Re: Re: [Pen-l] Liquidity trap

[Marv Gandall <marvgandall@xxxxxxxxxxxx>]

David Shemano wrote:

> Jim Devine writes:
[...]
> > > It may make sense to let the bubble pop completely, following the lead
> > > of the famous politician Andrew Mellon ("Liquidate labor, liquidate
> > > stocks, liquidate the farmers, liquidate real estate").  Marx,
> > > Schumpeter, and the so-called Austrian economists pointed to the way
> > > recessions purge imbalances from the economy, allowing for renewed
> > > accumulation and prosperity in a normal business cycle. But last time
> > > the political elites in the US and much of the rest of the rich
> > > capitalist world followed Mellon's path (during a crisis of similar
> > > magnitude),  the economy's roller-coaster car spun off the track.
>
> I totally dispute this.  The ten-year US depression was not caused by
> following the recommendations of Andrew Mellon.  If he had been listened
> to instead of indicted, the world would have been a much better place.
=================================================
Revolutionary socialists and anarchists during the Great Depression would
have agreed. :)

The 19thc. capitalist solution much favoured by libertarians - to let the
markets find their bottom - was no longer an option after the extension of
the universal franchise and the development of working class organization.
No government, liberal or conservative, is today prepared to allow
depressions to run their natural course for fear of the electoral
consequences or, worse, an explosion of social unrest such as occured during
the 30's. There is a need to boost mass purchasing power rather than to
drive down wages in order both to to revive the economy and to contain mass
political pressure from below.

The libertarian argument that such state intervention arrests the violent
but necessary process of creative destruction and props up zombie firms
leading to prolonged periods of economic stagnation is correct, but is
subordinate to the greater need to secure the system when it plunges into
crisis. It is perhaps contemporary capitalism's "primary contradiction".





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