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

[Paul Davidson <PB108928%UTKVM1.BITNET@xxxxxxxxxxxxxxxxx>]

FROM:  Paul Davidson
"      Economics Department
"      523 Stokely Management Center  (615) 974-4221
Dear Doug Henwood and Bill Mitchell: Your earnest and strong replies to my comm
ents deserve a serious response -- particularly Bill's suggestion that "the
future is probabilistic from the point of view of the system", since that
implies the existence of a TURING machine to "provide" the probabilistic
results. (If you can't wait to find out why a Turing machine, see my
just published article "Austrians and Post Keynesians on Economic Reality"
in CRITICAL REVIEW, vol. 7, Nos. 2-3, 1993.)
      But I can give a quick rsponse to Doug's question of the "dismantling" of
Sweden's welfare state and the gross "inequities" and inhumanities that
are displayed in the existing entrepreneurial system of the US, Europe, the
Pacific Rim, etc.  No one has ever claimed that the real world entrepreneurial
systems have solved the major "faults" of our economic system. In fact,
Sidney Weintraub and I (with significant financial help from Galbraith and
other members of the original Board of Editors of the JPKE) started the JPKE
in the late 1970s because we believed both the existing system and the main-
stream economics profession had slipped seriously back from the significant
improvements that Keynes's analysis had generated in the 1940s to 1960s--
both domestically and through the international payments system known as
Bretton Woods.
     In an interdependent global econmy under the post-Bretton Woods system, if
Sweden wants to come to the party being organized by the European Community
and its cousins in America and the Pacific Rim, then Sweden must dance
to the tune of the party organizers. Thus, they have chosen to "dismantle" as
the price of admission. (The question Doug might ask is why give up your
welfare "principles" for a crude capitalist party that crushes your workers.)
      The existing system -- and the profession -- has retreated to a position
similar to what was "conventional" before Keynes. The solution is to rebuild
the economics profession -- not on the basis of some 19th century academic
scribbler whose "pure" followers claim that  those professed "Marxists" that
have gained power have not followed Marxism and hence we have no test as to
whether Marxism will really improve the absolute economic standard of ALL
THE RESIDENTS OF THE WORLD, whether they be capitalists or workers.
(I have nothing against rich capitalists -- after all rich people are the
same as poor people except they have money! And as the Labour Party in
England never seems to have learned, give the workers the choice of the
posssibility (the dream) of being rich and the hope of being equal among
all workers in a society with no rich people, and workers will democratically
vote for the former.)
    In the 25 years that Keynes's Bretton Wood system existed, both cap-
ialists and workers in
OECD nations and LDC nations became richer and there
was some significant reduction in inequalities around the world. Statistics
developed by Irma Adelman indicate that between 1947 and 1973, real GNP per cap
ita in the OECD countries grew 2.6 times faster than between the wars. This gro
wth rate was almost double the PEAK annual growth  rate of the industrializing
nations during the entire Industrial Revolution while productivity growth
was more than triple that of the Industrial Revolution. This prosperity was
transmitted to the LDCs where from 1947-73, annual growth in per capita GNP for
ALL developing nations was 3.3%, more than triple the growth rate experienced
the industrializing nations during the Industrial Revolution. The statistical
evidence is undeniable that the Bretton Woods period was, as Adelman says,
an unprecedented golden age. And as I argue in my article "Reforming The World'
s Money"in the 1991-92 JPKE and as is further developed in my POST KEYNESIAN MA
CROECONOMIC THEORY book, the conditions during the first half of the Bretton
Woods period was those that are necessary under a Keynes GT to achieve
global full employment. (Yes, despite the folklore there is an open economy
analysis embedded in the GT  -- see my PKMT book.) The solution, in my view,
is not to retreat to Marxianism which -- depending who you ask -- has never
been tried or has failed in Eastern Europe and China. The solution is to
reestablish an improved Keynes-operating system -- and how that can be done
is spelled out in my PKMT book.

Have a good day!____Paul Davidson
))))_ fax # (615) 974-1686