Re: Why economists do not care about high rates of unemployment w

[Doug Henwood <dhenwood@xxxxxxxxx>]

On Wed, 13 Apr 1994, Paul Davidson wrote:

> Dear Doug: I did not say that Keynes said that the "goal of the WHOLE SYSTEM is
>  to maximize ... M'". What I  said was Keynes argued that "the FIRM has but one
>  objective -- to end the production cycle with more money than it started with"
>  Neither Keynes, nor I would claim that "what is good for GM is necessarily
> good for the country". Nor did Keynes want, as you put it "to rein in finance".
> Keynes was always a "cheap money" man who looked forward to the euthanasia
> of the rentier, i.e., to limiting the returns of those who owned capital.

A system built of profit-maximizing firms will be a profit-maximizing
system, no?

>        When you speak of the "barbarities of vulgar Keynesianism", I am not
> sure whether you are attacking Keynes's analytical system, or the jackass
> hybrid called neoclassical Keynesianism and/or New Keynesianism (including
> Barkley's New neoKeynesians).

The latter. As I said in my original, I admire JMK greatly.

> Keynes never argued that all you had to do was
> fix the quantity of money -- in fact he argued against the quantity theory
> of money.  What Keynes wanted -- if you had read Keynes including his addendum
> in the 1937 EJ on the finance motive (or even Davidson's MONEY AND THE REAL WOR
> LD) was an accommodating monetary system with policies that specifically
> increased aggregate effective demand to a full employment level.

Actually I've read a great deal of Keynes, and much of it several times.
I even read MATRW - once only, alas. I know that that is what Keynes
wanted; my point was that he greatly underestimated the political
obstacles to that goal - precisely because he ignored the politics of class.

> That is why
> he advocated "the socialisation  of investment .. [as] the only means of securi
> ng an approximation to full employment...IT IS NOT THE OWNERSHIP OF THE INST-
> RUMENTS OF PRODUCTION WHICH IS IMPORTANT FOR THE STATE TO ASSUME. IF THE STATE
> IS ABLE TO DETERMINE THE AGGEGATE AMOUNT OF RESOURCES DEVOTED TO AUGMENTING
> THE INSTRUMENTS AND THE BASIC REWARD TO THOSE WHO OWN THEM, IT WILL HAVE ACCOMP
> LISHED ALL THAT IS NECESSARY." (The General Theory, p. 378)

Ditto the political obstacles to those goals. Ownership DOES matter,
since the owners will have none of this interference with their most
basic class prerogatives, the control of investment and employment.

>          You worry about whether rentiers will consent to their own demise --
> I think they may prefer Keynes plan to limiting them to a "basic reward"
> determined by the state compared to your altenative of
>  death by the hands of Marxist revolutionaries --who will probably
> slaughter millions of workers and farmers along with the rentiers, and
> reduce the rest of the proletariat to a subsistence level-- if the lessons
> of Eastern Europe is any guide.

If there are no Marxist revolutionaries around, why should the rentiers
ever agree to this compromise? I'm surprised at your resort to the ad
hominem trick - I have no interest in slaughtering anyone, and last I
checked, our capitalist government has been no slouch in the slaughter
department. The Eastern-Europe-as-guide argument is worthy of a Wall
Street Journal editorialist, not a serious person. Of course a WSJ
editorialist would use it to discredit Keynes as well as Marx, but I see
you're not willing to go that far.


>         For someone who attacks Keynes for getting his Marx from a second
> hand and a third hand source, it seems strange that you attack Keynes through
> the "vulgar Keynesianism" of second and third hand Jackass-hybrid Keynesians.

I can only conclude that you didn't read my original words. How many
Jackass hybridizers quote obscure bits of the Treatise from memory?

>      We don't have to man the barricades to improve the existing entreprenerial
> system. Prrovided we cure the major faults of the existing system -- its
> "failure to provide full employment and its arbitrary and inequitable distribu-
> tion of income and wealth" [GT, p. 372], that is all that is necessary. And
> Keynes's analysis showed it is possible to cure both flaws without class
> warfare -- and with class cooperation instead.

These are not external faults of the existing system, but essential
features of it. Why is even social democracy in retreat in the FIrst
World? Why has Sweden been dismantling its welfare state, and why is
Swedish unemployment now at 7%, the highest in 70 years?

Doug

Doug Henwood [dhenwood@xxxxxxxxx]
Left Business Observer
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