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)
The great man wrote a short essay, published in 1930, entitled Economic Possibilities for our Grandchildren, which can be found in the book Essays in Persuasion. In it he speculated on a time 100 years in the future (not so far from today) when the ‘economic problem’ had been solved, and the changes that this might bring about in human behaviour and society. Here is a short extract:
“When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money motive at its true value. The love of money as a possession – as distinguished from the love of money as a means to the enjoyments and realities of life – will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard.”
Predicting the future is a difficult business, the moreso the further ahead we try and look. It seems that Keynes would have been disappointed with the world as it is today, in terms of the solving and transcending of the material or economic problem. In many already rich countries, overwork exists alongside unemployment and inequality. Some countries, few in number, have in recent decades made great strides in development and have joined the elite club of the richest. But poverty is still a major problem globally. It is not clear that the current orthodoxy and its influence on economic policy-making is sufficient to solve this in a sustainable fashion, in which the environment is protected even as humanity advances.