”. So I pointed out that absurdity. And you side with the lies, and implicitly with the crimes. History will judge which is more sad. And culpable.
I really can’t imagine what people think they’re doing today.
consider “I don’t think anyone needs to look at what Obama says about the banksters and their infinite crimes (or corporate crimes in general) to know whether or not he supports those crimes.”
In other words, don’t bother me with evidence.
@ Mike Shupp
Walker was a lecturer at Harvard for years, including 1889, the year he wrote the book cited here.
Hmm… are you quite sure of your sources? I note the book cited here — partially available at least at Google — was published in 1879, to begin with. The title page describes Walker as a professor at Yale’s Sheffeld School. The introduction refers to the text as based on lectures presented at Boston’s Lowell Institute in the previous year; he seems to have given lectures on three or four occasions in the 1880’s. An on-line biography of Walker at the National Academy of Science (http://books.nap.edu/html/biomems/fwalker.pdf) at the time of his death fails to mention a Harvard connection.
This is not the most pressing issue in the world, and I can quite believe that Walker was welcome as a visiting lecturer at Harvard, but I’m not seeing evidence that he had a formal academic position there. Possibly I should expand my search beyond the internet!
Excellent post, Mike. Thank you.
Speaking of Francis Walker, in _Liberalism_, L. T. Hobhouse refers to “Walker’s dictum.” According to a footnote in the Cambridge text , under the conditions of “impaired competition,” where two parties do not trade as equals, which prevails in the real world, “the tendency of purely economic forces . . . is continually to aggravate the disadvantages from which any person or class may suffer in the beginning.”
This statement was made by Thucydides in the Melian dialogs.
“you know as well as we do that right, as the world goes, is only in question between equals in power, while the strong do what they canand the weak suffer what they must.”
The McKinley model is very influential these day. Teddy Roosevalt was a virtual Communist.
As far as I can tell, during that era the gold bugs and the bimetalists were both fetishists, with the Greenbackers among the Populists, many of whom also supported a national bank, were the only ones who proposed a rational system. (Free Silver was a Democratic idea which kidnapped the Populist Party). But generations of students have been told that it was the Populists who were crazy. In his history of American monetary history, Milton Friedman non-committal about the Greenbackers and Populists, but it seems to me that he could have supported them, except that they were also inflationists. It’s very odd indeed to see today’s goldbugs described as populists.
I read the Michale O’Malley piece and would certainly not call it “excellent stuff.” It’s an entire article about the gold standard that never once mentions the interests involved. Instead of noting that Francis A Walker and his ilk (wealthy northeasterners) supported gold because they were generally creditors who feared inflation, O’Malley wants us to believe that abstract ideas about nature dictated the gold bug position. Of course there is no clear evidence for this argument other than a casual linkage in the metaphors used by certain people to talk about gold and immigrants. Even this falls apart, however, when he gets to Gompers. Sure, Gompers, as a leader of skilled labor (mostly Anglo-Saxon), deprecated immigrants. But did he support the gold standard? Actually, no, which is what you would expect of him as a labor leader (workers being debtors rather than creditors).
Without looking at the interests, you have no basis for analyzing the political rhetoric which is, after all, rhetoric. What bothers me about this kind of scholarship is that its authors think they are just so damn clever for noticing similarities in language across different discourses. But language is notoriously slippery and, in fact, the whole point of language is that it can be used to describe and discuss many different things, even with the same words, without those words having the same meaning. Nothing illustrates the absurdities of the linguistic approach better than this sentence in O’Malley’s conclusion: “We symbolize the difference between skilled and unskilled workers by paying skilled workers more.” Really? “Symbolize”? Is that what wage differences are, nothing more than symbols? The problem with historians of the linguistic turn is that they don’t seem to believe in substance at all.
Love your blogging. Wonder if this book would be relevant to the subject at hand: http://www.amazon.com/Gold-Standard-Logic-Naturalism-Historicism/dp/0520059824
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You’ve accepted a framing in which government actions to expand employment is intervention in the economy, yet government actions to finance securitization of mortages, to guarantee bank accounts via the FDIC, to overrule contract law for the benefit of corporations, to finance exports, and to spend trillions on war and “defense” are kind of natural side effects of the free market.
A big problem with “progressive” economics is that it starts by accepting the framing of the far right and then quibbles about minor issues.
“The needs of the many outweigh the basis of the currency.” Economic systems that follow this rule prosper and grow. All others, fail. This is premise of economic humanism.
Economic humanism is a new paradigm on money and currency management. Money and currency exists, solely, to serve the “needs of the many.” All economic theories of value, supply, demand, inflation, deflation, debt, surplus, investment, and return fall subordinate to this rule. Economic theory is not thrown out the window. Economic theory, associated with a currency, is subordinate to a supreme priority, “the needs of the many.”
The certainty of this theory is supported by the simple fact that a people’s currency naturally reflects, is derivative and icon to, the social, political, economic, and moral value of its people. This reflection is unavoidable and basic to any people’s currency. “The many” are the basis and final backstop of the people’s currency.
”The many”, being basis and backstop for the people’s currency, naturally require the money serve “the needs of the many”. That is “the needs of the many outweigh the basis of the currency”.
Economic humanism recognizes, respects, and factors for the human element of all monetary systems. Economic humanism provides monetary transparency. Mysticism is removed from money and currency. Federal reserve actions, the wizards behind the curtain, are transparently revealed for public and political scrutiny.
A dollar not serving the needs of the many is a dollar in need of revision and repair. Dollars, hoarded by the wealthy or banks, used to leverage, exploit, and manage “the many”, are dollars in need of revision and repair.
When service in a restaurant suffers, more waiters are needed. When fire breaks out everywhere, more fire fighters are needed. When crime becomes rampant, more police are needed. When democracy morphs to elected oligarchy and America lacks governance, send help to the few surviving democratic representatives. More representatives are needed. More presidents are needed. The antidote to corruption of power is disbursement of power. Step it up, America. Be proactive. Check out plan-b.
Citizen is coach to team democracy. Coach is responsible for success. It’s your call, coach.
Near the end of the post, “execellent” should be spelled “excellent”.
Forget the Walter Benn Michaels book, its outdated. Try Women, Compulsion, Modernity: The Moment of American Naturalism (Chicago: University of Chicago Press, 2004) to understand the link between gold bugging and patriarchy.
“But I do agree it’s pointless arguing with Democratic Party hacks, and I seldom do it anymore. But it was too funny here – two examples in a row of this business of citing an empty verbalization as a prime Obama “accomplishment””
Listen, you Stalinist doofus. Your challenge was this: “name a single, solitary, significant non-corporatist, directly pro-citizen (that is, not Reaganite trickle-down) policy he’s supported. Or for that matter name one he hasn’t opposed.”
There’s no mention of “accomplishment” (which you, for some reason, put in quotes as if I, or Robert, had used it). You wanted a policy that he supported, or didn’t oppose. He supported card check. He didn’t get it not because he didn’t push for it, but because there was never enough support for it among Democrats in the Senate. Your ill-informed, whiny insistence that “the Dems could have passed it at any time” is false. Obama isn’t the dictator you wish were running the country, enforcing the imagined wishes of the proletariat. If the Senate doesn’t want a bill passed, it’s not going to pass.
It’s all right, though — keep moving the goalposts. Ask for a policy that Obama “didn’t oppose.” Then, when you get answers that you don’t like, say that what you really meant were policies that Obama “accomplished.” And when people give you good answers to that — dramatic improvement in the NLRB, massive expansion of EPA regulations, an end to insurance-company discrimination against people with pre-existing conditions and a massive expansion of subsidies for health care — say that what you really meant were “what left-wing policies that had no hope of getting through Congress did Obama get through Congress.”
I didn’t see this response yesterday hidden at the bottom of the thread.
Nobody moved any goalposts. Among rational people empty words which are demonstrably contradicted by actions or inactions don’t count as “accomplishments”.
I will grant I wasn’t clear on “Obama” as opposed to the Democratic establishment. So you’re saying Obama wanted to act for the people but Reid, Pelosi and company obstructed him? I see zero evidence of that. To take just one example, Obama intentionally put his health racket bailout in the hands of Senate Democratic corporatists precsiely because he knew they’d deliver the pro-racket legislation he wanted.
And according to you Obama used the bully pulpit to demand Single Payer, but Baucus and crew obstructed him? I must’ve missed that.
And how do you explain how, after even the Congress rejected his plan to gut Social Security, he unilaterally convened his Bowles-Simpson Star Chamber to try to impose it autocratically? Indeed in a Stalinist way, to use your favorite term in a far more accurate way than you could ever achieve.
And tonight he’s going to continue with his criminal lies about the debt and deficit, which are not problems and constitute pure misdirection away from the only issue that matters, which is jobs.
And why is he doing this? Because like all other neoliberals, Obama is committed to destroying all real jobs. He wants permanent mass unemployment and impoverishment. Everything he’s done and failed to do proves this. The record is 100%.
You’ll never be able to explain how it’s possible to have wanted anything else and not have embarked upon a New Deal style jobs program. That’s because you know that’s the only policy anyone who actually wanted to serve the people would have embarked upon. It’s a no brainer, and there are no arguments against it.
But the Democrats are a criminal enterprise who did not want to serve the people, only further destroy them. And therefore they have acted as they have.
As for your name-calling, when the people overwhelmingly rejected the Republicans and voted for radical “Change”, it would hardly be “Stalinist” for those who were given the mandate* for change to override purely obstructionist pseudo-filibusters.
Just as it wouldn’t have been Stalinist for leaders who were actually accountable to the people to arrest and prosecute history’s worst financial criminals instead of continuing to bail them out and allowing them to continue their crimes. But then, this is a kleptocracy, and the politicians themselves, along with all their hacks, are simply criminal cadres.
But you know that already, and you’ve made your despicable choice in favor of the criminal elite and against the people. You must believe there’s no just God.
*If you look up the word “mandate”, I think you’ll find that it includes not being optional. Obama had an affirmative obligation to impose justice on Wall Street. He chose to further empower them. He’s a criminal.
if business enterprise is permitted to function with a minimum of interference, it will invest and innovate, so as to create the requisite demand for the goods it produces.
ISTM that the major logical problem with this rehash of trickle-down is that it’s a classic collective action problem. Every businessman profits from *other* businessmen paying their workers better (or hiring more of them), so that those workers can buy the first businessman’s goods; but nobody wants to pay his *own* workers better because their paychecks come right out of his own bonuses (or profits, for an owner-proprietor).
Say’s Law only works until capital figures out a way to divert a larger share of the value of labor away from the laborer (and isn’t thwarted in this effort by political institutions).
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On the Brad DeLong post (I know it’s not yours, but it’s relevant), I think he’s confusing Marx with Kalecki. He writes this:
“Back in the 1930s there was a Polish Marxist economist, Michel Kalecki, who argued that recessions were functional for the ruling class and for capitalism because they created excess supply of labor, forced workers to work harder to keep their jobs, and so produced a rise in the rate of relative surplus-value.”
Problem is that Kalecki dismissed the Marxist notion of surplus-value. It was Marx who made the ‘excess-labour = increased surplus-value’ recession argument. He to this phenomenon, rather famously, as the ‘reserve army of labour’.
Kalecki is far more relevant today than many people imagine. His profit model — which I did a piece over at Naked Capitalism today on (gratuitous plug: http://bit.ly/o9bGd8) — is central to Hyman Minsky’s work on the Financial Instability Hypothesis, as well as just generally being brilliant.
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On the Pilkington comment (I know, his comment is vaguely related in a dubious, roundabout way), I think he’s confusing Marx with… Pilkington.
“It was Marx who made the ‘excess-labour = increased surplus-value’ recession argument. He to this phenomenon, rather famously, as the ‘reserve army of labour”.
No, he did not. Pilkington did.
And here’s from Marxian economist, Prof. Anwar Shaikh’s 1978 “An Introduction to the History of Crisis Theories”:
“Notice that the effective demand originates entirely with the capitalist class: workers’ wages are part of the year’s gross investment expenditures by capitalists. It is quite illegitimate to treat consumption and investment as being functionally independent, since the bulk of consumption comes from wages, which are themselves a necessary aspect of investment expenditures.”
That’s the Kalecki remark about which DeLong wrote (comments sections): “I think you are talking about something irrelevant: ‘while workers spend what they get, capitalists get what they spend’ is (a) wrong, and (b) unhelpful. Kalecki’s argument about the political aspects of full employment, by contrast, is useful and insightful.”
Click to access shaikh78.pdf
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