Archive for the ‘Economic theory’ Category

Iran gets it: class

March 9, 2010

“[President of Iran] Ahmadinejad said, ‘the fact that the US has 14,000 billion dollars budget deficit and has issued over 29,000 billion counterfeit dollars during the past 30 years, buying goods with it, is the biggest theft in the history of human kind,’ as reported by IRNA. He said D8 countries have the potential to become a major economic block in the future.”

It has to be said I have more in agreement with Iran than with any organization in the left-wing of parasitism in my own country. I agree with the President of Iran on the question of international exploitation, as a matter of line. He concluded that he should organize religiously.

Meanwhile, the Obakianites organized back-asswards from tactics and strategy up to line without ever doing the overall analysis. Consequently there is vastly more scientific content in Iran’s religion than in Obakianite secular politics. Every racist Pilgrim in the West is worth 10,000 converts to religion.

It is the dogshit pragmatists of the West making religion most attractive. Meanwhile the real Islamists are attacking icons as Avakian organizes persynality cults.

Note:
http://www.hamsayeh.net/hamsayehnet_iran-international%20news977.htm

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The triumph of Dengism

January 1, 2010

The real hard-line supporters of Deng Xiaoping Theory are economics professionals in the United $tates, not in the sense of “seek truth from facts” but the “theory of productive forces” Mao derided in his last years. According to the theory of productive forces, wealth springs forward magically from capital goods that are dead with the exception of animals like donkeys, which also count as “productive forces.”

So in the late 1990s, we had the tech bubble and Alan Greenspan attributed lower long-term interest rates to the productive forces — in a way that Deng Xiaoping probably would not have. We heard that lower interest rates, higher growth rates and budget surpluses were possible because of technological revolution. Meanwhile, MIM explained the same phenomenon as a ramped up injection of surplus-value from China and the rest of East Asia to the United $tates. The spread into white collar work was the effect, not the cause of economic adjustments seen at that time.

Now on January 1, 2010, Keynesian Krugman publishes another variant of the theory of the productive forces to attack China. With Krugman we hear paeans to the Amerikan “working-class”‘s ingenuity, that it can increase living standards through autarkic development. Krugman’s January 1 2010 column is a nice encapsulation of where he was going to end up all along.

The difference between Krugman and earlier Greenspan (because Greenspan’s views have developed) is that Krugman acknowledges the Ponzi scheme that produced a destructive bubble. Krugman blames it on the exploited countries, especially China. Krugman maintains nationalist illusions about “productivity” as the underlying core view of the “fundamentals” of the Amerikan economy known as the “hard-working American people” so often referred to in presidential campaigns.

It turns out that economists and finance ministers were reading those polemics of MIM against Avakianites on the theory of productive forces and productive labor. The most oblivious Dengists were the Avakianites. They consciously opposed the MIM line but without anything to say. To see a real struggle of lines for our times, one would be better off reading Greenspan as a counterpoint to MIM.

Greenspan for his part would not countenance Krugman’s willingness to bash trade. However, both earlier Greenspan and current Krugman rest their lines on delusions about the Amerikan economy. Krugman will destroy it via trade protectionism while Greenspan gets the blame for the housing bubble. It’s only natural that the Greenspans had their chance and now the Krugmans of the world want a chance at the helm.

Ironically, China itself has a greater interest in rejecting Deng Xiaoping on the theory of productive forces than Amerikans trying to throw sand in the eyes of the Third World. Like it or not, the leaders hand-picked by Deng represent exploited laborers in China. Meanwhile, in the United $tates, books and magazines say that all good things in China started in 1978 or 1979, because our bourgeois academics can relate to departing from Mao on the theory of productive forces.

Deng quoted Mao on “seek truth from facts.” In this way, the followers of Deng in China and the Third World are more likely to depart from anti-labor views than our Dengists in the United $tates.

GDP misleads the mind

September 23, 2009

MIM is encouraged to see Sarkozy, Joseph Stiglitz and Amartya Sen dump on the overuse of GDP figures. It’s a kind of fetishism MIM has attacked for 25 years.

The dirty secret is that GDP is just whatever people spend money on and as such it has appealing philosophical properties for some, but not us. For us it really does matter if money ends up just spent on anti-migrant fences, tanks, employing people to manufacture banking fees and other forms of paper-shuffling.

Because of the economic crisis, GDP fetishism twists the healthcare discussion at this particular moment much more than usual.

Note:
http://www.nytimes.com/2009/09/23/business/economy/23gdp.html

Class struggle in Pakistan

August 3, 2009

The New York Times has made a backhanded admission that the Taliban is in position to carry out successful class struggle in Pakistan. However, the New York Times then blunders into mandatory-pc-Liberal-graduate seminar language:


“But Pakistan is more complicated than that. Its politics and economics are far more local than national; regional, ethnic and cultural differences are very deep. The mullahs of Swat may be calling for the downtrodden masses to unite, but here in Punjab, religious leaders are still firmly tied to the upper crust.”(1)

The clear message is to give up on uniting class and overcoming U.$.-backed feudal oppression. The clear effect is to point out that which divides the exploited. Such is the goal of all Liberalism, to get lost in all details, promote individualism and hence the upper classes facing off against lower classes divided by individualism. The follow-through will be post-modernism and amorality.

And this graduate seminar talk has polluted Western Marxism to such an extent that Imam Khomeini’s writings show more influence from Lenin and Mao than “Kasama,” Bob Avakian or others of a thin-crust of labor bureaucrats and counterinsurgency experts educated by tuition-ticket-sellers and Fort Bragg. Naturally, the New York Times does some inclusive research to find some leftist tokens in Pakistan to say the religious leaders are tied into the state and landlords in Punjab province.(1)

The New York Times did the right thing by looking at Pakistan, the world’s sixth most populous country.(2) We will now use the New York Times as a whipping boy to demonstrate the linkage between the U.$. labor aristocracy and Liberalism.

If the mullahs in Punjab province were not just a local complication but a far more powerful actor and in fact commanded the entirety of the Pakistan economy and gave the exploited zero — all this for simplification’s sake and to humor our philistine critics — the mullahs would be in charge of at most a GDP of $ 167 billion a year.(3)

By contrast, MIM has already shown, that by just one avenue of exploitation, the dollar bubble –the United $tates gained $758.5 billion in goods and services for nothing in 2006.(4) That’s before addressing Marx’s theory of surplus-value — just straight-up “cashier’s privilege.”

It is in the interests of the imperialists and their various petty-bourgeois partners to turn Pakistan’s attention inward toward its own exploiters. Yet if we have to choose between these Western Liberal exploiters and the Third World, we should choose the Third World every time. The Western Liberals mask the far larger exploitation and sources of economic surplus.

The ideal revolutionary would figure out how to take down both feudalism and imperialism and successful social revolutions do not get led by the stupid. Yet Lenin’s Comintern said in the case of Turkey that attacks on imperialism have to come first, hence alliance with feudal lords. Today, Lenin is more than vindicated, because feudalism stays feudalism, because the imperialist countries suck out the economic surplus that could have destroyed feudalism. The surplus that could be schools and books in the Islamic world instead serves as new digital televisions for the American-Idol-watching beer-bellied Amerikkkan so-called worker. The money arrives borrowed from the Third World and distributed via federal government and trade deficits.

The correct response to complexity is often, “and it cancels out.” To grasp hold of that which can be grasped and advance a situation requires a knowledge of strong causes of social behavior, not knowledge of every last weak force; although, local leaders will not succeed without knowing more of the details than outsiders.

The least false consciousness in the world class-wise is among the Islamic-led forces at the moment. Even as the Islamists fail in uprooting their own feudalism, they make indirect contributions to uprooting that feudalism through correct geopolitics — diplomacy and warfare. It is Iran doing the most to preserve Iraq’s oil rights and attendant oil prices by aiding insurgents in Iraq, not any Western communist global party — sad but true. The most “extremist” Islamists are also the most internationalist and thereby creating the political conditions for successful struggle against the largest sources of exploitation.

Notes:
1. “Where the Mullahs Are the Upper Crust,” http://www.nytimes.com/2009/08/02/weekinreview/02tavernise.html
2. http://en.wikipedia.org/wiki/List_of_countries_by_population
3. http://en.wikipedia.org/wiki/Pakistan#Economy
It was listed as $143.7 billion in another Wiki source pointing to 2007 IMF data.
http://wiki.answers.com/Q/What_is_the_GDP_of_Pakistan
4. https://mimdown.wordpress.com/2009/03/08/the-trade-deficit-and-class-struggle/

Wall Street Journal projects economic development problems on others

April 14, 2009

An editorial at the Wall Street Journal has the title “Aid Keeps Latin America poor: For real progress, they need the means to accumulate wealth.”(1)

While MIM has many criticisms of foreign aid, it is important not to elevate foreign aid to the most important factor in development, either positive or negative. If foreign aid were so detrimental, the united $tates would be the poorest country in the world, because it received the most foreign aid — in excess of all dividends handed out in 2005 and 2006. The aid comes in the form of imports paid for with a piece of paper called the dollar.

We never hear about it, because the left-wing of parasitism is deeply racist and nationalist. It always harps on progress in super-profit redistribution among minorities inside U.$. borders. So neither the Republicans nor Democrats are talking about the fact that it is not just the government in deficit, but also the private sector. One can separate from the fake Marxists working for the Democratic Party with this question all by itself. They need to go into denial because they are recruiting nationalist voters, while the real Marxists talk about exploitation, accurately.

When Joseph Stiglitz is to one’s left, and he is the more internationalist, one is in deep right-wing nationalist territory — and here I do not exclude 99.9% of the sociology profession. That’s why we cannot say the Democrats really oppose the Republican Party. The Democrats are liable to leave unexplained that Latin America’s development has suffered because of its aid to the united $tates, also known as exploitation. The Democrats including those facing off against MIM in various Maoist disguises are allowing false theories of economic development to flourish, because of their Amerikan nationalism and racist blindness.

About the only author on economic development that conservatives have read and understand is Alvaro Vargas Llosa. There is a simplistic argument bought by the likes of Margaret Thatcher that says Latin Americans are too dumb to want to protect their property rights, thus they willingly give up their shanties and other potential avenues to wealth.

The real question is why the laws appear to oppose U.$. settler style wealth. The answer is in the class in control, bureaucratic capital — usually with the help of U.$. military aid. The observation that bureaucratic capital squelches the ownership rights of common people is not an argument for capitalism. We in the united $tates have “too-big-to-fail” banks and insurance companies and in other countries residential land rights are monopolized in the same manner. That’s what happens under capitalist competition: the winner usually has control of the state.

Note:
Mary O’Grady, http://online.wsj.com/article/SB123897316163590919.html

Why lenders don’t lend and do exchange rates matter?

April 3, 2009

In engineering, a parameter refers to a physical property in an object. In the stock market, prices can fall by half quickly, but shares supposedly refer to tangible wealth. The question becomes how to attach numbers or formulas to the stock market. Economists in this situation end up saying it’s psychological, while we at MIM chastise theorists who can’t see that the actors in certain plays just lack chemistry. The difference it makes is how one prepares for the next crisis.

Although we oppose mercantilism and protectionism, and we hope to speed up the bourgeois tinkering that is inevitable in crisis, we are not saying there is a way to expand trade right now. The Geithners, Krugmans and G-20s do the tinkering. We seek to show Marxism in such a light that people can be convinced by experience that there is a difference with bourgeois economics and that Marxism is correct.

In a global and simultaneous downturn, some arguments of causation become impossible to sustain. Any exchange that averages out to zero will not explain a global upward or downward trend. Currency speculation gains its power from some other unseen cause.

So on the one hand we have a supposedly global psychology as an explanation for spending and asset valuation changes. On the other hand, we have Marxism saying the crisis is a result of capital accumulation and the one exchange which usually does not “average out,” money for labor-power.

On the surface, a currency war should be one of those things that averages out to mean nothing. Paul Krugman explains in his teaching on the “Friedman-Eichengreen Theory of the Great Depression” that gold (and implicitly the dollar today) holding preferences at banks can change and in turn influence the interest rate and thus cause a contraction. (Sometimes MIM is addressing theories connected to the Great Depression, sometimes the current crisis.)

MIM says that currency wars over the dollar can be significant, except in the trivial case where non-dollar holders and dollar-holders exchange the same goods. For us upholders of the labor theory of value, of course, downturn happens when exchange rates change to result in a reduction of labor input to global output. That happens because of racist stickiness in the international wage structure. Rich white wages can’t go down enough and Third World workers are not allowed to replace the white petty-bourgeoisie enough for exchange rates to be meaningless. U.$. labor inputs will not increase as much as Third World labor inputs decrease with an unfavorable change in the exchange rate for the dollar. A seemingly meaningless currency exchange masks surplus-value dependent on concrete historical circumstances such as we have now in the global class struggle.

Against us, one could say that although the Fed is lending at 0 or 0.25%, there is a two-tier economy, and the other tier has growing interest rates, the real reason for business contraction. MIM has already admitted that some things we are seeing right now are reminiscent of Third World economies, where we have always said access to capital is uneven.

Perhaps the reason bankers do not lend as much as before is collateral or perhaps Amerikans are worse and worse as businesspeople. Perhaps the dollar is the new gold standard and exchange rate worries are causing different reserve-holding practices.

Well, once we start allowing for irrationality, it could be that reserve requirements would be lifted by the government, and lending still would not change or even get worse from seeing such a move. We should watch out for using irrationality arguments post-hoc. MIM entertains all the theories here in this paragraph, but rejects them all. (Well, we believe decadence in the imperialist countries could mean a general decline in business saavy.)

To take an example, how shall we count Argentina, if I understand the Wall Street Journal report on it correctly. There is a run on the peso, not the underlying dollar that is used to cover the peso the way gold used to cover the dollar. However, the run was on the peso, so we cannot say in which direction currency wars will impel the economy. If we could say a run on the peso produces x and a run on the dollar produces y, we would be going somewhere, but instead, we all get dragged into banker think, where the international class of scared bankers does not care which currency gets the run, they’re going to freak out if enough of the economy is involved. If the run on the peso counts as a run on the dollar, then perhaps that is proof of a cause-and-effect that is not the theory of surplus-value. However, maybe a run when the dollar is rising means something else. Bloomberg reports it just as a standard mercantilist thing where Argentinians depreciate their currency and stop importing. Then we have a country-by-country bank runs with a flight to a “safe haven.”

The “safe haven” thing aside from being idolatry has Marxist ring to it. If the dollar falls now, there is a disaster in one direction. If the dollar rises, especially while inflation is going on, then this becomes an increase in exploitation of the Third World, an attempt to save U.$. profitability that becomes evermore difficult to sustain. So far, the steering has been in this direction.

We suspect that racist stickiness is a reason why a currency war can pop the housing bubble — even if interest rates are zero in the united $tates and outside. Moreover, we have already pointed out that without Marx’s theory of surplus-value, dollar fetishism creates U.$. profitability through the trade deficit. Whatever closes that deficit will eliminate profitability, decrease asset values and cause a further contraction of lending. (Have a nice day Mr. Geithner 😉 . )

As we are sure that the Treasury Department is not about to start a new policy centered on the labor theory of value, we would imagine that it would seek to tinker in order to expand the toolbox of monetary policy. We would imagine that an international currency would be one attractive tool, both to eliminate reserve-holding suspicions and to grow the non-bubble portion of the economy, possibly while improving U.$. image.

Already it is not possible to say that this contraction is the same as the Great Depression, because certain tools have already been utilized. We are only imagining that bourgeois authorities would want to invent new tools before abandoning capitalism. We’d have preferred that all tools were invented already so we could sweep away all the bourgeois authorities after they gave it their best shot.

I went to check on Barry Eichengreen and he publishes various papers of interest on these subjects. Krugman did not say openly, but in raising a “Friedman-Eichengreen” thesis, Krugman is conjuring the dollar as some kind of new gold for fetishism.

It was only Germany for which there was a case that a bank run related to exchange rate problems caused the Depression. Since it was only Germany, we don’t care. (Hah hah, just kidding.)

Eichengreen now says that exchange rate stability was a false market signal. This conjures up the various countries that peg their currencies to the dollar and those that use the dollar underneath as backing. It also conjures up dollar-holding requirements imposed as the terms of some loans. In other words, there was not real, true Liberalism, even if many of these things were customary and built into the system.

One may question whether anti-trust law application as suggested today by David Brooks at the New York Times is really politically possible and likewise one may question whether the factors Eichengreen are pointing to can be corrected in a Liberal way. He seems to believe that we are in for a period of increased regulation.

So anyway, there will continue to be stories about perfecting the market through regulation. There will be post-hoc stories of panic that cut both ways theoretically when compared with MIM’s theses that start from historically specific class struggles and point in one direction.

BONUS: A long-time question I have had, “who owns Korea?” is answered by Eichengreen. He says half of the Korean stock market is owned by foreigners. It is for lack of information on this point that I have hesitated to call $outhern Korea imperialist. In many ways it is an extension of U.$. business. At this time, the global wage in $outhern Korea is down considerably because of the depreciation of the won. Though Korean trade is down, in some ways Koreans are contributing more surplus-value to the rich countries at this moment. We do not have an overall measure at hand.

Notes:
1. http://www.princeton.edu/~pkrugman/femodel.pdf
2.
Argentina keeps dollar as exchange for peso, reserves threatened.
http://online.wsj.com/article/SB123845815223971685.html?mod=googlenews_wsj
3. http://www.econ.berkeley.edu/~eichengr/global_credit_crisis_history_12-3-08.pdf

The “wealth effect” and stimulus

March 13, 2009

U.$. net wealth actually declined in 2008, by 17.9%.(1)

 

“Americans’ net worth plunged a record 17.9% in 2008 as the value of their homes, stocks and other assets dropped swiftly, the Federal Reserve said Thursday in a report that did not bode well for consumer spending and the overall economy this year.

“With net worth dropping so much, consumers are likely to focus on saving, not spending, as they realize they can’t rely on their homes and stock portfolios as ever-rising sources of income, says RDQ Economics senior economist Conrad DeQuadros.”

 

This is a concrete demonstration of the “wealth effect” on GNP, a controversial theory if taken in isolation at this time.

If the U.$. economy actually ran a surplus without the dollar bubble, if the government budget were in surplus and if the interest rate were as it is now, there would be little debate about what the united $tates would do.

When the stock market is flattened with cash on the sidelines, “borrow-and-spend” becomes attractive. In this situation, if there is a wealth effect(2) it will offset the stimulus spending to some degree. Some might settle the argument over a number such as the “propensity to consume” of rich and poor. If consumption is down, and wealth is down, nonetheless, government borrowing of the sidelined money to give to consumers may be more stimulating than leaving it in the stock market as savings of the rich. Profits might rise from the stimulus and boost the stock market later.

The Democrats would typically duke that question out with Republicans. At the moment, the Keynesian wing of Democrats has the upper hand. However, MIM is more concerned about international aspects and we suspect but won’t aerate that the wealth effect will be confounded with something else at this time.

It would seem that borrowing money abroad instead of home has more instant bang-for-the-buck when it is for 10 years at about 3%. Borrowing the money from U.$. rich to give to less-rich people is just shuffling it from wealth to consumption, because as MIM has pointed out many times, there is no net surplus from U.$. workers. The borrowing from Amerikans might decrease the spending of rich Amerikans on consumption, but probably just not as much as the increased consumption of the less-rich given government jobs.

What we are really interested in is why the national bourgeoisie wants to loan this money to stimulate the U.$. economy when it can stimulate other economies.

On another question, economists give Obama a 59% positive rating.(3)  I wondered if there is no economist economists would give that high a rating to, but they give a 71% grade to Bernanke.

Notes:

1. http://www.usatoday.com/money/economy/2009-03-12-net-worth_N.htm

2. http://en.wikipedia.org/wiki/Wealth_effect

3. http://www.foxnews.com/politics/first100days/2009/03/11/obama-geithner-receive-failing-grades-latest-survey/

The trade deficit and class struggle

March 8, 2009

The U.$. trade deficit should be an unlikely place to look for class struggle. However, as uncanny as the united $tates is in its racism and national chauvinism, it is even more uncanny in its parasitism. The U.$. trade deficit is larger than dividends paid out of profits — thereby proving Amerikan parasitism all by its lonesome self.

Ordinarily one would expect that if a country traded in deficit a long time with other countries, the problem would eventually even out. Hence, the topic should be boring; notso for Amerikan parasitism.

According to the Economic Report of the President in 2008, net dividends paid out by corporations were $601.4 billion in 2005.(1) Meanwhile, the trade deficit was over $700 billion.

That means that the goods and services provided by foreigners to Amerikans more than created the entire margin of corporate dividends — all in exchange for a piece of paper called the dollar.

Those of more Marxist bent will find it interesting that corporate profits in 2006 in manufacturing were $293.4 billion and that’s counting cash kept on hand in addition to money to be sent out for dividends. In contrast, the trade deficit was $758.5 billion in 2006. So once again the surplus obtained just by the willingness of non-Amerikans to take dollars more than covered all manufacturing profits. So much for a story of exploitation of Amerikan workers.

The United $tates has had a trade deficit every year since 1976. In recent years, those deficits are not small considerations.

One can take one’s pick of how much parasitism is going on. We can also compare the trade deficit with the Pentagon. In 2006, the Pentagon budget was $534.5 billion.(2) So in other words, the 2006 trade deficit provided Amerikans with enough goods and services to fund the entire Pentagon operation and then some.

The trade deficit is not something we can blame on Keynes.(3) Nor does MIM want to come off as favoring a gold standard. When money was gold and not paper, the gold would have flowed out of a place doing consistent importing and then the gold would have run out — end of story. The advent of paper money coincided with the advent of imperialism as the last stage of capitalism, the decadent phase. Paper money was an improvement, but it also allowed the creation of humungous parasitism.

Amerikan blindness to this parasitism is across-the-board. Whether Nobel-prize winning economists, hard-core Trotskyists or social-democrats — the entirety of U.$. academia and politics is wrong. The facts of the trade deficit alone prove that MIM is correct. We know the racist international wage structure and discrimination profits are too difficult for our chauvinists to handle. What accounts for their blindness to trade deficits staring them in the face? Surely economists know that this trade deficit means Amerikans are getting something real for nothing. Yet they keep quiet so as not to rock the patriotic boat. They lack internationalism: their judgment cannot be trusted and they’ve proved that year after year in struggle with MIM.

Some MIM critics are in the category of “hard-as-rock-only-dumber.” The rest are too chauvinist or racist to start their academic or political work on the fact that Amerikans are exploiters. There are no profits to account for from their activity. Instead we have worker identity politics, female identity politics and so on –all with the wrong premise of widespread exploitation in Amerika.

That is why the national bourgeoisie of the oppressed nations is a more likely place to find progressive class struggle than inside the United $tates. The national bourgeoisie is more likely aware of trade deficit numbers and has a more objective sense of proportion than any Amerikans — a depressing truth about bourgeoisification. Everywhere an Amerikan bourgeois looks, he sees only other Amerikan members of the exploiter class. Yet, by religion, nationality or even just friendship and family ties, the bourgeoisie in the Third World is more likely to have contact with exploited people, and whether it likes it or not, the national bourgeoisie often has the job of representing the exploited in negotiations with the Western imperialists.

It is up to the national bourgeoisie of the non-Amerikans to decide whether they are going to go on providing the U.$. margin of corporate dividends or the Pentagon’s budget just because they idolize the dollar.

For more MIM documents on how there is no exploited “working class” in the united $tates read the 1987 and 1997 documents and MIM Theory #1.

Notes:
1. http://www.gpoaccess.gov/eop/tables08.html#erp7
2. http://blog.wired.com/defense/2009/02/obama-administr.html
3. http://en.wikipedia.org/wiki/Trade_deficit#John_Maynard_Keynes_on_the_balance_of_trade

Accountability from the Keynesians

March 5, 2009

George A. Akerlof & Robert J. Shiller
Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
Princeton University Press, 2009, 230 pp. hb

Not to call for the gold standard or anything like that, but U.$. dollars run amok factor into global economic crisis even according to Krugman now.(1) An explanation for the exchange rates is not a major concern in this book by Akerlof and Shiller. However, Akerlof is the Nobel Prize winner in economics for 2001 and Shiller an economic professor at Yale. Together they make the economics profession more accountable with their statement here.

Akerlof and Shiller explain that in the minds of the economics profession, “animal spirits” got written off de facto in the decades after Keynes and the Great Depression. It now has to come back into fashion, but the profession will continue to see it as sort of external to the profession.

When MIM told the First World Marxists that Amerikan “workers” are net exploiters, we heard back that we were being “academic.” There could hardly be a bigger and more consequential question for a U.$-based communist party, and this will have to go down as a joke on us here, being so impoverished of communism.

What is academic however, is the production of economics knowledge. Specifically, the problem is what subjects are counted as outside the profession. That has to do with not stepping on the toes of other academic departments common at U.$. universities — artificial bureaucratic divisions not accepted in Mao’s China for instance.

In their own view of themselves, economists always deserve a grade of at least C or better, because unemployment only reached 25% in the Great Depression, which leaves a grade of 75%. (p. 2) The remaining 25% we chalk up — to put this rudely — stuff handed to economists from outside the profession, psychology and whatever else that goes into “animal spirits.” Animal spirits dictate the business cycle according to real Keynesians.

Of course, the rich countries dominate the whole globe including by occupation, so we at MIM are not going to give economics a 75% grade unless that 75% is achieved in a test — without outside help — in other words without cheating. So it is not within the economics profession where we learn about economics as an international subject. [Disclosure — I am on no academic payroll, another irony in the debate about “academic” responses on exploitation questions. My critics on the other hand generally worked with people on academic payroll.]

For some questions handed to economists they can legitimately say “either way it’s not big enough to affect the economy enough to change our work.” If however a business cycle suddenly throws 50% out of work or if the global unemployment rate is very high, one may have a counter-argument. So Akerlof and Shiller provide accountability — a picture of how they see themselves and what questions they are answering. This book fleshes out subjects that may have to go under the rubric of “animal spirits.”

Of note, I’ll just say that the dollar has been the ultimate Keynesian confidence game; albeit, not covered in textbooks. Confidence in exporting to the united $tates has been linked to the dollar and has dragged $outhern Korea, Taiwan and Singapore out of poverty. But as MIM has said since MIM Theory #4, there is a limit to how much the world can expand economically via U.$. imports.

Surplus-value is linked to class struggle. In its “realization” aspects, Sweezy has already covered common ground with Keynesianism. However, in the class struggle, production-sided aspects of surplus-value, Marxism still stands apart.

On the subject of the dollar, some will say its exchange should have been regulated, thus the animal spirits idea again. “Sure we had military Keynesianism with Reagan. We had money illusion through a strong and stable dollar to con the world, but give us one more chance and we will regulate X ____ (fill in the blank with something missed in the last regulation cycle.)”

The appeal of Keynesianism is that it is incremental and useful to state bureaucrats. Rahm Emmanuel has said: “‘That’s how you make change possible, because it’s not threatening but accessible.'”(2) Our political response has appeal outside the united $tates, but Keynesianism lays a basis for corporatism in the united $tates, because there is no social vehicle for it to end up otherwise.

Along these lines, according to Akerlof and Shiller, the existence of capitalism comes down to the probity and intelligence of accountants — yikes. I’m sure many will read chapter 3 and come out saying, “OK, that’s the last straw! I’m signing up with the Maoists!” Akerlof and Shiller cover in a nutshell the various ways that executives and bankers have of making money without doing anything. Then in what Marx criticized as “idealist” thought, we are to believe in a neutral state intervention to regulate these executives. Well, but anyway, we only need that intervention to nail down the last 25% of employment is how they reason.

The weakness of Keynesianism as of today will be its lack of internationalism relative to Marxism. Akerlof and Shiller note global inequality, but do not link it to anything economic. We are supposed to accept that those with superior technological experiences are more productive — thus global inequality.(pp. 143, 194) (As stated in the footnote, however, the argument cannot be distinguished from the labor theory of value, because having additional physical capital is not the same thing as having additional technical experience. Countries with capital may invest more appropriated dead labor into education.)

Not at all to characterize the whole book this way, but there is a chapter on racial discrimination but not exchange rates and global inequality. We learn among other things before that chapter that affirmative action in lending led to the sub-prime mortgage crisis,(p. 155) a sort of variation on the idea that affirmative action led to grading inflation in universities.

This book is very timely for expressing the economic logic of the Obama counterrevolution. Against it we can sharpen our own arguments, but that would require another book. We are very thankful for the degree of accountability seen here.

Notes:
1. “For a while, the inrush of capital created the illusion of wealth in these countries, just as it did for American homeowners: asset prices were rising, currencies were strong, and everything looked fine. But bubbles always burst sooner or later, and yesterday’s miracle economies have become today’s basket cases, nations whose assets have evaporated but whose debts remain all too real. And these debts are an especially heavy burden because most of the loans were denominated in other countries’ currencies.”
http://www.nytimes.com/2009/03/02/opinion/02krugman.html?partner=rssnyt&emc=rss

2. http://www.foxnews.com/politics/first100days/2009/03/03/obama-gets-strong-support-poll/

Dusting off Krugman’s book The Return of Depression Economics

March 2, 2009

I dusted off my copy of Paul Krugman’s The Return of Depression Economics.

 

We can use it to remember what used to be the boundary between Marxism and Keynesianism. Krugman defends Keynes and ends his book saying: “Some say that the problems of Japan, of emerging Asia, of Brazil are structural, with no quick cure available; but I believe that the only important structural obstacles to world prosperity are the obsolete doctrines that clutter the minds of men.” (1999, p. 168) Marxist revolution is not a quick cure and it is a structural solution.

 

What Krugman says here is the Keynesian boundary with Marxism: “What does it mean to say that depression economics has returned? Essentially it means that for the first time in two generations, failures on the demand side of the economy– insufficient private spending to make use of the available productive capacity — have become the clear and present limitation on prosperity for a large part of the world.” (1999, p. 155)

 

The current downturn just trashed the work of most Western economists. That does not mean the Marxist solution of socialism suddenly became popular either, but we should recall Marx did not write anything about socialism. He described what he saw happening in the history of class society. Just because things have not reached the boiling point does not mean Marx’s analysis of class struggle is wrong. If we turned ourselves into atomic dust tomorrow, alien scientists would have to decide whose explanation of humyn history was the best, and in that decision the fact that socialism did not occur is not going to count against Marx as much as if prosperity reached the whole peaceful globe under capitalism.

 

My own idea about Keynesians, capitalists and the opposite sex is the same: we have to get them out of confidence games. When I first saw “Reds,” I thought it was very romantic, but after years of investigation and analysis, I came to be suspicious of what the movie says attracts females to males.

 

How often we hear that a man’s confidence is itself attractive. A merely psychological state attracts the female. This is not confidence for a math test or a running contest or even a team sport such as baseball. The female will decide her choice based on the confidence of the pursuer. Yuck, I never liked that idea. It makes me suspect there is nothing physical to a female’s choice, which is what I also think of Keynesianism.

 

Krugman admits that the same is true of economies. Speculator confidence has real world impact. He has a chapter on the subject and goes so far as to favor capital controls to kill off speculation — obviously edging closer to socialism.

 

We can call it “confidence” or equally ahistorical and acultural “animal spirits,” and what would be underneath is still going to be eroticization of class and such real world factors. Marx called it fetishism, vivification and reification.

 

Regarding today’s affairs, we can see Krugman for severe inflation and Lawrence Summers for moderate inflation to get out of recessions. (1999, p. 78) Our retort would be that the expectation of inflation might drive capital out of the united $tates. There is nothing saying forcing people off their asses will cause them to keep their asses in the united $tates. Alas, Krugman does not advise a world government and is not trying to jump-start a global “animal spirit.” The contradiction between private appropriation and socialized production is global, however.

 

On the other hand, it is difficult to do due diligence on investments, and it’s easier to plunk money down in U.S. Treasury notes. I’ll admit MIM never helped the national bourgeoisie much in finding investments and it’s probably difficult to find people for such a job. 3% annually for 10 years in the united $tates — that is ridiculous; hence, Krugman tells Obama to grab that money while the getting is good.

 

Would capitalism be capitalism without confidence games? What is an entrepreneur but someone with the confidence to lead and appropriate others’ labor? If everyone had confidence to run their business, we would be looking at communist revolution. It would be like having too many capitalists competing to lead too little labor.

 

If outside capitalists can judge the confidence games going on inside a country, what is that but another confidence game? Social-democratic Europe now stands in judgment of unregulated Amerikkka, but social-democratic Europe did not always have the ahem, confidence or attention it does now. It was like an unconfident male, who deserved no attention. We would say there were historically specific reasons of class struggle that made Europe suddenly attractive. Kerry was too French, and now all are French says Newsweek. Sarkozy’s haircut and tan were the same before and after the financial crisis. He didn’t change, but someone influenced outside perceptions of his attractiveness.

 

Krugman calls it “conspiracy.” The example of Soros going after Malaysia is perhaps not enough to go on. How could we call it class struggle when Soros might not even represent the average imperialist. Fair enough, but we stick to our explanation as class struggle nonetheless. We may not always be able to name the names of people very private by their nature.

 

Previous experience of seeing speculation as a “conspiracy” might explain why Krugman prematurely called an end to the “worst of” this current crisis before becoming the leader on the subject. It just seemed unimaginable that a “conspiracy” could take down the whole U.$. economy and much of the world with it.

 

Nor does referring to “protectionism” quite explain why Japan’s trade just collapsed by half. There was not a sudden spate of laws or trade pacts that caused that; although, now, there is talk of sovereign wealth funds, and the united $tates is violating some norms of free trade by sudsidizing some industries.

 

We would not want to see the contraction of the money supply, the raising of interest rates or the passing of newly restrictive trade laws at this moment. Nonetheless, we still have a crisis without these questions being a factor. Krugman is the boundary between Marxism and Keynesianism, on the Keynesian side. Paul Sweezy and similar previous underconsumption theorists are on the Marxist side of the boundary.

 

Private spending can be increased by redistribution to the poor (if the poor have a higher propensity to consume) on a point where Keynesianism, social-democracy and Marxism might seem to blur.

 

MIM theory is not underconsumptionist and demonstrates the power of Marxist theory relative to Keynesianism at the national unit of analysis. If redistribution of income by government stimulus programs does not enrich a country, the reason is that it has already appropriated so much surplus-value — a limit. What is more that limit could have been reduced by class struggle by other countries.

 

So the Wall Street Journal obliquely raises, what if we redistribute the top 2%’s income and that still does not match the stimulus program’s spending and that in turn does not close the lost GNP of this downturn? What if the total physical labor entered into the U.$. economy from all sources actually matters and domestic redistribution does not increase input of labor? The MIM theory is actually production-sided, not consumption-sided, for the national unit known as the united $tates and similar countries.

 

Again to speak more to the Keynesian side, if redistribution in the situation of a liquidity trap,

low profit rates and possibly expected inflation does not restore GNP growth and in fact investment declines, what will you say then? We are saying the Keynesians are the only other game in town. If Keynesians have to hang it up, we hope they turn to Marxism. Alternatively, not to worry Keynesians, if things look bleak for you, you can always wait to advise a world government — achieved by class and national struggle.