This sort of thing always pops up when social democratic governments start encroaching on the prerogatives of capital. Typically, some sort of a capital strike occurs, usually, capital flight occurs too. The government is then faced with the choice of pushing on in a more radical direction, taking over sectors of the economy and bringing them under public ownership or it must retreat. Over the past generation, most social democratic governments when faced with this kind of situation have retreated. Mitterrand did that in the early 1980s. Very recently, the Syriza government did that in Greece, after being threatened by the Troika. One of the few exceptions has been the Venezuelan government under the late Hugo Chavez and Nicolás Maduro, who have had the benefit of oil resources to give them a fiscal cushion, plus the fact that their governments have been willing to educate and mobilize the masses to support revolutionary policies.
The economist Michael Lebowitz, (who has served as an adviser to the Venezuelan government), addressed some of these issues a decade ago, in a Monthly Review article, "Ideology and Economic Development" (http://monthlyreview.org/.../ideology-and-economic...).
There, he noted: ----------------------------------------------------------------------------- Yet, it is essential to understand that the conclusions of the neoclassical economists are embedded in their assumptions—and particularly relevant here is the assumption that all other things are equal. Consider two simple examples, rent control and mineral royalties.8 If you introduce rent controls (at an effective level), the conservative economist predicts that the supply of rental housing will dry up and a housing shortage will emerge. Likewise, he will tell us that if you attempt to tax resource rents (notoriously difficult to estimate), investment and production in these sectors will decline, generating unemployment. Both those propositions can be easily demonstrated—and they can also easily be demonstrated to be entirely fallacious with respect to the necessary conclusion.
Assumed constant in both cases is the character and level of government activity. Clearly, rent controls may reduce private rental construction—but if the government simultaneously engages in the development of social housing programs (e.g., the fostering of cooperatives and other forms of nonprofit housing), there is no necessary emergence of a housing shortage. Similarly, taxing resource revenues may dry up private investment in mineral exploration but a government corporation established for exploration and production in this sector can counteract the effects of a capital strike. Obviously, all other things are not necessarily equal. Why should all other things be equal if a social democratic government rejects the logic of capital?
Thus, we need to be aware of the limits of the conservative economist’s logic. However, that does not at all mean that these arguments can be ignored! Because what the conservative economist does quite well is indicate what capital will do in response to particular measures. It is an economics of capital. And, nothing is more naive than to assume that you can undertake certain measures of economic policy without a response from capital; nothing is more certain to backfire than introducing measures that serve people’s needs without anticipating capital’s response. Those who do not respect the conservative economist’s logic, which is the logic of capital, and incorporate it into their strategy are doomed to constant surprises and disappointments.
Understanding the responses of capital means that a capital strike can be an opportunity rather than a crisis. If you reject dependence upon capital, the logic of capital can be revealed clearly as contrary to the needs and interests of people. When capital goes on strike, there are two choices, give in or move in. Unfortunately, social democracy in practice has demonstrated that it is limited by the same things that limit Keynesianism in theory—the givens of the structure and distribution of ownership and the priority of self-interest by the owners. As a result, when capital has gone on strike, the social-democratic response has been to give in. ---------------------------------
Likewise, Oskar Lange in "The policy of transition", wrote the following:
----------------------------------------------- The preceding treatment of the allocation of resources and of pricing in a socialist economy refers to a socialist system already established. The question does not present any special theoretical difficulty if a sector of small-scale private enterprise and private ownership of means of production is embodies in a socialist economy. However, on grounds which result from our previous discussion of the problem, this sector should satisfy the following three conditions: (1) free competition must reign in it ; (2) the amount of means of production owned by a private producer (or of the capital owned by a private shareholder in socialised industries) must not be so large as to cause a considerable inequality in the distribution _of incomes; and (3) the small-scale production must not be, in the long run, more expensive than than large-scale production. But the problem of transition from capitalism to socialism presents some special problems. Most of those problems refer to the economic measures made necessary by the political strategy of carrying.through the transformation of the economic and social order. But there are also some problems which are of a purely economic character and which, therefore, deserve the attention of the economist.
The first question is whether the transfer into public property and management of the means of production and "enterprises to be socialised should be the first or the last stage of the policy of transition. In our opinion it should be the first stage. The socialist government must start its policy of transition right away with the socialisation of the mdustnes and banks in question This follows from what has been said before on the possibility of successful government control if private enterprise and private investment. If the socialist government would attempt to control or supervise them while leaving them in private hands, there would emerge all the difficulties of forcing a private entrepreneur or capitalist to act differently than the pursuit of profit commands. In the best case the .constant friction between the supervising government agencies and capitalists would paralyse business. After such ab unsuccessful attempt the socialist government would have either to give up its socialist aims or to proceed to socialisation; ---------------------------------------------------------------
Lange finished up his argument with the following paragraph:
"[Alfred] Marshall placed caution among the chief qualities an economist should have. Speaking of the rights of property he observed: "It is the part of responsible men to proceed cautiously and tentatively in abrogating or modifying even such rights as may seem to be inappropriate to the ideal conditions of social life." But he did not fail to indicate that the great founders of modern economics were strong not only in caution but also in courage. Caution is the great virtue of the economist who is concerned with minor improvements in the existing economic system. The delicate mechanism of supply and demand may be damaged and the initiative and efficiency of business men may be undermined by an improvident step. But the economist who is called to advise a socialist government faces a different task, and the qualities needed for this task are different, too. For there exists only one economic policy which he can commend to a socialist government as likely to lead to success. This is a policy of revolutionary courage."
Jim Farmelant http://independent.academia.edu/JimFarmelant http://www.foxymath.com Learn or Review Basic Math
---------- Original Message ---------- From: Marv Gandall <marvgand2 at gmail.com> To: Pen-L Economics <pen-l at lists.csuchico.edu>, LBO <lbo-talk at lbo-talk.org> Subject: [lbo-talk] Corbyn's economic program Date: Sun, 13 Sep 2015 18:25:54 -0400
I�ve linked below to a richly detailed examination and friendly criticism of the radical program which has propelled Jeremy Corbyn into the leadership of the Labour Party.
The British Marxist economist Michael Roberts acknowledges that Corbyn is �a longstanding fighter for labour causes and for socialism� and that his campaign deserved the support of �all those wanting a better life for the majority�. But he doubts its Keynesian program can be realized in practice under a Corbyn government.
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