James Crotty discusses some of Keynes’ key ideas on the uncertain nature of the future and how this affects investment and finance in a capitalist economy. He points out that many of Keynes’ important insights can be found in Marx, but that Keynes put financial instability centre stage.
Last week I posted several times on Modern Monetary Theory (MMT), a set of ideas which seems to have plenty of support, or at least generates plenty of debate, judging by its presence on the internet.
MMT is an offshoot of post-Keynesianism. The policies which flow from its main theses suggest that a wise and benevolent state can ‘print’ money, within certain limits, to achieve full employment and moderate inflation.
Some MMTers also support an Employer of Last Resort (ELR) function for the state too. In other words, the state should provide a job at a set wage for all those who want one, so that full employment can be sustained even when economic growth slows or the economy goes into recession. The ELR policy was supported by Hyman Minsky whose ideas have also influenced MMT. He saw it as a more productive alternative to forms of welfare which pay people while they are inactive in terms of formal employment. Continue reading →
Continuing this week’s slightly eclectic series of posts on Modern Monetary Theory, here is a repost of a repost(!) of some thoughts on MMT and Marxism by blogger Scott Ferguson, via the Union for Radical Political Economy blog. The link is below.
David M. Fields has kindly asked me to expand my critique of David Harvey’s latest project for the Union for Radical Political Economics blog. The result is a brief essay titled, “Some Remarks on MMT & Marxism in Light of David Harvey’s “Marx, Capital and the Madness of Economic Reason”.
A short video featuring L. Randall Wray, one of the leading proponents of Modern Monetary Theory. He discusses the reasons why economists and politicians struggle to understand it, and why non-economists, particularly those working in financial markets, apparently do not have this problem.
Towards the end, he mentions policymakers’ fears regarding the potential for inflation, which I shall return to in the context of MMT in a future post.
There is an enormous amount of information across the internet on Modern Monetary Theory (MMT). A search in google gives around 2.6 million results, while that for post-Keynesian produces a mere 974 thousand! Marxist economics gives even fewer, at 913 thousand.
Having said that, a search for Marxism produces 13.3 million results. Of course, Marxist thought has had an influence far beyond economics, and even philosophy, politics and sociology, into such fields as anthropology and psychology.
Here is maverick economics Professor Michael Hudson on MMT, taken from his book J is for Junk Economics (p.155-7). Hudson is supportive of the theory and the economic policies which it implies.
Later in the week I will outline some ideas on money and inflation drawn from Anwar Shaikh‘s 2016 work Capitalism. Shaikh is critical of some aspects of MMT and provides extensive theoretical discussion and empirical evidence to make his case for a ‘Classical’ theory of modern money and inflation. Continue reading →
A short video featuring the ever-engaging Yanis Varoufakis, self-styled ‘erratic Marxist’ and former finance minister of Greece. Here he explains the process of debt deflation which, during the eurozone crisis, has hit Greece hard. In particular he outlines the difference between devaluing the national currency and reducing wages, and the effect these have on the debt burden and the prospects for economic recovery.
This quote is taken from a footnote to Marx’s Capital Volume II (p. 391 in the Penguin edition). The volume was put together after Marx’s death by his friend and collaborator Engels, drawing on extensive notes. The quote provides inspiration for the analysis of one particular contradiction in the dynamics of capitalism :
“Contradiction in the capitalist mode of production. The workers are important for the market as buyers of commodities. But as sellers of their commodity – labour-power – capitalist society has the tendency to restrict them to their minimum price. Further contradiction: the periods in which capitalist production exerts all its forces regularly show themselves to be periods of over-production; because the limit to the application of the productive powers is not simply the production of value, but also its realization. However, the sale of commodities, the realization of commodity capital, and thus of surplus-value as well, is restricted not by the consumer needs of society in general, but by the consumer needs of a society in which the great majority are always poor and must always remain poor.” (my emphasis)
It is important not to take this quote out of context. In addition, despite significant inequality and poverty, Marx was clearly wrong about the majority always remaining poor under capitalism. However, the contradiction described here between the production of surplus value and its realization upon sale, has given rise to plenty of debate among left economists. Continue reading →