Krugman in New Republic

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Sat Sep 26 23:10:02 PDT 1998


On Thu, 24 Sep 1998, Doug Henwood wrote:


> Rakesh Bhandari wrote:
>
> >In a recent New Republic Krugman blames the failure to implement Keynesian
> >policies of low interest rates/fiscal stimulus in the recession mired
> >third world on international speculators. I was wondering if one replaced
> >that scapegoat with international jewry, as Mahatir already has, whether
> >this analysis is any different than traditional fascism.
>
> Rakesh, just because List was a nationalist doesn't make him a Nazi; you
> could argue continuum, slippery slope, etc., but there's still a
> difference. There's a difference between "speculators" and "Jews," since
> someone like Krugman could define fairly precisely what social actors and
> functions he means, while blaming Jews is just racist crap. Why the urge to
> make these leaps?

Dear Doug,

OK leaving aside the debate about whether I overspoke on List (again I refer those interested to the excerpts from List's Memorandum cited by Neumann) I didn't make the leap about equating intl speculators and Jews-- Mahathir did. It's not for nothing that Adorno argued anti-semitism is intrinsic to capital.

Krugman is in open conversation with that protofascist about how to best implement capital controls to foil the plans of those wily speculators. Sachs seems to think they will only lead to more chaos and recommends devaluation along with lower interest rates.

At any rate, what I think is really troubling about Krugman's analysis is the suggestion that the IMF has been forced to impose fiscal austerity/high interest rates as a condition of rescue funds solely because of the power of international speculators or the power of hot money. This seems to me to blame a very narrow fraction of capital for Depression conditions and IMF sadism, hurtling hundreds of millions of people into the utmost degradation and death.

The IMF imposes austerity and liberalization on behalf of the imperialist bourgeoisie as a whole whose collective interest the IMF represents

*Imperialist industrial capital achieves further centralization through acquistions at fire sale prices; the bankruptcies that follow from austerity, high interest rates and changed accounting rules are in the interests of the most powerful firms, both domestically and internationally. And wage gains can be reversed in this environment as well.

*imperialist creditors are assured that they will be honored before all else by the imposition of fiscal austerity.

*as these countries are forced to sell to make hard cash only to honor creditors and not for further purchase (good bye Say's Law), their cheap imports are taking the edge of inflation in the US in particular, allowing Greenspan not to increase interest rates which could have the effect of piercing the bubble and hurtling the US into a deep recession.

The IMF is not simply kow towing to the dark powers of hot money; the IMF is no poor victim of dark forces as Krugman probably sees the world in his grown up dungeons and dragons outlook.

The IMF is carrying out its mission--to enforce the interests of imperialism as each periphery is brought to its knees by the transfer of value out of the country and the explosion of poverty as foreign direct investments and export markets shrivel up due to the slow down in global capital accumulation.

Needless to say, Keynesianism is proving itself a weak tool in Japan to revive accumulation on which the fate of the peripheries tied to it presently depend. And this can't be blamed on those dark forces. Indeed if Krugman's mad advice were taken to inflate Japan out of its liquidity trap, the devalued yen would be sure to sink the peripheries and probably induce China to commence yen devaluations which could have the most horrific impact.

But Keynesianism does not steer clear of that truly dark neo mercantalism of which List was an prophet. Keynesianism will help to bring that world on along with indirect real wage cutting and immiseration through inflation and complex monetary games.

best, rakesh



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