RE: [OPE] Recession could be best medicine

[GERALD LEVY <gerald_a_levy@xxxxxxx>]

> Some even believe a recession
> might be the best answer for the economy in the long term. That's still a minority view though.

 
 
Hi Alejandro VB:
 
 
Although Marx wrote in a different historical period - a period before
the state employed monetary and fiscal policy - he also believed
that an economic crisis serves a necessary restorative role in the
cycle of accumulation to the extent that its overcoming ensures
that the conditions for profitability are restored. This restoration of
favorable conditions for profitability are accomplished both by
driving down wages (and hence V) and through the forcible
destruction of constant capital values.
 
 
Whether this perspective is validated by the historical evidence
on what happens during a crisis is another matter. The evidence,
I think, will show that wages tend to be depressed below the
VLP during a crisis, but how in practice have decreased wages
and an increased size of the industrial reserve army affected 
aggregate demand during crises?  The historical experience of
the Great Depression, I think, suggests that there is no guarantee
that - even with decreasing wages and a destruction of capital
values - that the economy will necessarily recover.
 
 
There is also a question concerning investment in C: while
there is devaluation and destruction of C during a crisis, I
think it is only after the economy recovers and enters into an
expansionary phase that you see the large increase in investment
in new plant and equipment. Yet, many Marxians seem to think
this new investment in C occurs _during_ the crisis. Happily,
these are are matters which can be empirically investigated.
 
 
In solidarity, Jerry

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