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

[Doug Henwood <dhenwood@xxxxxxxxx>]

On Thu, 14 Apr 1994, Paul Davidson wrote:

>       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.)

Actually I'd ask no such question. I'm entirely aware of the external
pressures on a small country, even one as rich and sophisticated as
Sweden. A more interesting question is why the Bretton Woods institutions
that Keynes helped design turned into the political agents of
pre-Keynesian economics, and why the fixed rate system broke down so
badly. An answer to the first question has to touch on the political
power of the rentier class, which cannot be wished away through appeals
to the general interest; an answer to the second has to touch on the
weakening of US preeminence in the global economy. This has little to do
with changes within the economics profession.

>       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.)

Though Hyman Minsky wasn't referring to this kind of attitude in his
review of Money & The Real World, his comment on that book does come to
mind: "[B]ecause Davidson does not break with the equilibrium growth
vision that underlies standard theory and because the integration of the
financial and real dimensions of a capitalist economy is imperfectly
realized, the work as it stands does not mark a paradigmatic shift." All
you need do is add "economic and political" to "financial and real."

By the way, if the fixed FX-rate system was so wonderful for everyone,
why is there no political momentum to return to it?

Doug

Doug Henwood [dhenwood@xxxxxxxxx]
Left Business Observer
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