In fact there is nothing automatic about this process. Keynes' arguments on this subject are convincing. Capitamonetarism apparent, voices lists are under no obligation to invest their extra income in production. They are being raised in capitalist and social democratic circles demanding state intervention to revive the economy. But what are the real history and real implications of such "neo-Keynesianism"? And where do the interests of working people lie?
ERNEST MANDEL*
T WAS the English economist
John Maynard Keynes who first developed the theory that a budget deficit could be used to combat economic crisis and unemployment.
Workers' organizations in many countries accepted this idea, proposing high levels of spending, in particular on public works, as a way of reviving the economy. The various antiunemployment plans of the second half of the 1930s were also inspired by this concep tion.
From a theoretical point of view, raising overall demand
(effective disposable purchasing power) in a given country will facilitate a recovery insofar as there is disposable productive capacity (unemployed workers, stocks of raw materials and intermediary products, machines working below capacity. These unused resources are mobilized by the additional purchasing power created by the budget deficit.
Only when these reserves are exhausted do you get the fatal onset of inflation.
But there is a snag. In order for the budget deficit not to fuel inflation before full employment is reached, direct taxes must increase in the same proportion as income.
However the bourgeoisie prefers to buy state bonds rather than pay taxes, since the former make them money. Furthermore, tax evasion is a universal phenomenon in the bourgeois society of the late 20th century. Thus the budget deficit is almost always accompanied by a growth in the public debt.
Servicing this debt eats up a growing
6 part of public spending, so that there is a tendency for the budget deficit to grow without any corresponding beneficial effects on employment. On the contrary, since the wage-workers pay the bulk of taxes, the growth in the public debt implies a redistribution of national income from the working class to the bourgeoisie.
However, does not the growth in the income of capitalists stimulate investment and thus employment? This was the argument advanced by supporters of the "supply-side" recovery, who opposed Keynes in the 1930s and who have may prefer to store the income away or use it for speculation. Even when they invest, this may be in rationalization of production that cuts jobs. This was the dominant form of investment in the
1970s.
In reality, capitalists do not work "for the general interest". They make choices aimed at maximizing their profits, and this must lead periodically to rises in unemployment and more or less protracted economic crises. During these crises the mass and the rate of profit fall. Then the restoration of profits becomes the absolute priority for the bourgeoisie. An increase in the rate of exploitation of the workforce - the rate of surplus value, according to
Marx's formulation — is the key instrument for this. It is no accident that austerity policies are being implemented everywhere. In the last analysis,
"monetarist" deflation and Keynesian inflation are two variants of the same orientation.
The historical balance-sheet of the Keynesian policy is, furthermore, clear. The most promising experiment, Roosevelt's
New Deal in the United States, ended in failure. Despite the rise in public spending, it ended in the crisis of 1938, when unemployment reached 10 mil lion. It was massive rearmament which reduced mass unemployment.
This confirms Rosa Luxemburg's post-First World War prediction; she saw the arms economy as a "substitute market", that is to say as providing new outlets for the sale of goods and the realization of surplus value. In fact, arms spending served as the motor force of the expansion of the entire economy in the United States after 1948, and this expenditure underpinned the "long wave of expansion" between 1950 and
1970, even if at the price of a budget deficit and permanent inflation.
The other big stimulant for growth has been ballooning credit, that is to say an increase in the indebtedness
* The following article has been translated from the
August 28, 1992 issue of La Brèche, a Swiss revolutionary Marxist fortnightly.
September 28, 1992
Will everything be better after the referendum? of big firms and better off households. Even small scale credit to relatively deprived sections of the population increased rapidly after the 1974-75 recession, both in the USA and Europe. In the postwar period the capitalist economy floated to prosperity on a sea of debt. The debt counted in dollars (leaving aside that counted in other currencies) has reached the astronomical sum of some $10,000 billion, of which the Third World Debt represents a mere 15%.
This debt explosion is another substitute market. It creates additional purchasing power which can counteract the effects of the inherent contradictions of the capitalist system. However the benefits have a time limit; the growing debt fuels inflation and beyond a certain point this begins to hinder rather than aid expansion. This explains the change from the long wave of expansion to that of depression which took place at the end of the 1960s and the start of the 1970s.
There is something bizarre in the way in which neo-liberal dogmatists contrast their "supply-side" policies to those based on creating demand through deficit budgeting. Never, in fact, have budget deficits been higher than under the neo-liberals champion Ronald Reagan. The same is to a large extent true of the reign of Mrs Thatcher. They implemented record breaking neo-Keynesian programmes while all the time professing quite the opposite faith.
The real debate was not about the size of the budget deficit, but what it was used for. What social classes or major sub-groups of social
OUi !
NON!
CARR
PLANTLA classes were to profit, and with what results for society and the economy as a whole?
Austerity offensive
From this point of view the facts speak for themselves. Reagan/Thatcher neo-Keynesianism, connected with the so-called monetarist imperatives, has brutally reinforced the austerity offensives everywhere. Social spending and spending on infrastructure have been cut; arms spending has expanded massively in the USA and Britain and to a lesser extent in Japan and Germany.
We hope you fully understand the implications of what you have доrе...
DENMARI
ECONOMY Subsidies to private enterprise have increased. Unemployment and widening social inequalities have been stimulated. In the last 20 years the number of unemployed in the OECD countries has risen fourfold.
The overall social effects have been even more disastrous. You can learn on any college course on economic development anywhere in the world that the most productive long-term investments are those in education, public health and infrastructure. However the neoliberal dogmatists overlook this elementary truth when they approach problems from the point of view of an "equilibrium" that must be re-established at any cost. Their favourite targets for cuts are precisely education, health care, social security and infrastructure, with the inevitable harmful effects,
Does this mean that socialists should prefer traditional Keynesianism and variants of the welfare state to the poisonous cocktail of monetarism and neoKeynesianism currently on offer? If our answer is positive, it must be heavily qualified. Traditional Keynesianism implies various forms for the exercise and division of power within the framework of bourgeois society. This leads to various forms of social contract and "consensus" with those who currently hold economic power, on their terms. This is a purely one-way consensus, and it runs counter to an essential priority: the defence of the immediate interests of the workers and the pursuit of
PLANTie # 235 International Viewpoint
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7
The internationalist alternative
THERE are only two consistent approaches for workers, their unions and the new social movements in their confrontation with
International Viewpoint # 235 • September 28, 1992
ECONOMY the objectives of the new social movements. Such a defence requires the maintenance or reconquest of political independence by the working class. Furthermore, traditional Keynesianism is only the lesser evil compared to the growing internationalization of capital and the increasing a deflationary policy insofar as it leads
The first is that of collaboration with their "own" ruling class to a rapid and radical fall in unemploy-
"the Americans", ment. However, in present conditions neo-Keynesianism is leading to an ver. Such an orientation can only fuel chauvinism, xenophobia increase in unemployment and the marand racism. It is also a policy which offers no perspective. The multinationals can always find a country where wages are lower, ginalization of growing sections of the population. It is doing nothing to stem working conditions poorer and democratic liberties more restricted. The road of defence of "our industry" means to enter upon a the realization of the neo-liberal plan for a "dual society", that is to say an spiral of decline for incomes, working conditions and democratic institutionalized division of the workrights, in the name of competition. It means levelling down.
force and the growing degradation of its
The second policy - and the only effective one in the medium least secure sector. The depoliticization term — is that of cooperation between workers and social movements throughout Europe (and beyond) with the aim of defending and despair that this feeds provides a past gains and raising the wages and conditions of workers in the breeding ground for the growth of a less favoured countries towards those existing in more fortunate
Late capitalism, furthermore, is marlands. This orientation would also involve Europe-wide proposals on the whole range of social, economic and ecological issues.
ked by a far greater level of internatio-
This would be the only framework broad enough for such proponal concentration and centralization than in the past. Multinational or trans-
It is true that nuances between centre-right and centre-left can national firms are now the main form of be detected in the "European" institutions; these have been seen organization of big capital. Less than
700 of them control large parts of the over the Social Charter. Nor can we be wholly indifferent when it comes to supporting a better against a worse position. However, world market. Faced with these allwhatever the nuances, there is unanimity on the need for an auspowerful transnationals, the traditional nation state is increasingly less capable
We should not oppose the Maastricht Treaty in the name of of effectively applying a coherent and giving priority to political action inside the national state. On the efficient economic policy.
contrary, we should support any initiative which fosters awareness of the need for common action and solidarity on a European
Decline in state intervention scale. Nor is this in contradiction with defensive battles at a natio-
Of course, multinationals are not the only form of big enterprise. Beside
An essential moral aspect of such a policy is for the workers them essentially "national" firms contiand social movements to revive the principle and sentiment of nue to exist as well as public and semisolidarity, well expressed in the motto of American trade uniopublic enterprises. Thus the economic nism: "an injury to one is an injury to all"—E. M. * role of the state has not fallen to zero.
Nonetheless the long term tendency is towards a gradual decline in the efficiency of the economic interventionism of the national state. The neo-liberal ideological offensive is to a large extent the product and not the cause of this basic evolution.
Faced with the rise of transnational enterprises, the national state is no longer an adequate economic instrument for the dominant factions of the bourgeoisie. However, the ruling class needs the state for self-defence. It needs a nation state to defend its specific interests - including in the various supernational bodies - against its foreign competitors. It needs the state to absorb economic and social crises. And it needs the state for repression in case of explosive socio-political crises.
Insofar as the national state becomes less useful, the effort is made to substitute supranational institutions for it.
However, important political, cultural and ideological obstacles have to be
8 overcome if these latter are to take on power of the multinationals.
against "the Germans", sals to be effective. terity policy. some of the real attributes of a state. This turns out to be more complicated than expected. Thus, European unification remains suspended between a vague confederation of sovereign states and a European federation with some of the characteristics of a state, with a single currency, a central bank, a common industrial and agricultural policy, joint army and police forces and finally a central governmental authority.
The institutions embodied in the Single Act or the Maastricht Treaty reflect this hybrid character. They are pre or semi-state forms, with the real power resting in the hands of the EC's Council of Ministers, that is to say in that of the 12 associated governments. Real surrenders of sovereignty are few.
The Maastricht Agreement requires of the states that they reduce their budget deficits to 3% of Gross Domestic Product (GDP) in the name of monetary stability. Few states will achieve this goal by 1996 or even 1997 or 98. Will
"the Japanese" or whoethis mean a "Europe of the five"? The mechanism is by no means as well oiled as EC Commission president Jacques Delors pretends.
On top of this there is a time-bomb: the medium term effects of the so-called "budgetary stabilization" on the economic situation and on employment in particular. According to a confidential note from the OECD these will be very bad, a conclusion supported by several studies.
The mere fact that the provisions of the Maastricht Agreement mean a toughening of austerity policies should be enough for the workers' movement and the left to reject them.
However we should not be fooled. Under cover of "budgetary discipline", Maastricht offers nothing more than an excuse for the continuation and toughening of austerity policies that the governments concerned are already implementing. And it is these policies that have to be fought above and beyond the Maastricht Treaty. *
Workers struggles
POLAND gotiable, and has thus reached usurious proportions (the inflation rate for 1992 is not expected to pass 60%). The discontent of the peasantry has given rise to a new radical peasant organization called Samoobrana (Self Defense) which has organized traffic blockages.
Unlike the big strikes of the previous decade which were united by common
IN some respects the Polish scene this summer recalled the great social struggles in Poland of the previous decade:
occupied factories supplied by discontented peasants, demonstrations, inter-factory strike committees, and so on.
The strikes, which began at the end of June in the Upper
Silesian coal mines, spread to the huge factories that have traditionally been the centres of Polish worker militancy.
While these strikes were not a repeat of those of August
1982 as some commentators have held', they did constitute the first serious social warning to the new regime. And the changes on the union and political plane which they began will not fail to have repercussions in the future.
JAN MALEWSKI
FOR twenty days of work, I earn two million zlotys (about $150).
They don't pay for nothing. I work hard for them. I'm not a communist but I want to earn as much as I did under the old regime. Otherwise I'Il stay out on strike until the end. They must understand this."2 In these few words, a striking miner summed up the feelings of many workers. They trusted Solidarnos and the successive governments that it supported.
They believed that only the market economy could assure their well-being. They believed in the promises that were made according to which Poland would enjoy an economic boom as soon as hyperinflation was stopped. But three years later, the gulf between their hopes and reality has led to big disappointments. The political and economic crisis in which Poland finds itself is longer and more serious than they had imagined.3
The results of the social policies of the new regime form the background of the strike wave. At the end of July 1992, there were 2.4 million unemployed workers (13.1% of the economically active population). One quarter of the unemployed lost their last jobs through mass layoffs. Nearly one million unemployed have been without work for over a year, and therefore are no longer eligible for social security.4 Real average incomes, which have collapsed since the beginning of the implementation of the market reforms known as the "Balcerowicz plan", continue to drop.
During the first six months of 1992 real wages in the six main sectors of the economy were 4.4% below what they were in the first six months of 1991 and 6.8% in relation to the last six months of 1991. Peasant incomes also collapsed. According to an official study by the central statistics office (GUS), the real income of peasant families was 18% below that of the first semester of December 1991.6
Government policies
These results are the direct fruit of the policies implemented over the last three years. The taxation system for public enterprises has led to the paradoxical situation that the taxes paid by these enterprises over the last year amount to 125% of their profits! Contrary to private enterprises which are taxed on their own sales, the state enterprises must pay a "dividend" calculated on the basis of the capital (productive as well as unproductive) of the enterprise and a tax on the raising of wages beyond that of the norm (called popiwek), in which the rate grows in an exponential manner when the norm is exceeded. The result is that 45% of the state enterprises are heavily in debt, a large proportion of this being made up of debts contracted to pay taxes or debts owed directly to the treasury!
Indebtedness also plagues the peasantry. Those who believed the promises that the new government made in 1989-1990 and took out loans to buy agricultural machinery, are today on the verge of bankruptcy. The interest rate, devised in relation to the prevailing rate of inflation, which reached 585% in 1990, is not renedemands directed at the government in the name of union freedom, the strikes of last summer resemble those of a much earlier period of Polish labour history. The demands are quite diverse and unfocused, and the union movement is scattered, divided and disorientated by the new rules of the economic game.
### Background of strikes
Thus, the background of the strikes in the Upper Silesian mining fields was the deterioration of the miners' social situation who had previously been amongst the best paid layers of the working class as well as the still unclear plans to close mines considered non-profitable from the point of view of the government's restructuring plans.
The miners' anger has been fueled by wage cuts amounting to about one half of their salaries over the last few months, which is why their demands have focused on wages. To this can be added a sense of having been betrayed by Solidarnose in general, and their own colleagues in particular, who once having become ministers seem to have forgotten the demands which brought them to power. On July 10, a local leader of Solidarnosc was thrown out of a mine by striking miners. Soon after, the unions which came out of the old state organizations(the OPZZ and others) and Solidarity 80, took over the leadership of the strike.