Mandel and Keynes

Doug Henwood dhenwood at panix.com
Thu Sep 17 08:29:15 PDT 1998


Louis Proyect wrote:


>Now to answer Rakesh's claim that Mandel made concessions to Keynes. Rakesh
>believes that the following is evidence of such a concession:
>
>"A further important factor should be borne in mind, which has to some
>extent been correctly pointed out by the Keynesian school. Money as
>purchasing power of monetarily effective demand should not be compared
>exclusively with the ongoing flow of commodity production; for it also has
>a mobilising effect--in other words, it can restore fluidity to a given
>stock of commodities. This function is especially important in a crisis of
>overproduction." (Late Capitalism, p. 419)
>
>Nothing can be further from the truth. Mandel is not endorsing deficit
>spending or any other Keynsian measure. He is simply taking note that the
>bourgeoisie utilizes such measures in a "crisis of overproduction,"
>obviously like the one we are facing now.

The bourgeoisie isn't doing anything like this right now - quite the opposite. The U.S. has balanced its budget, Europe has been cutting its deficits sharply, and Latin America and Southeast Asia have had savage austerity programs imposed on them. Germany says there'll be no G-7 interest rate cuts, and Greenspan is in no hurry to loosen. (And the president of the monetarist St Louis Fed, William Poole, says there's no reason to loosen at all.)

The fiscal tightening across the OECD has been pretty stunning. According to OECD estimates, the cyclically adjusted deficit in the EU was -5.3% of GDP; it's likely to be around -1.5% this year, a shift of 3.8 percentage point. The U.S. went from -4.0% to 0.0%, a shift of 4 percentage points. I don't think there's any precedent for this kind of fiscal tightening since the end of World War II. The only exception is Japan, whose cyclically adjusted fiscal position went from a surplus of 0.9% in 1992 to a deficit of -2.2%, a shift of -3.1 percentage points. Coming out of the early 1990s recession, there was a mild shift to deficit spending across the OECD, and coming out of the 1980s recession there was a very big stimulus, mainly coming from the Reagan deficits. If the world is slipping into a true global slump, there's no help coming from either fiscal or monetary stimulus - quite the contrary, if anything, policy is tightening.

Doug



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