An interesting interview with Robert Pollin on the Real News Network, in which he discusses the possibility of achieving full employment under capitalism. He considers the ideas on this subject of Marx, Keynes, Kalecki and Friedman.
For me, the historical record seems to support the ideas of Kalecki and Marx, in that achieving full employment may be possible, but sustaining it is much more difficult. This is because it tends to change the balance of power in society in favour of the workers, which the employers don’t like. If high inflation or a squeeze on profits is to be avoided, a new bargain between employers and workers is necessary.
The solution is thus a political one, and leads to a different kind of capitalism. It may be possible for a while but, once again, history suggests that this is hard to sustain, and that a squeeze on profits will result, leading to a slowdown in investment and growth and subsequently to a rise in unemployment once again. This also lends support to the ‘classical’ ideas of Anwar Shaikh on wages and unemployment, which I discuss here.
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.
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 →
A series of interesting short videos featuring Anwar Shaikh of the New School, an economist I greatly admire, where he discusses his influences and aspects of his life’s work.
His magnum opus, Capitalism, was published last year, and I have written on parts of it several times on this blog.
For those who don’t want to go through them all, I can recommend as a taster video number nine (of eleven), ‘Keynes and Classical Economics’, where he discusses the links he makes between the ideas of Keynes on aggregate demand, and competition and profitability in the work of Marx and the Classical economists. To reach this, press play, then skip forward between videos using the player controls.
The passage below is taken from the concluding pages of John Maynard Keynes’ famous General Theory, where he speculates on the benefits to international relations from avoiding conflict over international trade. If full employment can be achieved domestically through judicious government policies this would, he hoped, lessen the need for countries to come into conflict with each other over the balance of payments of trade, investment and capital flows.
Given the historical record, I am actually skeptical about the possibilities for achieving and sustaining full employment, however that might be defined. I am therefore not a perennially optimistic Keynesian. Sooner or later, growing economic imbalances will give rise to crisis and recession, and rising unemployment. However, I do think the world economy could be more wisely managed than it is now, with the US the (still?) reluctant hegemon and a rising China among other potentially destabilising trends. Continue reading →
“The outstanding fact is the extreme precariousness of the basis of knowledge on which our estimates of prospective yield have to be made. Our knowledge of the factors which will govern the yield of an investment some years hence is usually very slight and often negligible. If we speak frankly, we have to admit that our basis of knowledge for estimating the yield ten years hence of a railway, a copper mine, a textile factory, the goodwill of a patent medicine, an Atlantic liner, a building in the City of London amounts to little and sometimes to nothing; or even five years hence. In fact, those who seriously attempt to make any such estimate are often so much in the minority that their behaviour does not govern the market.”
John Maynard Keynes (1936), The General Theory of Employment, Interest and Money, Ch.12, p.149
“A ‘sound’ banker, alas! is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional and orthodox way along with his fellows, so that no one can really blame him.”
John Maynard Keynes (1932), Vanity Fair, January (taken from The Essential Keynes, edited by Robert Skidelsky, p. 516)