When is Keynesianism not Keynesianism?

[Thinking Man's Idiot]

No return to old Labour

(Friday 19 December 2008)

When is Keynesianism not Keynesianism? When it's Brown's version. ROBERT GRIFFITHS explains why.

Has the new Labour government turned back to the policies and values of old Labour? Have Prime Minister Brown and Chancellor Darling embraced the strategy and policies of Keynesian economics?

Certainly, some trade union leaders welcomed the pre-budget report as an encouraging sign that new Labour's neoliberal approach was being abandoned for more traditional Labour policies. Sections of the Tory Party and the right-wing media claim the same although, for them, this would be an indictment rather than a plaudit.


As for the conversion to Keynesianism, there is consensus across the political spectrum that just such an about-face has occurred.
But some clarity about terms and concepts might lead to greater understanding and allow the labour movement and the left to more accurately assess the scale of the tasks that still lie ahead.


The term old Labour usually describes the social-democratic values, objectives and policies which predominated in the Labour Party until the triumph of Tony Blair and his faction in 1994 - a mixed economy with a substantial public sector, extensive economic regulation, support for free collective bargaining and workers' rights, continuous improvement in the range and quality of public services including housing, rising public expenditure financed from progressive taxation and public borrowing, a redistribution of wealth from the rich to the middle and working classes, a permanently high level of employment, greater social mobility based on equal opportunities for working-class children and an expansion of civil liberties and democratic rights.


However much they lacked boldness and resolve, previous Labour governments saw themselves as representatives of workers and their families while also governing in the national interest. The main aim of social democracy was to improve the lot of the working class without rupturing society by breaking from capitalism.


True, this approach involved Labour governments in shameful compromises and abject surrenders. In particular, they carried out foreign and military policies that served the interests of British imperialism both as an independent force and then as the junior partner of US imperialism.


Yet they sometimes made substantial progress towards some or all of social democracy's traditional objectives. So much so that the ruling class became unnerved from time to time by the dynamic which developed within the labour movement towards more left-wing and radical objectives.


In their first few years, Labour governments invariably had to be pressured, subverted and softened up before being bundled out of office and replaced by capitalism's first-choice team, the Tory Party.


But, as shadow chancellor, Gordon Brown dumped the concept of wealth redistribution through taxation. From 1997 and especially since its second term of office in 2001, new Labour has consciously sought to represent the interests of monopoly capital inside the labour movement.


The social democratic commitments inherited from the late John Smith and demanded by the trade unions were discharged, but with the minimum possible disturbance to big business.


Since then, we have had an endless stream of privatisation, private finance initiatives, corporation tax cuts, attacks on civil liberties, assaults on immigrants and asylum-seekers, wars, Star Wars and plans for a new generation of nuclear weapons.


Most of the anti-union laws remain in place and council house-building has ground to a halt.


The richest 10 per cent of the population increased their share of Britain's wealth from 63 per cent in 1996 to 71 per cent 10 years later. The poorer half saw their share go down from 6 per cent to 1 per cent.


One-quarter of Britain's 700 biggest companies pay no corporation tax on their monopoly profits, while gas and electricity monopolies, which are already making record profits, can raise prices by more than 40 per cent in a single year with impunity.


The Labour Party's internal democracy has been all but abolished. The party is now a mockery of the one which used to engage in fierce debates at annual conference, elect a powerful national executive and select parliamentary candidates from the left as well as the right.


Handing £550 billion to failing banks and money markets while nationalising the bankrupt ones to recapitalise them and return them to future shareholders does not signal the slightest step towards social democracy. Neither does an insignificant reduction of VAT.


As for trailing a small income tax increase for the rich in 2011, Harold Wilson would have laughed like a hyena at such preposterous play-acting. Not one wealthy parasite in Britain will be paying that extra tax when it comes into effect. Their accountants will have had more than two years to devise an avoidance scheme.


Nor do these measures have anything in common with Keynesian economics.


John Maynard Keynes urged governments to inject massive extra demand into the economy during recessions in order to prevent full-scale slump. In his 1936 work The General Theory Of Employment, Interest And Money, he proposed that this be done by borrowing from the wealthy - usually through the issue of Treasury bills and government stock - and spending it on labour-intensive schemes which did not produce capital or consumer goods for the market.


The government would play the central role in directing these funds, as US governments did in the 1930s New Deal and from 1945. In this way, destitution and social upheaval could be avoided and the capitalist system maintained.


This new Labour government has "privatised" its Keynesian role by enabling the banks to borrow from the wealthy and abandoned Keynes altogether by leaving it to them and the rest of the private sector to reflate the economy if, when and how they see fit. This means that the hundreds of billions of pounds spent so far have not built a single house or saved a single job, excluding bank directors.


A Keynesian approach would have been to use the £550 billion primarily to undertake huge job-creating public-sector projects.


These could include a massive council house-building programme utilising
sustainable energy technology, developing regional and national grids for water and wind power, the manufacture and installation of solar panels on government and housing premises, the production of new rolling stock for a renationalised railway system and the production of renewable energy vehicles for disabled mobility, Third World assistance and civil emergencies.


New Labour's vague proposals to bring forward a house-building programme relying on private developers and contractors and the "free," ie monopoly-dominated, market do not begin to measure up to Keynesian prescriptions.


Keynes anticipated governments utilising the savings of the wealthy to fund their construction schemes. Hence his view that some of the projects would probably have to benefit them as much as the poor.


One problem today is that Britain's wealthy stash their largely ill-gotten gains in offshore tax havens, many of them under British jurisdiction, or invest it overseas in the absence of capital controls since 1979.


A social democratic government would have attempted to regulate these huge leakages. A socialist government would have closed them down altogether.

Griffiths is general secretary of the Communist Party of Britain.

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[Thinking Man's Idiot]

Understanding the Economic Crisis and Socialist Perspectives for Change


The crisis in global financial and stock markets that began with the September-October meltdown is shaping up to be quite unlike anything that has been experienced by most of us in our lifetimes. It is true that many in the United States may be old enough to remember the market crash of 1929 and the onset of the Great Depression. And in Japan, many people are well aware of the so-called “lost decade” that followed after the bank crashes of the 1980s. Both of these were easily crisis of this magnitude, but current financial is taking place on a global scale. More...

[Thinking Man's Idiot]

This is no repeat

(Sunday 21 December 2008)

FAWZI IBRAHIM




The current financial crisis is not the great depression all over again - it's worse. FAWZI IBRAHIM explains why.

As the financial turmoil continues, comparisons are naturally being made between the great depression of the 1930s and the current meltdown.
While the outward symptoms are very similar - bank failures, economic downturn, unemployment, hardship and near-collapse of the system - the underlying factors are anything but. In fact, they are polar opposites.
The '30s depression was one of capital abundance. That of 2008 is one of capital deficiency.
JK Galbraith in his book The Great Crash wrote: "The causes of the depression are still far from certain."
That may or may not be true, but its terrain is well known.
It is what John Maynard Keynes and others refer to as "overinvestment" or what Karl Marx calls "overproduction."
Keynes, echoing Marx a century earlier, describes it as "a condition where there is a shortage of houses, but where, nonetheless, no-one can afford to live in the houses that there are."
Galbraith prefers to talk of "insufficient investment - investment that failed to keep pace with the steady increase in profits."
According to Galbraith, in the years leading to the '30s depression, there was too much capital around that could not be invested.
Compare this with today's credit crunch.
The crunch - or, to give a more appropriate name, capital deficiency - did not happen by accident.
It is not what the apologists tirelessly tell us, caused by greedy bankers and speculators, the "unacceptable face of capitalism." This implies that there is an acceptable face of capitalism.
The cause of the credit crunch lies within the capitalist mode of production in general and capital accumulation in particular.
Capital accumulation is the continuous augmentation of capital by more capital as profits are fed back and reinvested to engender more profit, leading to greater capital accumulation and so on in a non-ending cycle of self-expansion.
It is the inner strength of the capitalist mode of production and its core attraction
But that inner strength which saw capitalism through cycles of boom and bust, wars, crises and depressions is its core weakness today.
The transformation is complete - from spewing and utilising abundant capital to choking for lack of it. Welcome to the world of credit crunch, capitalism in the critical zone.
In a boom, profits are high and capital accumulates yielding even more profits.
However, if for any reason the rate of profit falls, then profits would follow suit unless more capital is invested to counterbalance the fall in the rate of profit.
The amount of additional investment necessary to compensate for a fall in the rate of profit would depend on the original or baseline investment. A small initial capital of £10 million at an annual rate of profit of 5 per cent would yield a profit of £500,000.
If the rate of profit fell to 4 per cent, the profit will drop to £400,000.
To compensate for this drop and keep profit at the same level of £500,000, investment must go up to £12.5 million, a rise of £2.5 million.
This is a relatively small amount which may not be too excessive for the market to provide.
However, if the baseline investment was £10 billion instead of £10 million, then the additional investment necessary to maintain profits for the same drop in the rate of profit would be 1,000 times greater - £2,500 million.
If the rate profit fell by more than 1 per cent, an even greater additional investment would be necessary.
In a highly developed economy such as those of the US and Britain in which the baseline capital investment is in trillions, a drop in the rate of profit would necessitate additional investment in billions if profits are to be maintained, let alone increased.
In general, therefore, as capitalism develops and capital accumulates, the baseline investment increases and with it the additional investment necessary to counteract a fall in the rate of profit.
A tipping point will be reached at which the increased investment necessary to counterbalance a drop in the rate of profit is prohibitively high, greater than market can provide.
This is the backdrop of the present near-meltdown of the global financial and economic system, hence the biggest ever handover of public money to the financiers.
In an attempt to give their policies some semblance of respectability, British and US governments have been using Keynes's name in support of their historic giveaway.
The "bail-out" has very little to do with Keynesian economics. The unprecedented multibillion bail-out is a straightforward transfer of money from the working population, the taxpayers, to the corporate sector, with no strings attached.
The fact that the recipients are supposed to return the billions that the government gave them is a sham.
The banks can only return what they were given by making a profit, which is extracted from the working population, the taxpayers, whose money it was that the bank were given in the first place.
Neither is the "state ownership" of parts of the banking system the nationalisation that many on the left crave for.
Those "nationalised" banks remain within the corporate sector, acting independently from the government as was so clearly demonstrated when the government's calls for easier credit and fewer repossessions failed to impress the banks and building societies.
The Engineering Employers Federation said that its members found borrowing more expensive and less readily available.
Repossessions are set to continue at the same level, irrespective of government pressure.
Reductions in the Bank of England interest rates in November and December were only reluctantly passed to some customers and a new mortgage package was introduced specifically to ensure that customers do not automatically benefit from such reductions in the future. The recession will take its course.
As usual, the burden will be borne by the working class. More people will suffer greater hardship for a longer time than in any other previous recession.
The emergency budget of Chancellor Alistair Darling made certain of this, as current and future income of the working population is siphoned off to the corporate sector.
Those on the left and in the trade union movement who welcomed the pre-budget report, pinning their hope on regulation should think again. Capital deficiency is now a normal feature of a 21st century capitalism for ever in need of a bail-out, a sort of blood transfusion gone mad that saves the recipient but kills the donor.
The time to regulate capitalism is over. It's time to bury it.
Fawzi Ibrahim is a lecturer, author and former national treasurer of the University and College Union.





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[Thinking Man's Idiot]

Bad dose of the IMF

http://www.rinf.com/forum/showthread.php?t=6248

[Thinking Man's Idiot]

Rate of Profit
“Rate of profit” is a term introduced by Marx in Volume III of Capital for the ratio of profit to total capital invested in a given cycle of reproduction, or the proportion of value in any given commodity which constitutes profit for the capitalist.
In bourgeois economics, “rate of profit” means the proportion of the total capital invested accruing to the capitalist as profit per annum.
For a given period of circulation, or cycle of reproduction, the two definitions are equivalent. The circulation time of capital is the time that elapses between a capitalist making an initial investment and when the products are sold and the original capital plus a profit are recovered. This cycle of reproduction is a major factor in the development of capitalism, and much of Volume II of Capital is concerned with circulation of capital and the problems of Realisation.
Keeping in mind the distinction between the Marxist and conventional uses of the term “rate of profit”, the following issues are of importance.





Surplus Value and Profit
If a certain quantity of constant and variable capital are invested in a productive process, then at the end of a cycle of reproduction these values will have renewed themselves, but in addition, if the labour power of the employees has used to at least the social average of usefulness, there will a surplus-value.
Marx expresses this symbolically: c + v -> c + v + s, where c is the constant capital, v the variable capital (wages) and s is the surplus value, and the value of every product can be seen as composed of these parts.
On the basis of this conception, the rate of profit for the individual capitalist who got into the game of profiteering by investing (c + v) at the beginning of the cycle of reproduction, makes a ‘profit’ of s and therefore the rate of profit is s/(c + v). The individual capitalist is unlikely to see this surplus value in its entirety however, for the landlord, the state, the bank and everyone else will all demand a cut of this surplus: the productive worker must maintain not only “their own” capitalist, but all manner of hangers-on as well.
This rate of profit, s/(c + v), which is the ratio which affects the individual unit of capital, is different from the rate of surplus value, s/v.
The rate of surplus value expresses the proportion of unpaid labour that workers donate to the capitalist (s) over to the necessary labour time, v, that the workers spend reproducing their own needs, and is paid as wages, or variable capital.
Tendency of Rate of Profit to Fall
Marx believed that there was an historic tendency for the rate of profit to fall as a result of the growing socialisation and complexity of the labour process, and the growing productivity of labour. Each capitalist employs less labour and spends more on machinery and materials to produce the same value. Marx characterised this process as an increasing “organic composition of capital”. Since employing workers is the only source of profit, Marx believed that the rate of profit would fall.
The tendency of the rate of profit to fall, Marx believed is one of the main contributors to the historic crisis of capitalism.
Formation of General Rate of Profit
All political economists have begun from the fact that a single, general rate of profit applies in every industry across an economy, even though it fluctuates from year to year and may achieve higher or lower levels in different countries. Marx differed in his approach from all the political economists in that he began with the concepts of necessary and surplus labour time, concepts which actually contradict the existence of a general rate of profit, and only came to rate of profit later.
The formula for the rate of profit, (s/v)/(c/v + 1), leads to the result that the rate of profit is higher in those industries where the organic composition of capital is lower, i.e., labour intensive industries. This contradicts the empirically given fact that the rate of profit is constant across all industries. Marx had to explain how this phenomenon of the general rate of profit comes about.
One of the achievements of bourgeois society is that capital provides the means by which a greater or lesser proportion of the social labour may be devoted to this or that task by a seemingly objective process, independently of the opinion of any individual, via the Stock Exchange for example. The free movement of capital from one industry to another is a vital part of the labour process in bourgeois society.
The movement of capital from one industry to another is driven by differing rates of profit, which depends, among other things, on the organic composition of capital and varies from industry to industry.
It is a simple question of supply and demand: if at any given moment, for whatever reason, there is a super-profit to be made in a particular branch of industry, then capital flows into that industry. Companies engaged in the given branch of industry may enjoy a rise in the price of their stock, or capitalists in other industries may shift capital into the new area. Workers employed in the given industry find themselves much in demand, overtime is abundant and their wages rise, and more workers flood to work in the new trade. The rush of capital into the newly profitable activity leads to an oversupply of capital, the flood of workers to fill the shortfall eventually brings wages down again. Overproduction of the commodity brings about a fall in its price, with the result that the higher rate of profit which arose as a result of the lowering of the organic composition of capital (e.g., cheaper materials) disappears and the average rate of profit is restored. A recent example of this process has been seen in the boom in IT shares: the highest rates of profit attract high wages and high investment, but once everyone and their dog has set up in the IT business, over-inflated share prices crash, bankruptcies and unemployment follow.
Rate of Profit vs. Rate of Surplus Value
Thus, a general rate of profit and a general rate of surplus value may coexist in a given society, despite the fact that the two measures appear incompatible. The rate of surplus value reflects the proportion of the total social product appropriated by the capitalist class, and the rate of profit reflects the proportion of any given product appropriated by an individual capitalist producer.



Rate of Surplus Value
The rate of surplus value is ratio of the surplus labour time, which the producing class works without pay, to the necessary labour time, that they need to maintain their standard of living.
Expressed algebraically, if v is the necessary labour time (or value of labour power), and s is the surplus labour time, then the rate of surplus value is s/v.
Extending the surplus labour time is called absolute surplus value, while reducing the necessary labour time is called Relative surplus labour.
The rate of surplus value reflects the overall rate of exploitation of labour in a given society, and is distinct from the general rate of profit.
The rate of surplus value is a concept whose sense is not limited to capitalist production. For example, a serf may be required to work for a certain number of days per annum on land belonging to the nobility, making the proportion of surplus to necessary labour-time quite explicit.

[Thinking Man's Idiot]

http://www.adbusters.org/blogs/rethi..._imminent.html

http://socialistbanner.blogspot.com/...ilemma-of.html

http://themustardseed.wordpress.com/...or-2008-12-21/

[Thinking Man's Idiot]

A lecture by Nick Beams
The World Economic Crisis: A Marxist Analysis
Part 3
http://www.wsws.org/articles/2008/de...nbe3-d22.shtml

[Thinking Man's Idiot]

Economic crisis: no escape under capitalism


Thieves fall out: crisis exacerbates inter-imperialist contradictions

[Thinking Man's Idiot]

Revolution Newspaper Issue 151


We don’t need to “Rescue” this Capitalist System
We need to GET RID OF THIS SYSTEM
We Need Revolution!

Millions of people in the U.S., the wealthiest country in the world, are homeless. People’s need for shelter and other facilities does not determine what actually gets built. Instead, if more profit can be extracted by building luxury condos than by constructing good basic housing for masses of people, then it is luxury condos that get built. This is because different blocs of capital must either expand or die, and their expansion depends on the highest possible profit. This basic law of capital determines what gets produced, how, and for whom.

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[Thinking Man's Idiot]

A change of emphasis

(Monday 22 December 2008)
GORDON Brown's declaration that his government will "invest through this downturn" embodies the correct sentiment, but his figures don't add up. More...