Tuesday, March 04, 2014

Skidelsky on Keynes and Marx

Robert Skidelsky, a biorapher of Keynes has a short article in 2012 Keynes, Hobson and Marx. From the conclusion of the article:
"Recent events have persuaded me that there is something intuitively right about the Marxist analysis. It is especially illuminating about globalisation. It seems to me quite reasonable to interpret the off-shoring of US production to China and East Asia as an attempt to restore the profitability of American capital by locating production in regions where labour was cheap and trade unions did not exist. This raises the crucial question of to what extent globalization as now practised is in the interests of the citizens of developed countries.
This brings me to my main criticism of Keynes. The idea that economic outcomes could be impacted by class power was beyond his ken. Essentially, unmanaged capitalist systems failed to maintain full employment because classical economics gave the wrong message. It assumed away uncertainty, and thereby mandated a high degree of laissez-faire. Light-touch regulation of the financial system was all that was needed because banks were optimally self-regulating.
In short, the flaw was theoretical, not structural. What was needed was a more accurate theory, not a redistribution of power. As Keynes famously put it at the end of the GT, 'ideas' are more powerful than 'vested interests' (GT, 283). The almost contemptuous dismissal of the non-ideational elements of the economic system as 'vested interests' shows that he lacked proper cognizance of them.
Keynes's re-definition of the economic problem of his day as a technical problem in economics was politically very convenient. Practical businessmen are quite receptive to new ideas providing they allow them to keep their profits and managerial prerogatives. In the interwar years deficient demand leading to mass unemployment was a threat to both, not least because it aroused social hostility to capitalism. Keynes was definitely preferable to Marx. So they were happy for the state to look after demand and protect them from the unions, even to acquiesce in modest measures of redistribution to keep the people happy.
However, the state proved unable to protect the Keynesian revolution itself from the consequences of the continuing full employment it guaranteed. Full employment strengthened union power; unions used their position to push wages ahead of productivity; wages started to encroach on profits. So the business class demanded an end to the full employment commitment, lower taxes, and freedom to export capitalism.
I think this analysis explains many features of the post-Reagan, post Thatcher economy: the much higher levels of unemployment, the weakening of the trade unions, the curtailment of the social safety net, the stagnation in real wages and concomitant surge in household indebtedness, the increased pressure on working hours, the capital-friendly changes in taxes, the de-regulation of finance, and much else.
But the Reagan-Thatcher solution to the problem of capitalism has recreated the Hobsonian problem of underconsumption. Since the 1980s, the rich, in western countries, have been able to appropriate the lion's share of productivity growth. So future crises are inevitable.
To avoid them we need to rebalance our economic life: away from consumption towards leisure, away from financialisation towards sustainability, away from globalisation towards community, away from love of money towards ethics.
How to do this is a political question, to which post-Keynesians should now turn. Keynes should remain our inspiration. But we need to go beyond him in both thought and action."

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