Why? Because an economy with more and more automation based on private enterprise and private capitalist production could still sell its output and obtain money profits, if a government managed the demand-side of the economy by providing a guaranteed income (with, say, taxes on consumption, property, and ownership of financial and real assets and returns from those assets, with the shortfall covered by central bank money creation). As long as the balance of payments functioned successfully, a type of capitalism could continue.
That is, such an economy would still be a variety or type of capitalism: it would not be a command economy or the type of socialism envisaged by Marx.
Any Marxist response to this depends on Marx’s definition of capitalism. If one wants to define capitalism merely as a system of private production based on employment of free human wage labourers, then of course capitalism would cease once employment of free human labour ceased.
But this is just playing with words: setting up a narrow analytic definition of capitalism (true by definition), and ignoring other obvious real world aspects of capitalist systems of production.
If capitalism is to be defined in any empirically-defensible sense, it would need to use the following criteria:
Capitalism is a system of production as follows:Now if (3) fell and fell or even ceased to happen in an economy where production is increasingly done by machines, then it would still leave us with criteria (1) and (2).
(1) where the vast majority of all capital goods are owned privately and where there is a high degree of private property (in land, houses, private possessions, etc.) and rights to private property;
(2) where the vast majority of all decisions on investment and production of commodities are made by private agents (though this does not exclude certain public goods);
(3) where there exists a class of free human beings who work for a wage, either from the private or public sector (though mostly in the private sector).
The new system of nearly fully or fully automated production would in essence still be a type of capitalism, because it would still have traits (1) and (2), which clearly lie at the heart of what capitalism is.
In short, it would not be a system where all business is owned by the state or where the state plans all economic activity, and there is no necessary reason why a capitalist mode of production must end even if human wage labour falls towards zero.
LK,
ReplyDeleteI am trying to get a better fix on what constitutes your (alleged) Leftism, since you reject so many of the shibboleths and delusions of the left. (I won't itemize, as you have posted many here.)
Obviously you are secular and socially permissive: in favor of gay marriage, etc. But those aren't Leftist per se. Nor is support for a welfare state (just ask Bismark.) So what's left?
It does seem you recognize the need for a market economy and capitalism. But I think you want more governmental intervention and especially spending to (hopefully) combat unemployment, and because you see more cases of market failure than, for example, I do, and think there is a way for intervention to deal with them.
Fair summary?
My guess is you'd agree with DeLong here.
Delong had a corresponding post on ways markets can fail (especially via non-participation) but I cannot find it.
http://delong.typepad.com/sdj/2010/12/what-do-econ-1-students-need-to-remember-most-from-the-course.html
Ken B,
DeleteAt the heart of what is sound on the left is this: a proper economic science of capitalism, and policies to make capitalism highly successful, dynamic, and a very effective force for making all people in society wealthier.
That system is a social democratic capitalism with effective regulation and macroeconomic interventions -- the policies that produced what historians now call the "golden age of capitalism" (c. 1945 t 1973).
Unfortunately, parts of the left got contaminated by crackpot ideas like Marxism. But, unfortunately, the right doesn't have any proper economic science of capitalism either: it has the fraud of neoclassical economics or Austrianism, which, at their heart, are pseudo-scientific nonsense just like Marxism.
E.g., Wicksellian loanable funds, the natural rate of interest, rational expectations, the EHM -- these are all unrealistic and absurd theories just like the Marxist labour theory of value.
Also, at the heart of this is understating properly how markets do in fact work. E.g., how do we really equate supply and demand in the modern capitalism? Well, it is not because of mythical flexible prices and wages clearing markets -- this is almost wholly untrue, and at most only ever apples to small subset of flexprice markets.
In reality, supply and demand are equated **mostly** because businesses respond to demand signals and cut or raise production and employment in accordance with these signals, managing any problems through inventories and capacity utilisation. Business prices are remarkably inflexible with respect to demand and set on total average unit costs plus a profit mark-up.
It surprising how poorly this is even understood in neoclassical economics, many of whose models actually assume flexible wages and prices.
Thanks. A thoughtful response. I will mull some more questions.
DeleteBut one thing we disagree on is the strength of your mark up pricing argument. This is just one of the ways in which prices are sticky. The keyenesians are right about sticky prices, but are still neo-classical right?
One thing missing from your response is the death camps. Bob Roddis assured me you wanted death camps.
Ken B,
DeleteShort answer: the neoclassical synthesis Keynesians and New Keynesians have the intelligence and wit to recognise the reality of highly inflexible wages and prices, yes, but they are still fundamentally Walrasian neoclassicals at heart with a heavy dose of Knut Wicksell (sometimes Marshall).
Long answer: if you have the perseverance, I’ll do my best to explain further.
Maybe start with my chart here and if you soldier through my posts here and here.
There are 3 types of Keynesians:
(1) old neoclassical synthesis Keynesians, e.g., people like John R. Hicks (1904–1989), Franco Modigliani, Paul A. Samuelson, Robert Eisner, Walter W. Heller and Robert M. Solow. In the 1970s, neoclassical synthesis Keynesians went through a crisis because of stagflation.
(2) out of neoclassical synthesis Keynesianism and monetarism, there emerged in the 1980s/1990s New Keynesianism, e.g., people like Joseph E. Stiglitz, Olivier Blanchard, John B. Taylor, David H. Romer, Christina D. Romer, Bradford DeLong, and N. Gregory Mankiw.
(3) the heterodox, non-neoclassical Post Keynesians.
-------------
Now both neoclassical synthesis Keynesians and New Keynesianism are founded on Walrasian neoclassical theory, and they assume that if only wages and prices were highly or perfectly flexible this would be an effective, universal, reasonably rapid and sure-fire solution to employment and cure for recessions (that is, via clearing of markets, including flexible wages to clear the labour market).
Post Keynesianism rejects this view, because Keynes showed us why wage and price flexibility is highly ineffective and likely – in many circumstances – to severely exacerbate economic problems, making things worse (note well: this doesn’t mean it can never work, only it is, generally speaking, highly unlikely to). See this post here.
As I said, both the neoclassical synthesis Keynesians and New Keynesians have the wit to recognise the reality of price and wage rigidity. That is why they advocate monetary and fiscal policy to cure unemployment (though the conservative branch of New Keynesianism embodied by N. Gregory Mankiw is sceptical even of fiscal policy! They are actually more a species of monetarist).
By the time you get to New Classicals and Austrians, you have entered cloud cuckoo land, where price and wage rigidity is barely acknowledged, or – when it is – is blamed on evil government and trade unions.
But once you properly understand mark-up pricing (see here if you have the patience) you can see price rigidity is mostly caused by capitalists themselves.
continued:
DeleteThey, generally speaking, shun universal price adjustment, because market clearing by flexible wages and prices is bad business: it causes more problems to them than it is worth. (Note carefully: neoclassical theory requires much, much more than just the odd sale to clear stock or going out of business sale – I’m not denying the existence of any of these things). Add to this: most people – even middle class people – vehemently resent and often oppose nominal wage cuts (for more on this, see the work of Bewley here).
That is some Rube-Goldberg-ass social planning. So the list of things you don't understand has expanded from "Marx's theory," "communism," and "socialism" to "capitalism," and "the state."
ReplyDeleteThe silver lining here is your idea for a property-owning dynastic dystopia is way less realistic than global socialism.
Eager to see your response to Ken, since you've been very dismissive when I've made similar observations.
"That is some Rube-Goldberg-ass social planning. "
DeleteComing from a lunatic cultist who wants (1) the government to nationalise nearly all industry and (2) then plan virtually all production and consumption, that comment is rich indeed.
Tell us again, Comrade Hedcase: is it your opinion that Marx never made any mistakes or errors, and that all 3 volumes of Capital are totally consistent?
Are you aware of even one error, mistake or failed prediction in the 3 vols. of Capital?
The description of capitalism given in this post would be consistent with that used by the vast majority of academic economists. Perhaps the Marxist commentator would like to provide his own definition so others can understand arcane terminology of his cult.
DeleteComing from a lunatic cultist who wants (1) the government to nationalise nearly all industry and (2) then plan virtually all production and consumption, that comment is rich indeed.
DeleteThank you for the case in point re: your incomprehension of socialism. Saves me some typing.
Are you aware of even one error, mistake or failed prediction in the 3 vols. of Capital?
I've answered this numerous times in the last year. If you're not going to retain the answer, why bother?
Perhaps the Marxist commentator would like to provide his own definition so others can understand arcane terminology of his cult.
Oof. You've already tipped your hand and revealed you're not going to take my answer seriously. Very hamfisted.
For those who are earnestly confused, the problem is that LK doesn't even consider the relations of class and how they constitute economic systems. Losing the wage labor relation doesn't leave "a type" of capitalism, because the social relation of capital itself would cease to be. And even in light of this, our supposed "leftist" blogger takes it to the most reactionary place imaginable, basically saying: "human labor is obsolete, but let me tell you why we should keep social classes anyway."
"Thank you for the case in point re: your incomprehension of socialism."
DeleteSo a transitional communist state wouldn't nationalise most industries? Would it, then, leave most production in private hands, idiot? lol..
"I've answered this numerous times in the last year. "
So you're still unaware of any error in Marx's work? Even though his metallist view of money is refuted by history?
You, essentially, *still* to this day think Marx was inerrant -- despite all evidence to the contrary.
Thanks for admitting how Marxism destroys your brain and leaves you looking like quasi-religious cultist you are, Comrade Hedcase.
"Losing the wage labor relation doesn't leave "a type" of capitalism, because the social relation "
DeleteAnother stunning proof of my argument. Your definition of capitalism hinges on only one aspect of modern capitalism, ignoring the rest.
And yet other Marxists actually maintain that the Soviet Union was never communist but a state capitalist system, e.g., we know that under the New Economic Policy (NEP) from 1921 when Lenin was forced to introduce an economic system with substantial private production and market activity.
So was the Soviet Union socialist, state capitalism or what, according to you?
"the problem is that LK doesn't even consider the relations of class and how they constitute economic systems."
DeleteI think he sees the economic system far more clearly than anyone mired in Marxist dogma. That's why he mentioned the self-employed, who are often both proprietors and workers in their businesses. He might have also mentioned the many millions of workers who directly or indirectly own shares in companies.
One of your most interesting posts.
ReplyDeleteBut, what about war economy, nazi economy, or Ussr during NEP. There are capitalist or not ?
ReplyDeleteThese were hybrid economies.
Delete(1) The US and Britain in WWII were democratic moderate command economies, but with a very great deal of private enterprise.
(2) The New Economic Policy (NEP) was a type of authoritarian command economy (increasingly with respect to the commanding heights) but clearly with a considerable degree of private production and market activity though it was gradually reduced through more and more planning.
(3) Nazi economics after 1936 was increasingly a type of authoritarian command economy too and again with substantial private production and market activity. Nazi economic planning only really became intense after WWII began and under Albert Speer.
Lol, apparently you've "degenerated" into a "reactionary."
ReplyDeletehttps://twitter.com/UnlearningEcon/status/698218024252403719
That is only because some people on the left suffer from the Marxists disease and a pathological hatred of capitalism, going well beyond the reasonable criticisms one can make.
DeleteThose idiots ought to look at the actual history of the Soviet Union, say, when Lenin was forced to adopt the New Economic Policy (NEP) in which there was still substantial private production and market activity.
Hey LK, do you know of any books, papers or else, regarding the criteria of capitalist mode of production? Thanks in advance
ReplyDeleteI have admit, no. No doubt there is a literature on this subject somewhere, but I've not looked into it, to be honest.
DeleteAlso i found a nice solution to technological unemployment.
ReplyDeleteSimply in case of serious technological unemployment the central bank would be able to subsidize labour for private companies until full employment achieved for example the central bank will pay to corporation 25 cents for every salary dollar or 50 cents and regulate this subsidy until full employment achieved) in the same way like central bank control rate of interest today.
also something unrelated.
ReplyDeletei found really interesting testimony in times where financial instiutions (and the "evil central bank") werent really developed and in a time where the definition of money was closest to the so called austrian commodity money.
taanit 19b (jewish scripture from 2 centuary AD)
http://halakhah.com/pdf/moed/Taanith.pdf
R. Hanina said: If a se'ah of grain costs one sela’ and is obtainable it is
drought; but if four se'ahs cost a sela’ but are not easily obtainable, then it is a famine. R. Johanan
added: This holds good only when money is cheap and food dear, but if money is dear and food
cheap then the alarm is sounded at once. For R. Johanan said: I remember well [the time] when four
se'ahs cost one sela’ and yet there were many in Tiberias swollen from hunger because there was not
a coin to be had.
its the first documented deflation and the horrible deflation consequences in the world.
and its was in a time where central bank and
and financial instutiions dont really existed at all.
and a time where money been closest to the definition "commodity money" (Israelites used silver as their currency).
note 1: seah=equals 1 se'ah would equal 7.33 litres or 7.33dm3.
ReplyDeletenote 2:Selah=equals 1 Selah equals to 19.2 gram in case of Land of israel in the 2 centuary silver was the most popular currency.
Comrade Hedlund:
ReplyDelete"Refuted in what way?
Refuted by the modern existence of fiat money totally severed form gold, you dumb b*stard, since Marx states repeatedly that money must be attached to and officially convertible into a commodity like gold, always:
“But as soon as credit is shaken [sc. in commercial crises]—and this phase always appears of necessity in the cycles of modern industry—all the real wealth is to be actually and suddenly transformed into money, into gold and silver, a crazy demand, which, however, necessarily grows out of the system itself. And all the gold and silver, which is supposed to satisfy these enormous demands, amounts to a few millions in the cellars of the Bank.
In the effects of the gold drains, then, the fact that production as a social process is not subject to social control is strikingly emphasized by the existence of the social form of wealth outside out of it as a separate thing. The capitalist system of production, it is true, shares this with former systems of production, so far as they rest on the trade with commodities and private exchange. But only in it does this become apparent in the most striking and grotesque form of the most absurd contradiction and nonsense, because, in the first place, production for the direct use of the producers is most completely abolished under the capitalist system, so that wealth exists only as a social process expressed by the interrelations of production and circulation; and in the second place, because capitalist production forever strives to overcome this metallic barrier the material and phantastic barrier of wealth and its movements, in proportion as the credit system develops, but forever breaks its head on this same barrier.
In the crisis the demand is made, that all bills of exchange, securities, and commodities shall be simultaneously convertible into bank money, and this whole bank money consists of gold.” (Marx 1909: 673–674).
“But it should never be forgotten, that money, in the first place, in the form of precious metals, remains the basis from which the credit system naturally can **never** detach itself.” (Marx 1909: 712).
“The banking system shows, furthermore, by putting different forms of circulating credit in the place of money, that money is in reality nothing but a special expression of the social character of labor and its products, so that this character, as distinguished from the basis of individual production, **must** present itself in the last analysis as a thing, as a peculiar commodity by the side of the other commodities.” (Marx 1909: 713).
Yes, all of that is accurate. Are you all clear on what is meant by "in the last analysis"?
DeleteFurther, can you explain to me why the elimination of a policy of price-fixing on one commodity "severs" the dollar's relation to it? Are you saying the market is a less authentic mediator of dollars and commodities than the state?
Moreover, if the relationship is well and truly severed, banks and states would have no reason to jealously clutch their gold reserves; one almost wonders why the USA felt pressured to close the gold window at all.
Your idiocy is on the level of any Rothbardian.
DeleteMarx is saying that money can never be officially severed from conversion into gold at a fixed rate by the state. This has clearly happened today.
According to you, it's still true merely because you can buy gold with money (WTF?), an outrageously dishonest, lying misrepresentation of what Marx said.
In fact, Marx said "the credit system naturally can **never** detach itself” from gold, i.e, as an official backing of credit money convertible into gold at fixed rate.
Virtually everything you say proves how your mind is turned by mush by this Marxist insanity. You've lost this point. Get over it.
Hedlund has a point. Consider Canada. Canada has always been on a tulip standard, because you have always been able to buy tulips with Canadian dollars. So we've always had petalism. Although you can also buy roses, so perhaps Canada is on bipetalism? Does that make Hedlund doubly right?
Deletelol.. You are right! All countries on fiat money also have a:
Delete(1) bovine standard since we can buy cows with money
(2) feline standard, since we can buy cats
(3) a chocolate bar standard, etc. etc. etc.
Pure genius!
Hedlund,
ReplyDeleteThe level of your pathological lying is so extreme that you now deny what you conceded last year. I said Marx was wrong on this point and you agreed in this comment:
>“Attempts to claim that fiat money can properly function as money within Marx’s economic
>system as Marx understood money are utterly wrong. If Marxists are going to do this, they must
>admit that they need to radically revise Marx’s economic system and that Marx was wrong about
>money in important respects.
It seems so.
Hedlund@June 9, 2015 at 6:18 AM
http://socialdemocracy21stcentury.blogspot.com/2015/06/marx-on-necessity-of-money-being.html?showComment=1433855906492#c4190896160816262629
You are now a proven liar.
Quote my whole reply.
Delete"It seems so. I said I generally withhold judgment on this topic (since it's orthogonal to my research interests), but if pushed I suppose I'd agree with this sentiment. As I've mentioned, there are many theorists who have attempted to make just such revisions, but I'd probably come down more on the side of those who distinguish the origins, roles and behaviors of commodity money from those of non-commodity money."
I have not budged from this position, and in fact have grown more secure in it as I've been rereading the original texts along with the arguments of scholars such as Claus Germer, Alan Freeman, et al. I tried to provide some of these to you, and as I recall you never looked. As usual.
You remain completely, irrationally allergic to context. This is absolutely twisted, LK.
lol. You said "but if pushed I suppose I'd agree with this sentiment". If you had half a brain you could never have said this if you actually thought the theory was true.
DeleteYou are incoherent and comical.
Any person who refuses to see that Marx's views on metallism are false has already demonstrated a degree of irrational stupidity so bad that they are clearly on the same level as any idiot religious fanatic.