[PEN-L:466] Re: Re: Query: Arjun Makijani exchange rates

[Gar Lipow <lipowg@xxxxxxxxxxxxxx>]

I'm interested in Arjun Makjani's theory not only as a basis for
program, but as a basis for analysis. I've always assumed (as a
dedicated egalitarian) that one (not the only but one ) of the things
we were fighting for was a pretty equal distribution of wealth and
income among the worlds population. If you use standard means of
estimating world GDP this means that not only the rich, but a large
part of the working class in the first world would take a pretty big
hit. But if Arju Makjani is right and the production of third world
countries is being underestimated really severely, to the point where
the per capita income in most third world countries is really two and
three times that of conventional estimates then such a redistribution
might leave the majority of first world workers better off
individually than they are now.

I know that equality of wealth and income is not the only point of
socialism, but it is one of the points, and an important one.

The example I saw cited in Thad Williamson's book "What Comes Next" is
Mexico vs. the U.S. in 1994 and suggested that the real value of
Mexico's economy at that time was almost double that of the official
exchange rate. I would be very curious to know if there is some
reference source that would let someone do this calculation on a
Country by Country basis for the entire world, or whether someone has
already gone to the trouble of doing this. Are there standard
purchasing power parity tables out there somewhere?

James Devine wrote:
>
> Gar writes:
> >Has actually developed an exchange rate  table using Arjun Makjani's
> >basket of goods method? (For those unfamiliar with him, he argues that
> >market exchange rates are yet another way of cheating poor and third
> >world countries . One example of his point  is that you can buy within
> >Mexico more with the Mexican peso than the exchange rate with the
> >dollar would suggest. He suggest a fair currency exchange rate would
> >compare how many dollars vs. how many pesos it takes to buy a fixed
> >basket of goods.) Does his basic argument make sense?
>
> I reviewed Arjun M's book for MONTHLY REVIEW awhile back. His basic
> proposition is that exchange rates should be set -- fixed -- equal to the
> Purchasing Power Parity rates. It's a fun proposal, and it would be no big
> deal for the advanced capitalist countries. After all, the Bretton Woods
> system was somewhat like that and it worked for a couple of decades (mas o
> menos, as they say in Spanish, pues). But if the market exchange rate
> differs radically from the PPP rate, as he argues it does for Mexico, then
> the World Monetary Authority (or whatever he called it) would have to work
> mightily and steadily to negate the effects of market forces.
>
> It's a fun proposal, but the balance of world power between the 3rd and 1st
> worlds would have to change radically in order to make it work. After all,
> it would shift the distribution of income radically, Radically with a
> capital R. The 1st world would resist, to say the least. A world income tax
> -- and negative income tax -- seems more likely and easier to arrange.
>
> And currently, in an era where the US is no longer the unchallenged
> hegemon, even the Bretton Woods system of fixed exchange rates seems
> infeasible.
>
> > Are market currency exchange rates one way the first world extracts
> surplus value from the second and
> >third?
>
> strictly speaking, in terms of Marxian value theory, the capitalists in the
> 3rd world (many of whom are based in the 1st world) and what's left of
> pre-capitalist ruling classes extract surplus value from the workers in the
> 3rd world. (These days, the East has gone South, so that the 2nd world is
> part of the 3rd.) Then, the exchange rate mechanism is one part of the
> redistribution of the surplus-value to the capitalists in the 1st world.
> I guess. I'll have to think about how Arjun M's theory works a bit more...
>
> Jim Devine jdevine@xxxxxxxxxxxxxxx &
> http://clawww.lmu.edu/Departments/ECON/jdevine.html

--
Gar W. Lipow
815 Dundee RD NW
Olympia, WA 98502
http://www.freetrain.org/