(Though this is a pen-l discussion, I'll send it to lbo-talk. I'm below
quota today.)
Now that it's settled that Max Sawicky and Louis Proyect are not the same
person, we can examine a debate between them. Or to keep it simple, let's
simply look at what Louis said:
>The brute fact is that capitalist growth slowed down in the early '70s and
neither neo-Keynsianism, nor monetarism has worked to change that. The
reason for a slowdown in growth is that there is a slowdown in demand,
which government policy under capitalism can not change. ... Shutt's book
is really an eye-opener and I recommend it strongly, ... He describes a
problem of "market saturation" in which the "increasing maturity of most
consumer markets in the industrialized countries was becoming a noticeable
constraint to economic growth in the industrialized world by the end of the
1960s. This meant that in addition to static demand for non-durable goods
(food, drink and clothing) the markets for most durable goods (automobiles,
televisions sets, etc.) tended more and more to be governed mainly by
replacement demand rather than by the continuous opening up of new groups
of first-time buyers, which had been possible throughout the 1950s and
early 1960s. Hence demand for goods generally began to grow more in line
with population--which was in any case increasing more slowly than in the
immediate postwar period--rather than at the rapid rates recorded up to the
mid-1960s. This is a rather intractable problem for a system based on
profit...<
The saturation of consumer goods markets (especially those for durables) is
hardly "intractable." One easy solution is "built-in obsolescence," as with
the way that Detroit used to build new cars that made the old ones (only
about 2 or 3 years old!) looked obsolete, while making the vehicles so they
didn't last very long. We see this with PCs, where there seems to be a
conspiracy by MicroSoft (in conjunction with Intel) to develop software
that makes your old hardware obsolete by slowing it down and filling up
hard-disk space. So you have to buy new stuff.
Another strategy (which is mixed with the first) is to develop new products
and new needs. People are convinced that they can't just drink coffee; they
need double mocha lattes from Starfucks. People need color monitors,
speakers, DVD-ROM drives, etc., etc., for their PCs.
Michal Kalecki, a Marxist economist who developed some of the basics of
Keynesian economics before Keynes did, stressed that it's not the size of
the population that's crucial to the demand for durables and housing, but
the size of their incomes.
Now this is not to deny the problem of saturation of durables markets, but
to say that it's more of a cyclical problem than a secular one.
(Overpurchasing of modems hurts the demand for modems for awhile, until
people are convinced they _need_ new, faster, "better" ones or the old ones
become inadequate.) In the long haul, total consumer demand moves with
total consumer income (leaving a little for saving). The exact ratio of
consumer demand to income, of course, depends on how high wages are
relative to labor productivity.
BTW, if consumer demand doesn't increase with income, investment,
government purchases, and net exports can fill the gap for awhile. (see
below) I agree, however, that consumer demand represents the bedrock of
total demand in the long run.
In a separate missive, Louis writes: >Dennis, what you are referring to
above was the consequences of private
investment. American corporations invested in Asia because there was a
higher return. This is not what took place during the New Deal and has no
relationship to Keynsian theory. The problem in Asia today is overcapacity.
OVERCAPACITY. "Pump-priming" has no answer for this problem. <
Louis, you don't explain the overcapacity. The way I would do so is to
point to stagnant wages relative to labor productivity. Many Asian
economies pursued low-wage export-oriented strategies, with most demand for
their products coming from outside (basically from Japan, the US, and
Europe). To some extent, Japan followed this strategy, too.
When you're competing over the same market, devaluing a country's currency
(which lowers your export prices in dollar terms) doesn't do any good in
terms of raising sales if all the other countries do it (competitive
devaluation). But it does make imports more expensive in terms of the home
currency and raise the value of your debts in terms of dollars, causing all
sorts of financial problems. This is the basics of why East Asia is in deep
yoghurt these days.
Getting beyond Asia, the world-wide world-wide stagnation problem results
from the general "race to the bottom," in which wages are slowly being bid
down relative to productivity, causing world consumer demand to fall
relative to world income and output.
Investment can fill the gap for awhile (maybe after being goosed by
monetary policy), but it helps create new capacity, simply delaying but
intensifying the problem. Investment spending is also flaky, unreliable,
imposing fluctuations on the economy -- while it is subject to a total
stand-still when faced by pessimistic expectations, excessive debt loads,
and idle capacity.
Government deficit spending is politically incorrect these days, but would
be acceptable to our fearless leaders in war-time (or preparation for war).
Of course, the idea of using exports to fill the gap makes no sense if
we're talking about the world economy as a whole.
Louis continues> Excess capacity must be liquidated. There are redundant
human beings (variable capital) and redundant buildings and machines (fixed
capital). That problem was solved in WWI and WWII quite neatly. Millions of
workers got killed and lots of factories got blown to bits.<
Half of this (or a little less than half) makes sense to me: destroying
fixed capital gets rid of excess capacity neatly, while the spending on war
raises demand. It may take some sort of war (between whom and whom?) to get
world capital off its duff and engineer a world boom. But maybe if there's
enough of a mass movement from below to scare the ruling class, some sort
of world Keynesian public works program could result. Following Keynes,
pyramids could be built; bottles filled with money could be buried in deep
mine shafts and then people could dig them up. (In the end, capitalism
requires -- but is unlikely to get -- a world political-economic set-up
where wages will rise in step with labor productivity if long-term demand
stability is to prevail.)
But the "redundant people" are not an obstacle to capital. Capitalism
_loves_ unemployment. The existence of the reserve army of labor-power is
one factor that allows accumulation in the first place. The problem with
unemployment for the system is that it sometimes provokes social unrest.
Frankly, I don't expect a big war (of the scale of WW1, WW2, or Vietnam) in
the near future. The US has a military hegemony, with its NATO allies,
against most of the third world (and new entrants into that world, like
Russia). Brush wars against the newly industrializing countries or against
the poor countries are much more destructive to their victims than they
help destroy existing capacity or stimulate aggregate demand.
Jim Devine [EMAIL PROTECTED] &
http://clawww.lmu.edu/Departments/ECON/jdevine.html
