why krugman is wrong

Duvinrouge says many ‘socialists’ have got pleasure from seeing Krugman expose the prejudices and flaws in those advocating austerity as a solution to the crisis. He is right that austerity won’t work and is mainly being pursued for ideological purposes. However, he is wrong to believe that Keynesian fiscal stimulus can solve the crisis. He is wrong because he misdiagnoses the crisis and misunderstands the nature of value.

For Keynesians like Krugman, the problem is a lack of demand because the private sector is not investing. Without a surge in exports they argue that it is the government’s job to take up the slack and restore effective monetary demand. This would have some merit if the problem was just a lack of demand due to producers not investing and instead hoarding their money. But this ignores the mountain of debt and the reasons why there is so much debt.

interview with andrew kliman

Duvinrouge: Can you tell me what the key message of your new book, The Failure of Capitalist Production, is?

 

Andrew Kliman: The Great Recession was waiting to happen. There were unresolved problems in the system of capitalist production that had been building up over a third of a century. The rate of profit fell and never recovered in a sustained manner, which resulted in persistently sluggish investment and economic growth, which in turn resulted in rising debt burdens. And these problems induced governments to solve them or paper them over with policies that made the debt build-up even bigger.

DVR: Your book is full of statistics and as we know interpretations of statistics can be very different. It would appear that your choice of historical cost as opposed to current cost is crucial. Please can you explain the difference?

 

Accountants can value assets at their current cost or at their original cost when they were acquired. The latter is usually called their “historical cost.” Both methods have their place. But one thing you can’t do is compute the rate of profit, i.e., the rate of return on investment, by dividing profit by the current cost of the capital assets. It’s not wrong to do this; it’s impossible. What you wind up with just isn’t a rate of return on investment. What the assets are currently worth is simply not the same thing as the amount of money that has actually been invested in them. To measure the latter, you have to take their historical cost and subtract depreciation.

marxist crisis theory – cyclical and breakdown

duvinrouge attempts to explain cyclical crises and longer term trends

A lot of Marxists seem confused about economic crises. Some evoke the fall in the rate of profit to explain cyclical crises, some underconsumption, some forget the law of value and sound like establishment economists,  while some just forget the materialist foundations of Marx and drift into a world of subjective will powering the class struggle. So here’s an attempt to explain the nature of an abstract cyclical crisis and how it differs from breakdown.

A cyclical crisis is just over-production. An overproduction of commodities relative to the commodity that acts as the universal equivalent – money. In otherwords, production runs ahead of the market. There is a problem realising surplus value. As the law of value asserts itself commodity production falls, i.e. there’s a recession.

unhappy economies: greek debt, PIIGS and the eurozone crisis

Oisín Mac Giollamóir explains the meaning of the current European crisis, and the relationship between debt and class struggle

Happy economies are all alike; every unhappy economy is unhappy in its own way. The well-worn acronym PIIGS (Portugal, Ireland, Italy, Greece and Spain) conceals more than it reveals. The PIIGS are not all alike.

Consider the difference between Ireland and Italy. Pre-crisis Ireland had a debt/GDP ratio of 25%, one of the lowest in Europe. Today it’s over 100% and is projected to rise to over 120%. Ireland’s crisis is not due to an over-expanded public sector, unsustainable spending, persistent budget deficits or anything like that. It is due to the bubble in the property market and the ongoing mismanagement, largely at the European level, of its collapse . Over the last four years Ireland’s economy has been wrecked by the crisis.  In contrast Italy has had major problems for sometime. Italy’s debt, which has already reached 120% of GDP, does not reflect the kind of rapid shift that has happened in Ireland. Rather Italy has had a long run budget problem. Italy’s debt has not been below 100% of GDP since the early 90s. Italy’s debt problem cannot be blamed exclusively on the crisis in the same  that Ireland’s can.

It is therefore important not to conflate the differing problems faced by the PIIGS. When we talk about the Greek crisis we need to be aware of the particular nature of Greece’s problems.

women at the cutting edge… 30th october

A day of discussions hosted by Feminist Fightback. 11am – 5pm, Saturday 30 October at The Arbour, 100 Shandy Street, London E1 4ST (nearest tube Stepney Green)

On 20 October the ConDem government’s “Spending Review” will detail enormous cuts in public services. We are already feeling the impact of earlier cuts many effected by Labour; nurseries and libraries are closing, jobs are being lost. As the government “austerity drive” steps up, the reality is that cuts will hit the lives of all but the wealthiest. In many cases women will be hit the hardest with recent reports estimating  that women will suffer 72% of the tax and benefit cuts.

are the cuts necessary, and does it matter?

Oisín Mac Giollamóir responds to a debate on whether UK capitalism ‘needs’ to make the cuts

First, does it matter whether the cuts are necessary or not? Some might say “No. Everyone knows that Labour would have introduced them as well. The point is to show how they are necessary regardless of who is in power and to argue that the only real solution is revolution.”

I disagree: it is not the task of revolutionaries to merely point out the limitations of Labour and situate ourselves to the ‘left of Labour’. Rather, we should fight for anything that increases the power, confidence and autonomy of the working class. We should support wage-workers and their dependents making demands for themselves independently of the needs of capitalism.

the commune issue 17

The September issue of The Commune is now available. Click the image below to see PDF or use the list of individual articles as they are posted online.

Contact us at uncaptiveminds@gmail.com if you would like to buy a printed copy (£1 + 50p postage) or set up a subscription. (£12 a year UK/£16 EU/£20 international.

News

spectre of communism haunts china’s rulers – Adam Ford on the recent strike wave

solidarity with the miners’ strike in ukraine – by Chris Kane

demo to support berns salonger cleaners – an IWW member writes on recent solidarity initiatives with migrant workers in sweden

is UNISON ready to fight the cuts? – a UNISON branch official looks at the state of the union as it gears up for major confrontations with the government

Life at work

a “zero hours” contract… for thousands of hours – Jack Staunton writes on his work in a government market research call centre

‘the security is to keep us in!’ – Sharon Borthwick reviews Rivethead, a ‘book of tales from the assembly line’

Strategies for fighting the cuts

building a movement against cuts – by Steve Ryan

nothing will be like it was before – Tom Denning writes on strategies we need and strategies we don’t

no escape from theory – Oleg Resin revisits the 1970s ‘state debate’ and questions the nature of public services

the ‘social wage’ and the hackney nurseries campaign – Camille Barbagallo and Nic Beuret look at how the cuts axe is falling, and why

proposed principles for anti-cuts movements – a motion by Dave Spencer to The Commune’s upcoming conference

Events

from meltdown to upheaval – an assembly on the crisis and how we organise hosted by The Commune, 11th September

the commune around britain – details of local groups and forums

women at the cutting edge – Feminist Fightback meeting on the crisis, 30th October

Our network, the left and theory

potere operaio: the last firebrands – Martine Bourne reports on one of the recent London forums on communist organisations past and present

a syndicalism for the 21st century? – Sheila Cohen draws the lessons of the 1910-14 Great Unrest for a modern understanding of workers’ democracy

for creative and critical thinking on the left – Permanent Revolution’s Eleanor Davies calls for joint forums and a culture of openness

from meltdown to upheaval: 11th september assembly

The Commune are hosting an assembly on Saturday 11th September, debating the effects of the crisis, the existing resistance and the questions it raises regarding how we organise. We have now filled in more of the timetable and blurbs for workshops, see below.

All welcome. We will be soliciting and publishing local and industry-specific reports in the lead-up to the event, see below for examples and see here for the questionnaire. Workshop details below, followed by timetable. The event is from 10am on Saturday 11th September at LARC, 62 Fieldgate Street, London E1 (Aldgate East tube).

local report from hackney, london – crisis in the city’s ripped back-yard

Written for debate at The Commune’s assembly on September 11th 2010 in London.

1) Intro 2) Class/Capital Structure in Hackney 3) General Re-Structuring in the Working-class Terrain 4) Overview of the Cuts 5) Recent Strikes / Resistance 6) Initiatives of the Left 7) Open Questions for Communist Strategy 8) Questionaire for Local reports 9) Footnotes

from meltdown to upheaval: 11th september assembly

We are hosting an assembly on Saturday 11th September, debating the effects of the crisis, the existing resistance and the questions it raises regarding how we organise.

All welcome. We will be soliciting and publishing local and industry-specific reports in the lead-up to the event, see here for the questionnaire. More details on each workshop and timings to follow. The event is from 10am on Saturday 11th September at LARC, 62 Fieldgate Street, London E1 (Aldgate East tube).

an alternative to the age of austerity

by Chris Ford

The new decade began with The Times predicting an “age of austerity” in the UK which will last for years. We can expect, they said, cuts in public spending to offset the Treasury budget deficit of £178 billion, caused to a large extent by the bank bailouts after the September 2008 crisis.

The view that the financial sector is at the roots of our current predicament is not restricted to the bourgeois papers like The Times. This view is common amongst liberal, Labour Party and socialist opinion. John Cruddas and a hundred other MPs are campaigning for a High Pay Commission, arguing our current predicament was caused by “greed”, as banking and executive salaries grew excessively. There is certainly widespread bitter resentment amongst working class people that we are paying for a loan to rescue the banks. Cruddas appears like a philanthropist from a Dickens Christmas story coming along to help the poor, making the rich share the pain of the recession. But state controls on high pay would only scratch the surface of the crisis: we need something far more fundamental.

the persistent fall in profitability underlying the current crisis

by Andrew Kliman

I have just released a new study of the rates of profit of U.S. corporations, 1929-2007, with emphasis on the period since the early 1980s. It’s entitled “The Persistent Fall in Profitability Underlying the Current Crisis: New Temporalist Evidence.

You can obtain the text, and an accompanying spreadsheet file containing data and graphs, by clicking on the link.

july 8th london forum: kliman speaks on the capitalist crisis

Andrew Kliman, author of ‘Reclaiming Marx’s Capital’, will be giving a talk in London on Wednesday 8th on ’causes and implications of the capitalist crisis’. The meeting takes place from 8pm at the Lucas Arms, Grays Inn Road, near King’s Cross.

Kliman, a member of the USA’s Marxist-Humanist Initiative, has argued that we have to see the current crisis as part of a wider structural crisis of capital, and moreover has argued that statist and Keynesian solutions to the crisis are a dead end for the working class. See our October interview with him here.

The meeting is being jointly hosted by The Commune and The Hobgoblin group.

All welcome. Plenty of time for discussion. Email uncaptiveminds@gmail.com for more info: map of the venue appears below.

the people’s charter – a charter for change?

by Chris Kane

Pick up any paper, listen to any news bulletin, and you will find reference to yet another redundancy announcement.

Unemployment is predicted to rise to two million by spring and three million in another year: indicators put it as the worse recession since 1980. Due to the rising cost of living and growing unemployment, arrears are mounting, repossessions are expected to rise to at least 75,000.

The unelected Business Secretary Lord Mandelson says that after the recession there will emerge “a renaissance in UK manufacturing and the expansion of the UK’s knowledge-based industries”. This promise of jam tomorrow is no more comforting than Brown’s job creation schemes, a drop in the ocean of the jobs cull underway.