Thursday, January 10, 2019

The coming recession evokes only Marxist hand-wringing

From Michael Roberts: ASSA 2019 part 2 – the radical: profitability, growth and crises.
"... Those who read my blog regularly know that I would go further or indeed put it differently.   Capitalist economies go into slumps because of a collapse in profits and investment and this leads to a collapse in “effective demand”, not vice versa as the Keynesians (in whatever species) would have it.  So a restoration of profitability is necessary to restore growth under capitalism- this is what I (and G Carchedi) have called the Marxist multiplier compared to the Keynesian multiplier.

What is wrong with Keynesian theory and thus policy is that it denies this determinant role of profitability.  Indeed, in a way, the neoclassical mainstream has a point – that it is necessary (rational?) to drive down wages, weaken labour through unemployment and reduce the burden of the state on capital to revive profits and the economy. Of course, the mainstream cannot explain crises; often deny they can happen; and have no policy for recovery except to make labour pay."
It's another area orthodox Marxists tip-toe around. The focus on changes in profitability as the driver of the economic cycle together with a superior theory of crises makes Marxist economics far more insightful than the neoclassical tradition which Steve Keen so gleefully debunks, or the left-Keynesianism which he so enthusiastically supports.

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But if - absent the socialist revolution - the answer to a capitalist recession is always to restore profitability, what would Michael Roberts advise?

That's the difficulty: the point where the theory transitions from positive to normative.

It gets worse: by pursuing Keynesian policies which tend to further wreck the economy and which confuse and demoralise the working class, the eventual reaction can be catastrophic: (Chile, the NSDAP).

I sense a paralysed coyness here from the Marxist left, impotence due to the very lack of illusions. I guess 'fight in the absolute certainty of defeat' doesn't have much of a ring to it.

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