Random Thoughts from the High Desert
Written by Sig Silber
Read the MARXIST APPROACHES TO ECONOMIC CRISES.
Some may think this is boring... and I understand. But to me understanding the history of economic thought is anything but boring. I have always been impressed with the work of Karl Marx who may have been the best economist of all time. He certainly ranks up there in terms of most influential. Marx and those who wrote about economics at that time had some theories as to the difficulties Capitalism would face. These included:
- A declining rate of profit.
- Overproduction or Under-consumption...today we call it a deficit in aggregate demand.
- Immiseration of the workers. A reduction in the standard of living of the workers thus preventing them from buying that which Capitalists produced. I have been writing a lot about the skewing in income and wealth distribution that has taken place since the early 1970's. .
- A need to find other markets i.e. Imperialism. Today we have many nations seeking external markets. Clearly that is an impossibility. The sum of all trade balances must be zero.
- A need to spend money on military adventures. Enter Lindsey Graham and John McCain and Barack Obama.
- An ever increasing capital to labor ratio including the ability of machines to reproduce themselves totally eliminating the need for labor and leaving the capitalists in a position where they needed to consume their entire production. Was Marx psychic? Did he envision robots?
- A need to depend on investment to continue the cycle with production being use exclusively to create more machines. China has not gotten to that point yet but they sure do depend on investment to make their economy work.
- Class warfare and an overthrow of Capitalism either peacefully or not so peacefully
I may have left some out. And from this list one sees the origins of Keynesian thinking. Thus Keynes is a successor to Marx. And from this list one sees the origins of Progressivism which can be viewed as an attempt to rescue Capitalism not destroy it. But intentions and results are not always the same.
One thing about Marxists, although they had/have no clue as to how Marxism would work, they correctly diagnosed Capitalism over a hundred years ago. I have Marx's writings going back to 1857-1858. That is about 100 years later than when Adam Smith started writing. The Physiocrats (who I really enjoy with Quesnay being the main remembered member of that group) - date back not that much earlier and really were contemporaneous with Adam Smith but being French have been pretty much overlooked by those who write textbooks in English or German.
In the early days, there were not that many political economists who made the cut and are required reading for anyone who wishes to think about economics but there are perhaps ten names early on whose thoughts are really worth understanding.
Unfortunately, the Marxists were not satisfied to just write papers and quite frankly back then one could not pay their bills by writing papers...there were few grants consistently available so they needed to create revolutions to have real-life experiments. Same in France with the French Revolution. And these experiments became repressive because some of the foundations of Marxism are flawed.
Similarly, Progressivism tends to become repressive because it too is flawed and not consistent with human nature which is the problem with Marxism. Conservatism is consistent with human behavior but does not handle money and credit very well. So Conservatism also does not map well against the real world.
What is interesting to me is that essentially every problem we have today was identified well over 100 years ago. And yet we are amazed that we have these problems.
We do not have term limits for politicians and perhaps we should. But we appear to have term limits on prior knowledge.
It is a shame that what was known about the challenges of Capitalism has been forgotten.
Frank Li has been writing on the challenges of Democracy and how the issues with democracy have been forgotten. When the masses rule, poverty is the result. The only thing worse than capitalism is non-capitalism. This of course creates a terrible dilemma.
Do children not have parents? Do children not learn from their parents? If we continually have to relearn the lessons of the past, it is hard to avoid the mistakes of the present.
Read Marx. Read all the major participants in the Scottish School of Economics. If you must, read the ravings of Austrians and if you can figure out what they are saying - please explain it to me. Read MMT/MMR.
If our elected officials were educated people, we might have less problems. But they are not. We elect pretty much the most uninformed people we can find. They have skills but to the extent they have skills, they tend to remain in local or State politics where knowledge counts for something. If they make it to D.C., we know they are skilled in only one thing... well two things.. getting reelected and staying out of jail while committing crimes.
They do not teach economics in law school. They do not teach agriculture in law school. They do not teach mining in law school. They do not teach manufacturing in law school. Clearly they do not teach software design in law school.
They teach imperfect and perfect crimes in law school. And apparently they do not even teach that very well since the U.S. Constitution is not very long but so far it has not been interpreted. Same goes for the New Mexico Constitution. In New Mexico we still have not figured out what "Public Welfare" means. We do not know what "seizure" means. We do not know what "permanent" means. We do not know what "fully appropriated " means or "priority". We do not know how to calculate a "return on investment of a pipeline project".
I read today that we have a Governor who thinks Taco Bell sells New Mexican cuisine.
Not that Milios and Sotiropoulos, the authors of the article I linked, are Marxists but they are Greek Economists who are experts in Marxism and curiously they say the following:
"In this fashion, capitalism appears to be entrapped (since the mid-1970s) in a perennial crisis, the end of which is not readily visible. the "cause" of this is considered to an "excess of capital" due to the either the low consumption capacity of the popular masses or the fact that capital is unable to find outlets for investment. This has two probable consequences. First, this "surplus" capital stagnates in the money markets, creating "bubbles", or is used to underpin ineffective policies of forced accumulation (my interpretation QE) that depend on lending and debt. Second, this capital circulates internationally in pursuit of accumulation by dispossession, profiting, that is to say, not from exploitation of labour but from direct appropriation of income (e.g. my interpretation ACA) chiefly from those who are not financially privileged or do not occupy an appropriate position in the market for credit."
Wow! That almost sounds like a Conservative perspective.