by Michael Roberts
My recent article for the Socialist Review (What’s wrong with the Keynesian answer to austerity?, http://www.socialistreview.org.uk/article.php?articlenumber=12273.)
has provoked a mild ripple of debate within leftist economic circles in
the UK. In particular, James Meadway, the lively leftist economist,
has sprung to the defence of Keynesian ideas in the struggle against
‘austerity’. He commented on my piece critically and referred to a blog
post he did last October explaining how Marxists like me are too hard
on Keynesians (http://faithfultotheline.wordpress.com/2012/10/09/keynes-keynes-and-keynes/).
Meadway’s main argument is that you should not tar with the same brush
leftist or so-called post-Keynesians like himself (I think he is) that
are anti-capitalist in their objectives with the so-called New or
‘bastardised’ Keynesian views of people like Paul Krugman that stick to
sustaining capitalism and basically follow all the old neo-classical
economic models (see my recent post, http://thenextrecession.wordpress.com/2013/04/03/keynesian-economics-in-the-dsge-trap/).
Of course, it is true that there is a spectrum of views within the
Keynesian economics fold – there was back in the 1930s and early 1940s.
There were communists or socialists like Joan Robinson and Michel
Kalecki whose ideas have been developed by post-Keynesians like the
brilliant Engelbert Stockhammer, Ozlem Onaran and other Kalecki
followers (for more see, http://hussonet.free.fr/postk.htm).
But the vast majority of economists who consider themselves Keynesians
do not espouse the view of the post-Keynesians and are much closer to
the position of Krugman in the US, or Richard Layard or Malcolm Sawyer (http://www.classonline.org.uk/pubs/item/fiscal-austerity-the-cure-which-makes-the-patient-worse) in the UK. Let me remind you of The Manifesto for Economic Sense
that Krugman and Layard wrote back in summer 2012 as their way forward
to solve the economic crisis. On my blog, I re-edited it as A Socialist Manifesto to show the strong differences between Keynesian and Marxist policies against austerity (http://thenextrecession.wordpress.com/2012/07/03/a-manifesto-for-socialist-sense/). Have a look.
Within the Marxist or socialist spectrum, there are also many
different strands. Divisions are great about what Marx ‘meant’ and what
is the ‘Marxist theory of crisis’. Indeed, I would say that my own set
of views is probably a minority opinion within the Marxist school of
economics, which is led by the likes of Gerard Dumenil, David Harvey,
Richard Wolff or Michael Lebowitz. The majority of Marxists look to
underconsumption or overproduction, inequality, financialisation or
financial instability as the main causes of crises under modern
capitalism, and not to profitability and fictitious capital, as I do.
And I am not even dealing the wide range of views on imperialism, the
euro single currency and so on.
But having said there is wide range of views within Keynesian and
Marxist economics, that does not mean that we cannot draw a line in the
sand both theoretically and policy-wise over the differences between a
Marxist view of the capitalist economy and even the radical
post-Keynesian one. In my view, there are qualitative differences
between Keynesian and Marxist view of what is happening in a capitalist
economy and what to do about it.
James Meadway says in his post (op cit) that a “radical
Keynesian” programme in this case would mean *hugely* more than just
“governments spending more money”: it would include, inter alia, the
overhaul of the financial system, the democratic direction of
investment, and so on. Keynes himself – to come to the third confusion
–at least toyed with this, concluding his General Theory with a call for
the “euthanasia of the rentier” and the “socialization of investment”.
Keynes was unabashedly, unashamedly pro-capitalist and elitist
(retaining, for example, his Presidency of the Royal Eugenics Society
right up until his death); nonetheless he identified circumstances in
which in order to save capitalism it was necessary to destroy it. It is
this tension in his work that the radical left needs to play up to,
rather than smothering: that the (correct) insights of Keynes (in
aggregate demand, in the dysfunctionality of finance) need bringing out
and the contradictions need exacerbating. The anti-capitalist elements
should be brought to the fore. A blanket dismissal of “Keynesianism” as
such cannot do this.
But that’s just the problem. Keynes ‘toyed’ with ideas like the
‘socialisation of investment’ but in the final analysis – and it is in
the analysis – he remained in the pro-capitalist camp. His vague
‘socialisation’ never even got as far as the programme of the Labour
Party at the time for ‘the common ownership fo the commanding heights of
the economy’, let alone workers’ control or democracy. As Meadway
says, Keynes was very elitist and a great supporter of ‘bourgeois
values’. And his ‘euthanasia of the rentier’ implies only some gradual
natural phasing-out of the rent-seeking financial sector. There was no
call for the public ownership of the banks – indeed, I don’t hear that
from the lips of many post-Keynesians now.
In a recent post (op cit), I pointed out the positive contribution
that Keynesian theory has made to economics. But there are three things
that distinguish Keynesian theory (in all its forms) from the Marxist
one and thus decide the issue for me on what”s wrong with it. The first
is that Keynes does not break from the neoclassical model of perfect
markets and factors of production. There is no theory of value based on
the exploitation of labour power. That is a fundamental error in
understanding the laws of motion of capital.
That leads to the second reason. For Keynes, profit is not the
independent variable driving investment, employment and growth. On the
contrary, profit does not appear in Keynes’ calculation, except as a
dependent variable of investment. Keynes gets it the wrong way round.
His macro aggregates hide the exploitative nature of the capitalist
system and thus also miss its Achilles heel, profit. Even his foray
towards profitability in his discussion of declining returns on capital
is conceived in neoclassical marginalist terms i.e. the ‘marginal
efficiency of capital’, not profit from labour power. Thus Keynesian
policies for more government spending to boost ‘aggregate demand’ pay no
attention to the impact of such spending on profitability. So
Keynesians cannot understand or explain why capitalists do not support
more government spending even in a slump – it is irrational. Don’t
capitalists want to save capitalism?
And third, what also flows is the view that there is no flaw in the
productive manufacturing sector of a capitalist economy. Crises and
slumps are caused by flaws in the financial sector. The capitalist mode
of production for profit through markets is basically fine. As Meadway
puts it, Keynes had “very roughly, in Marxist terms, a concern with
the problem of realization and the issues raised by volume 2, rather
than (as in more supply-side approaches) a concern with the problems of
volume 3.” Well, you cannot do without Volumes 1 and 3 that deal with exploitation and profitability.
The issue is not whether Marxists should work with Keynesians against
the policies of austerity. Of course, they should (although I am not
sure some Keynesians will always work with Marxists!). For my part, I’d
work with President Obama or Nick Clegg if they opposed ‘austerity’
(but they don’t). The issue I was looking at in the article in
Socialist Review was whether Keynesian economics can show a way out of
the fall in living standards and employment for the majority of people
in the US and Europe, imposed (only partly) by austerity. Also can
Keynesian economics offer a way to end permanently the cycle of booms
and slumps under capitalism? I don’t think it can.
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