We are all Keynesians now

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Fri Jun 5 17:34:40 PDT 1998

Sometime this week there was a story in the WSJ about Krugman's recommendation that Japan should print yen madly. What would the class or distributional consequences be of the resultant inflation? Would such a strike against deflation and reduction in real interest rates indeed yield that elusive investment boom? Would the devaluation of the yen be a catastrophic blow to all the little geese high-flying Japan was supposed to be leading?

As for the Keynesian and AFL-CIO view that "there-is-no-savings-shortage-so-let-the-govt-spend" , are we all in agreement with the following logic: "while Keynes is no longer politically popular, [Robt]Pollin's collection suggests that he may nevertheless be right--any successful efort to increase the aggregate saving rate will hurt corporate investment. Increased saving shrinks the market for goods, depresses the capital consumption allowances that finance gross investment, and dampens current and future profits. Thus deficit reduction in the name of freeing up aggregate saving for private investment is worse than simply a misplaced effort: by depressing aggregate demand and thereby hurting corporate saving, it actually harms real investment." Michele Naples, review of R Pollin's Macroecon of Saving Finance and Investment in Challenge, May June 1998.

It may be true freed up savings wouldn't be invested, but will govt spending and all the other Keynesian stimuli really have these desired effects on real investment?

What are the grounds for skepticism about the Keynesian panacea? What do people think of Mattick's critique--which as some know from previous email lists I consider the most important Marxist contribution after World War II (Marx and Keynes: the limits of the mixed economy; Economic Crisis and Crisis Theory; Economics, Politics and the Age of Inflation; Marxism: last refuge of the bourgeoisie? all books that need to be read ten times or so).

Best, Rakesh

More information about the lbo-talk mailing list