Re: What is Marx's view of fiscal policy ?

[Jim Devine <jdevine03@xxxxxxxxx>]

if you'll indulge me, I'll respond to my own e-mail.

On 6/4/07, Jim Devine <jdevine03@xxxxxxxxx> wrote:
> though it's true that the role of underconsumption has been
> exaggerated, it's not true that consumption by workers is irrelevant.
>
> My research (in my dissertation and after) indicates that there are
> two general types of regimes that can face a capitalist system (or a
> capitalist country without much international trade, such as the US
> before 1970 or so): (1) strong labor; and (2) weak labor. The form of
> the crisis differs between these two.
>
> In the first case, the normal excessively expansionist tendencies of
> capitalism (the tendency toward over-accumulation) are expressed as
> they were during the late 1960s, as falling unemployment, increased
> uppityness of workers, and squeezed profits, which is expressed in
> slower growth and inflation (i.e., stagflation).
>
> In the second case, these tendencies are expressed as they were during
> the late 1920s (in my interpretation) with accumulation growing too
> fast relative to consumer demand. This does not cause a simple
> recession but instead makes the economy increasing unstable, i.e.,
> prone to shocks of various sorts (such as the 1929 crash).
>
> the recession, when it happens, reinforces the weakness of labor. This
> can cause an underconsumption trap. Accumulation is blocked by unused
> capacity, debt, and pessimism. So businesses try to restore profits
> (hurt badly by the recession) by cutting wages and speeding up the
> labor process. This depresses consumption relative to production,
> making the recession worse, as in the early 1930s.

My first comment is that it's only in this underconsumption trap --
i.e., deep depression -- that Keynesian fiscal stimulus is effective.
It's due to a contradiction between what's good for individual
capitalists (low wages) and what's good for their class (higher
consumption demand). Keynesian (and, more generally,
social-democratic) policies can help with such intraclass
contradictions, but not with the kinds of dynamics that promote
over-accumulation (without converting capitalism into a planned
economy).

However, the large size of the government budget (as after World War
II in the US) can smooth out the normal fluctuations of the system.
Unfortunately, this also encourages the creation of an inflationary
hangover which is painful to get rid of. It can also allow the
persistence of low unemployment rates, which cause a relatively
permanent squeeze on profit rates.  In these cases, the "Keynesian"
policy only delays and changes the form of the economic crisis.
--
Jim Devine /  "Segui il tuo corso, e lascia dir le genti." (Go your
own way and let people talk.) -- Karl, paraphrasing Dante.