michael writes: > > >I believe that the slaughtering of captial values gives capital a lot >more room to maneuver than a Keynesian solution -- which I regard as a >temporary fix -- although I am not convinced that the ultimate problem >is deficit financing.
I don't think the ultimate problem is deficit financing either!!! but a shortage of surplus value which explains both the slow down in accumulation and business hostility to the expansion of the state even when state demand can (as you say) relieve excess capacity (inventories, idle plants, idle workers) in the short run. As fears of a slow down become dominant, there is bourgeois fear that the state will have to grow even more and thus exacerbate--via the threat of taxes and capital crowd out--the fear of continued declining private profitability which in turn leads to even more retrenchment of investment. A higher marginal efficiency of capital then requires the state to rein itself it, to create extra opportunities for national capital in the world market, and most of all to suppress labor. For example, Bob Jessop the Marxist state theorist speaks of a transition from the Keynesian welfare to the Schumpeterian workfare state. Which is not to say that even such a lean and mean state will stimulate investment levels consonant with full employment and general prosperity. The business class finds that it cannot do with or without effective demand generated via deficit financing. Unable to solve its own problems, a new class has to assert itself. > > > I think govts have in fact already found that running deficits the >> size that would be needed to achieve full employment would only yield >> retrenchment in private investment; > >Rakesh, I am not sure how you support the above. after the failure of the Reagan deficits, European social democracy and now Japan's aggressive fiscal policy to stimulate strong growth, govts are attempting to encourage private investments by containing the run up of debt and thus to instill confidence in the business sector that the future tax burden and interest costs will be manageable vis a vis their profits. Krugman as a business Keynesian thinks that Bush has been skirting near to the edge of the destruction of that confidence. He's not necessarily wrong. I am certainly not saying that such trimming is working or has worked to generate strong investment and full employment! > Right wingers often >say the same. Does Mattick/Grossman propose that idea? Which idea? Mattick's idea was that state debt consumed capital yet interest and principal were owed, thus making state paper fictitious capital; principal and interest would thus have to come out of the private economy, as Sismondi long ago recognized. Mattick did not disagree that the public consumption of capital could at times and for periods improve production and employment levels. > >Now, we have to make a distinction between deficit spending at the >trough and near full >employment. near the trough, it will encourage investment -- less so >the further you come to full employment. Private investment never brings the economy to any where near full employment; the compensatory expansion of the public sector seemed to do little to generate a strong bout of private accumulation and seemed to have in fact undermined business confidence rather than encouraged investment overall as you are suggesting; however, the attempt to trim expenditures and get budgets in order has also not yielded full employment investment levels either. Mattick's point was not that anti Keynesianism would generate full employment and prosperity! His point was that private economy and mixed economy alike were not immune to the kinds of downturns that Marx predicted--in other words, capitalism had NOT changed and could not be changed via state management. > > >This above statement sounds similar to Robert Barro. With low capacity >utilization, companies don't care much about fixcal prudence. It is of course important what companies think and do as opposed to what Robt Barro thinks and does. rb
