Money Runners for Marx
On Bloomberg today is a piece by George Magnus, senior economic advisor at UBS, on the relevance of Marxian ideas.
Policy makers struggling to understand the barrage of financial panics, protests and other ills afflicting the world would do well to study the works of a long-dead economist: Karl Marx. The sooner they recognize weâ€™re facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it …
Consider, for example, Marxâ€™s prediction of how the inherent conflict between capital and labor would manifest itself. As he wrote in â€œDas Kapital,â€ companiesâ€™ pursuit of profits and productivity would naturally lead them to need fewer and fewer workers, creating an â€œindustrial reserve armyâ€ of the poor and unemployed: â€œAccumulation of wealth at one pole is, therefore, at the same time accumulation of misery.â€
… To put Marxâ€™s spirit back in the box, policy makers have to place jobs at the top of the economic agenda, and consider other unorthodox measures. The crisis isnâ€™t temporary, and it certainly wonâ€™t be cured by the ideological passion for government austerity.
Here are five major planks of a strategy whose time, sadly, has not yet come.
First, we have to sustain aggregate demand and income growth, or else we could fall into a debt trap along with serious social consequences. Governments that donâ€™t face an imminent debt crisis — including the U.S., Germany and the U.K. — must make employment creation the litmus test of policy. In the U.S., the employment-to-population ratio is now as low as in the 1980s. Measures of underemployment almost everywhere are at record highs. Cutting employer payroll taxes and creating fiscal incentives to encourage companies to hire people and invest would do for a start.
Second, to lighten the household debt burden, new steps should allow eligible households to restructure mortgage debt, or swap some debt forgiveness for future payments to lenders out of any home price appreciation.
Third, to improve the functionality of the credit system, well-capitalized and well-structured banks should be allowed some temporary capital adequacy relief to try to get new credit flowing to small companies, especially. Governments and central banks could engage in direct spending on or indirect financing of national investment or infrastructure programs.
Fourth, to ease the sovereign debt burden in the euro zone, European creditors have to extend the lower interest rates and longer payment terms recently proposed for Greece. If jointly guaranteed euro bonds are a bridge too far, Germany has to champion an urgent recapitalization of banks to help absorb inevitable losses through a vastly enlarged European Financial Stability Facility — a sine qua non to solve the bond market crisis at least.
Fifth, to build defenses against the risk of falling into deflation and stagnation, central banks should look beyond bond- buying programs, and instead target a growth rate of nominal economic output. This would allow a temporary period of moderately higher inflation that could push inflation-adjusted interest rates well below zero and facilitate a lowering of debt burdens.
“policy makers have to place jobs at the top of the economic agenda, and consider other unorthodox measures.”
Hoo! That gave me a good belly-laugh . . . !
I doubt Marx would have considered this a “once-in-a-lifetime crisis of capitalism.” More likely, he would have seen it as the latest in a recurrent series of crises endemic to capitalism at its very core.
A US report draws this conclusion “…history teaches us that curtailing budget deficits prior to the end of a balance sheet recession leads to a deflationary recession. This time is no different….” We need a massive federal jobs stimulus or suffer the consequences.
While I’m no expert on Marx or Marxism, the question occupying Western Marxists since the end of WWI has not been what this “economist” envisions, another in a series of crises, but why has there been no revolution–when all the circumstances have been ripe, and ripe, again.
It has been a long time since Marx.
Since then there has been Lukasc, the Frankfort School, Gramsci, and into the present, Agger and Jacoby.
When the world has been turned on its head, when politics is played out everywhere EXCEPT in the places we call political, when it is the LESS developed countries that declare revolution–after decades of being oppressed by that very fountain of democracy, the United States–it seems rather quaint capitalists and their publicists now propose that Marx, and his prescriptions during the age of competitive capitalism be applied to the age of monopoly capitalism.
What will these numbers do?
They will rally the capitalists themselves!
The historical circumstances, the totality, today, is not the same as it was post WWII. Proposing the return to something that maybe was, but maybe wasn’t as it seems through the very lens that creates the suffering of today, seems a nice story told to the children of the 1%.
“…the question occupying Western Marxists since the end of WWI has not been what this â€œeconomistâ€ envisions, another in a series of crises, but why has there been no revolutionâ€“when all the circumstances have been ripe, and ripe, again.”
A Bizarre commentary. The question perplexing that generation of Marxists was how the dynamics of reform capitalism had blunted the revolutionary spirit of the proletarian. An equally daft problematic in some senses but not what you have outlined.