Yearly Archives: 2020

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Perry Anderson On Brexit

The new issue of New Left Review is out and Perry Anderson has a 73-page essay on British state and society.

Some good description of Brexit:

In 2015, Cameron was returned to office without need of the Liberal Democrats, who were decimated at the polls, and in the wake of Labour’s renewed defeat, Corbyn was elected its leader in the first one-person-one-vote election in the party’s history. Within a year came the referendum, called and lost by Cameron on Britain’s membership of the EU.32 His decision to call one, product of long-standing divisions among the Tories, was designed to silence the Eurosceptic wing of his party, in a careless display of class insouciance that with united establishment support—extending from the City to the TUC, not to speak of all-party backing—victory was assured. But as in France and the Netherlands, a popular rebellion against the whole governing class led to the opposite outcome. Two thirds of the working class voted for Leave, a higher proportion than any stratum—including even the best-off—voting for Remain, on a larger turn-out than seen in years. London, beneficiary of the financial bubble and closer to Paris than Manchester by rail, voted heavily for Remain; the abandoned industrial North, hardest-hit by austerity, heavily for Leave. On the left, opinions had divided. Those in favour of Remain argued that the xenophobia of Brexiteers of the right made the EU a lesser evil, those in favour of Leave that departure would be a blow to the neo-liberal oligarchies on both sides of the Channel: each voting negatively against, rather than for, anything. But what would Brexit actually mean for the European Union, or for Ukania in parting with it? So far, all that was clear was that ‘Blairized Britain has taken a hit, as has the Hayekianized EU’ and ‘critics of the neoliberal order have no reason to regret these knocks to it’, against which the entire global establishment had inveighed.

More fine-grained analysis made clear the extent to which the Brexit result, though certainly multi-stranded in motivation, was the expression of a regional and social revolt in the North of England: Leave majorities were concentrated in former strongholds of Labour, now reduced to a hinterland of decayed industries and discarded proletarian households.33 There was hostility to immigrants in this part of the country, as elsewhere in Britain. However, that it was not the primary driver of the outcome could be deduced from Labour’s unexpected recovery in the election of 2017, once Corbyn campaigned on a platform amounting to a rejection of the whole neo-liberal order in place since the 1980s. In the face of a high Tory vote, he not only held most of the North, but swept the youth of the country by margins never previously approached by Labour, in what was now a second popular uprising against the entire British establishment. Yet Corbyn’s position remained tenuous in his own party, whose permanent apparatus and parliamentary delegation remained ferociously opposed to him.34 The small team around him lacked any preparation for government in what would be the predictable conditions of an implacable siege by capital and the media. There were no grounds for euphoria.

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Britain’s liberal market economy—read: secular eversion—generated the two-fold revolt that produced Brexit. The victory of Brexit led to Conservative capture of a majority of the working class. Working-class expectations require concessions from a suddenly altered Conservative regime that Brexit impedes. The desertion of its proletarian base leaves Labour sociologically adrift in the eddies of a protean middle class. Its share of the middle class is attached to Europe, no part of it more passionately than the liberal intelligentsia. Attracted towards Labour by its stance in the cultural war over Europe, the English intelligentsia is alienated from it by what became of its own principal habitat under it. In Scotland, alienation of all classes of society from Labour has given power to a nationalism looking to Europe. Departure from Europe has both inflamed Scottish nationalism and entrapped it. The price of departure, indexed by the EU to political not economic considerations, has left Britain’s rulers answerless politically and, in all probability, the wells of Brexit further poisoned economically. No part of the current configuration is independent of the others. Their nexus is bound to dissolve, in one way or another. When or how is anyone’s guess.

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32 Susan Watkins, ‘Casting Off?’, NLR 100, July–August 2016.

33 Tom Hazeldine, ‘Revolt of the Rustbelt’, NLR 105, May–June 2017.

34 Daniel Finn, ‘Crosscurrents’, NLR 118, July–August 2019.

New Left Review, 125

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UNCTAD Trade And Development Report, 2020

UNCTAD has released its annual trade and development report.

It emphasises the importance of Keynesianism and cites Post-Keynesian authors such as Joan Robinosn, Nicholas Kaldor, Wynne Godley, Francis Cripps, Marc Lavoie, Anthony Thirlwall.

From the summary:

From crisis to prosperity for all

Much more ambitious multilateral measures will be required if a global crisis is to be transformed into a global recovery:

  • Expanding the use of Special Drawing Rights (SDRs) to support national development strategies in developing countries through a truly internationally governed reserve system. At the very least, developing countries’ fiscal spaces should be backed by the equivalent of $1 trillion of SDRs to meet current liquidity constraints.
  • Financial support for boosting the health emergency response to COVID-19 in developing countries through a Marshall Plan for Health Recovery funded through increased official development assistance (ODA) commitments, international tax reform and enhanced multilateral financing mechanisms, on a scale to build resilience and boost recovery.
  • An international Public Credit Rating Agency to provide objective expert-based ratings of the creditworthiness of sovereigns and companies, including developing countries, and to promote global public goods. This would, moreover, help to promote competition in a highly concentrated private market.
  • A Global Debt Authority to stop a repeat liquidity crises from turning into serial sovereign defaults. Such an authority would build a repository of institutional memory on sovereign debt restructurings. It would also oversee the establishment of a global publicly accessible registry of loan and debt data pertaining to sovereign debt restructurings. In addition, it would develop a blueprint for a comprehensive and transparent international legal and institutional framework to govern automatic temporary standstills on sovereign debt repayments in times of crises and to manage sovereign debt workouts in a fair, efficient and transparent manner.

The title is the link. You can download find the PDF file in that link.

Glenn Greenwald Twitter Thread On Identity Politics As A Cover For Imperialism And Neoliberalism

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Glenn Greenwald has an excellent Twitter thread on how the “centrists” use identity politics as a cover:

He writes:

Contempt for it on the merits aside, one has to acknowledge the propagandistic genius of exploiting harmless-to-power identity politics as the feel-good cover for perpetuating and even strengthening the neoliberal order and further entrenching corporate and imperial power.

See the full Twitter thread and also a recent post, Identity Politics As A Neoliberal Alternative To A Left, where I mentioned him.

Wynne Godley On Sensibility

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Wynne Godley in a 1988 article, The Sensibility Of Contemporary Institutions in Theology, (first given as a Sermon before the University in King’s College Chapel, 31 May 1987:

Recourse to the dictionary gives, among the definitions of the word sensibility, ‘the glad or sorrowful recognition of a fact or a condition of things’. Also, ‘readiness to feel compassion for suffering’.

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But the major issues at stake have been vastly more important than ones which concern sensibility narrowly defined. They go beyond who becomes rich and who remains poor. They extend to matters such as slavery, mass unemployment and civil war.

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… The IMF would do well to reperuse its own Article I, which .lists among its purposes: ‘to facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy … ‘ In this passage you hear the authentic note of optimism and mutual concern which informed economic relationships within and between countries in the first twenty-five years after the war.

I have been forced to recognize with sadness and very great disappointment that I have so far failed in my personal endeavour to change the course of events or the attitudes of other people. But I remain steadfast to what I understand to be the meaning of Christianity: the unique value it places on the individual inner life; the ability to tolerate aloneness and the imminence of death; the joyful and sensitive concern for and love of other human beings.

Wynne Godley On Control Of International Trade

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From Alan Shipman’s biography, Wynne Godley, A Biography, Chapter 9: Balance Of Payments, Deindustrialisation And Protection, page 151:

Of all Godley’s policy prescriptions, direct import controls were the one most roundly rejected by other economists, and least likely to be adopted by politicians with any chance of gaining power. The accusation of advocating a policy that was economically illogical, politically infeasible and inadmissible in international law hurt deeply, but never crushed his belief that import quotas should be seriously considered as an additional macroeconomic instrument. The depth of the wound emerged in an unusually personal statement to a 1978 conference on ‘Slow Growth in Britain’, convened by Oxford University’s Wilfred Beckerman in Bath. ‘I am disconcerted and distressed to find myself, together with the group of people with whom I work in Cambridge, in such an isolated position. For we seem to be the only group of professional economists who entertain the possibility that control of international trade may be the only way of recovering and maintaining the prosperity of this country; that free trade may be an enemy for the relatively weak’ (Godley 1979: 226).

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References

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Godley, W. (1979). Britain’s chronic recession—Can anything be done? In W. Beckerman (Ed.), Slow Growth in Britain. Oxford: Clarendon Press.

Keynes said that:

A study of the history of opinion is a necessary preliminary to the emancipation of the mind.

Although in the poor countries, ones colonised and which suffered because of imposition of laissez-faire, there have been a lot of opposition to free trade—and those voices aren’t heard through silencing internationally—in the advanced countries, it has been almost non-existent except from Cambridge Keynesians and maybe a few others. In recent times, we see some opposition, but not remotely like this even 40 years ago. It is important to know the history of thought to understand how hegemonic the ruling ideology has been.

For Wynne Godley, dissenting against free trade was one of the most important reasons for his dissent against the profession. In his short autobiography written in 2001 for A Biographical Dictionary Of Dissenting Economists, Godley said:

There are two aspects (in particular) of the work of the CEPG [Cambridge Economic Policy Group] which put its members into a category which may he termed ‘dissenting’. The first – a matter mainly of concern to the modelling fraternity and academic econometricians – was the unconventional view we took about how to construct and use an econometric model.

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The second, and more egregious, respect in which we became a ‘dissident’ group was that, as a result of trying to think through the possible ways in which Britain’s net export demand might be improved, we entertained the possibility that international trade should be, in some sense, ‘managed’. There might, we argued, be no way in which the adverse trends could be reversed other than some form of control of imports. Our argument (see for instance Cripps, 1978; Cripps and Godley, 1978) was never one in favour of protectionism as normally understood – that is, the selective and unilateral protection of relatively failing industries under conditions of general stagnation. On the contrary, we were most careful to lay down conditions under which the management of trade would benefit not only our own country (without making its industry less efficient) but would also increase the level of trade and output in the rest of the world. The two basic principles were, first, that trade management should reduce import propensities without ever reducing imports themselves (in total) below what they otherwise would have been; and, second, that ‘protection’ should be as minimally selective as possible (for example, through the use of market mechanisms such as auction quotas) so that industrial inefficiency would not be sponsored.

I was surprised by the hostility with which our ideas about trade were received. It seemed to me at the time, and still seems to me, that the arguments actually used against us (at their most coherent by Maurice Scott et al., 1980) did not, in practice, rest on a well-articulated theoretical position but on very special assumptions about behavioural relationships and international political responses. (I have, to the best of my ability, answered these particular points in Christodoulakis and Godley, 1987.)

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The ‘dissident’ argument in favour of managed trade is well summarized in Kaldor (1980), where he points out that the modern theory of international trade is based on the assumption that all production takes place according to the conditions described by the neoclassical production function, with constant returns to scale. Kaldor postulated instead, and he was surely right to do so, that the principle of circular and cumulative causation leads (through dynamically increasing returns) to a process, not of convergence, but of polarization between successful and unsuccessful economies in which success in competitive performance feeds on itself and losers become immiserated by trade.

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Godley’s Major Writings

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(1978), ‘Control of Imports as a Means to Full Employment: The UK’s Case’ (with T.F.
Cripps), Cambridge Journal of Economics, 2, September.

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(1987), ‘A Dynamic Model for the Analysis of Trade Policy Options’ (with N. Christodoulakis), Journal of Policy Modelling, 9.

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Other References

Cripps, T.F. (1978), ‘Causes of Growth and Recession in World Trade’, Cambridge Economic Policy Review, No. 4.

Kaldor, N. (1980), ‘The Foundations of Free Trade Theory and Recent Experiences’, in E. Malinvaud and Fitoussi, J.P. (eds), Unemployment in Western Countries, London: Macmillan.

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Scott, M., Corden, W.M. and Little, I.M.D. (1980), The Case Against Import Controls (Thames Essay No. 24), London: Trade Policy Research Centre.

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Nicholas Kaldor On The Importance Of History

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Nicholas Kaldor in Limitations Of The General Theory, published in Collected Economic Essays, Volume 9, first published 1982 on the role and importance of history in causation:

My purpose here is to show that many of the difficulties which emerged in the operation of Keynesian policies of demand management were due not to any defect in basic conception but to the failure of Keynes (and of his followers) to work out the full implications of his ‘paradigm’ of the economy as against the ruling ‘paradigm’ of neo-classical economics.

Keynes himself emphasized that the writing of his book was ‘one long struggle to escape from habitual modes of thought and expression … The difficulty lies not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.’3

As far is possible within the confines of a lecture, I hope to demonstrate that the limitations of the General Theory derive more from a failure to escape from traditional modes of thought than from any basic defect in those aspects which were fundamentally new. Apart from his failure to cut himself loose from one of the main tenets of the quantity theory of money, with which I shall deal only briefly as I have discussed it extensively on earlier occasions, the three main aspect in which Keynes remained too much a follower of tradition concern: first, the micro-economic background, in other words, the implications for his theory of the way markets function; second, the regional or territorial aspect, the implications of inter-regional trade for the differing rates of employment-growth of different areas; and finally, the failure to recognize that owing to the importance of increasing returns in manufacturing, the development of an industrial system is largely self-generated, where, owing to a powerful feed-back mechanism, ‘events of the recent past can only be explained in terms of the actual sequence through which the system has progressed; history enters into the causation of events in an essential way’.4

3 General Theory, Preface, p. vii.

4 Cf. Jukka Pekkarinen, On The Generality of Keynesian Economics (Helsinski, 1979), p. 113. He adds that in consequence ‘it is not reasonable to view the economic process as allocating given resources wuth given technologies and preferences’.

Nicholas Kaldor’s View That Exports Is The Only Exogenous Source Of Demand

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From a Twitter discussion on balance-of-payments, I was reminded of a section of John E. King’s 2009 biography of Nicholas, titled by the name.

From pages 193‒195 (+ endnote + references in Bibliography):

Kaldor’s willingness to take extreme positions was very well illustrated by his post-1966 emphasis on exports as the only exogenous source of effective demand, which I criticised in Chapter 4, Section 7. The closely related balance-of-payments-constrained growth models seem, at first glance, to be more relevant to a (long-departed) world of fixed exchange rates than to the world we live in, with floating currencies and huge payments deficits (and surpluses) that can apparently be sustained indefinitely. Kaldor would probably have responded to this with four counter arguments. First, he would have claimed that it was true only of rich countries with currencies that were sufficiently attractive for foreigners to hold to make continuing large deficits sustainable (for example the United States, the Euro bloc, Britain and Australia). The balance of payments constraint remained binding for small, poor countries with unattractive currencies (Bolivia, Zambia, Thailand). Such countries also continued to be dependent on the IMF and the World Bank, which dictated deflationary responses to their payments deficits, including (but not confined to) devaluation. In any case, Kaldor would have insisted, the external constraint continued to operate at the regional or sub-national level: poor, relatively backward regions cannot depreciate against richer, more productive regions within their own country (this was why he had advocated the Regional Employment Premium).

Second, Kaldor would have invoked his habitual ‘elasticity pessimism’ to deny that (at least for countries with initially serious problems of international competitiveness like the United Kingdom) currency depreciation would have the stimulating effect on exports, and the dampening effect on imports, that mainstream theory dictated. In this he would have been vindicated by evidence concerning the ‘Kaldor paradox’: countries that devalued in the 1950s, 1960s and 1970s tended to lose market share in world trade, while those countries whose currencies appreciated gained in market share (McCombie and Thirlwall 1994, pp. 289–99). Third, he might well have accepted Paul Davidson’s argument that a floating exchange rate regime introduced an unwelcome element of uncertainty into the world economy, discouraging investment and slowing growth across the board, so that a return to fixed exchange rates was both possible and desirable (Davidson 2006). 13

Fourth, and decisively, Kaldor would have argued that there were two channels through which the balance of payments constraint operated, not one. In addition to the policy channel (‘stop-go’, or demand deflation in response to payments deficits), there is an automatic process through which poor export performance leads to sluggish aggregate demand and thence to low business investment and slower output and productivity growth, in the absence of any policy response whatsoever. This fourth defence hinges on the controversial proposition that, for any individual country or region, exports are the only exogenous source of demand, with investment (and consumption) being entirely endogenously determined. This is a very strong assumption, but if it is accepted, the external constraint on growth becomes binding in all circumstances, and cannot be written off as historically or geographically specific, or confined to the Bretton Woods epoch (see also McCombie and Thirlwall 1994).

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Notes

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  1. Note, however, his stated belief that a return to Bretton Woods in the late 1970s would have made things worse (Kaldor 1978c, p. xxi). Not all Post Keynesians agree with Davidson on this important point, Wray (2006) for example arguing that flexible exchange rates are a necessary condition for national economic sovereignty.

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Bibliography

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Davidson, P. 2006. ‘Liberalization or regulating international capital flows?’, in L.-P. Rochon and S. Rossi (eds), Monetary and Exchange Rate Systems: A Global View of Financial Crises, Cheltenham: Elgar, pp. 167–90.
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McCombie, J. S. L. and Thirlwall, A. P. 1994. Economic Growth and the Balance-of-payments Constraint. Basingstoke: Macmillan.

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Wray, L. Randall. 2006. ‘To fix or float: theoretical and pragmatic considerations’, in L.-P. Rochon and S. Rossi (eds), Monetary and Exchange Rate Systems: A Global View of Financial Crises, Cheltenham: Elgar, pp. 210–31.

Now, I do believe in this (for the present rules of the game), as it otherwise stock-flow ratios rise without limits, fixed exchange rates or floating, something King seems to be fine with!

Also, King is extremising Kaldor’s views, which are extreme nontheless—not extreme in a negative way. What’s exogenous and endogenous also changes with the time-period we’re looking at. Something which is exogenous in the short-run can be consistently thought of as endogenous in the long-run.

Joan Robinson On How Free Trade Is Destructive

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Joan Robinson in her 1977 paper What Has Become Of Employment Policy on how free trade has been destructive and leads to divergence of fortunes of countries. Also in Collected Economic Papers, Vol V. Relevant text (with footnotes and quoted references in the same text) reproduced below, with my highlights:

II

Class war was not the only element of inherent vice in the free-market system to disturb the age of growth. There were also the problems generated by the unevenness of development amongst various capitalist nations and the economic and political relationships between industrial countries and primary producers, particularly those in the third world.

The pre-Keynesian theory of international trade required the balance of imports and exports for each country to be maintained by movements in relative price levels. After experiencing the attempt to return to the gold standard in 1925 (see Keynes, 1972), Keynes adopted the view that depreciating the exchange rate was much to be preferred to attempting to depress the price level. At the end of his life, feeling obliged to defend the Bretton Woods agreement against his better judgement (Kahn, 1976), he lapsed into arguing that, in the long run, market forces would tend to establish equilibrium in international trade (Keynes, 1946). He had forgotten his old crack, that in the long run we are all dead.

As it turned out, market forces generated disequilibrium. Differences in competitive power, whatever their origin, set up a spiral of divergence. A country such as West Germany, with growing exports, could maintain a high rate of investment and therefore of growing productivity, which enhanced its competitive power, and allowed real wages to rise so that workers were less demanding. In the United Kingdom, any increase in employment caused an increase in the deficit in the balance of payments so that every hopeful go had to be brought to an end with a despairing stop. Thus strong competitors grow stronger and the weak, weaker.

Because of the size and strength of the United States and its overseas economy, trade plays a small part in national income, but not a small part in the world market. The USA can move from deficit to surplus without much disturbance at home, but with a great deal of disturbance to the other trading nations. Moreover, it was able to take advantage of the dollar being the world currency to run an ever greater outflow on capital account with an ever growing deficit on income account, until President Nixon, with the dollar devaluation of 1971, suddenly tried to reverse the position with a stroke of the pen. All this laid great strains on the international monetary system.

Keynes worked out the structure of the General Theory mainly in terms of a closed economy. When it is extended to take in the operation of international economic relations, a missing link appears in the argument. The rate of interest was to be used to regulate home investment, and Keynes believed that a secular fall in interest rates was both necessary for this purpose and desirable in itself. Exchange rates were to offset differences in relative labour costs. Then nothing would be left to regulate short-term capital movements. Traditionally this was the function of relative interest rates. Britain, and other countries with chronically weak payments balances, could not indulge in cheap money however much home conditions required it, and had to follow the interest rates of other countries up whenever they happened to rise. This was one more turn in the spiral of weakness weakening itself.

Over and above the strains set up by the uneasy relationships amongst the industrial nations themselves, there were the strains involved in the relations of the industrial countries as a whole and the third world. The formation of prices in the free-market system is in two parts—cost-plus in manufacturing industry and supply and demand for primary products.† A rise in the level of production and consumption in industrial countries normally increases demand for all kinds of primary products. When prices of materials rise, while money wage rates are constant, real wages fall and so generate a demand for rising money wages, which adds to the original rise in costs. Thus favourable terms of trade reduce class conflict in the industrial countries and unfavourable terms exacerbate it.

Commodity prices responded sharply to the pressure of demand during the Korean war boom, but this was soon over and during the 1950s the terms of trade moved in favour of industrial countries. However, the long boom, swollen by the Vietnam war, financed by the USA on the principle of guns and butter, caused an acceleration in the rate of increase in commodity prices and finally sparked off the great inflation of 1973.

In an economic model, it is possible to analyse the consequences of any one change by keeping other things constant. In real life a lot of things happen at once. During the long boom, an excess of demand over growth of capacity led to shortages of one commodity after another. The demonetisation of the dollar in 1971 drove speculative funds into commodity markets. The Moslem oil producers, temporarily bound together by hostility to Israel, suddenly realised the extent of their monopoly power. Inflation at what now seems a mild and acceptable rate had been going on for years all over the capitalist world, setting up expectations that inflation would continue and undermining the conventional belief that a dollar is a dollar. Injected into this situation, the sudden rise in the costs of materials, especially oil, blew the inflation sky high.

This concatenation of circumstances has been described as a historical accident. But it is the inherent vice in the free-market system of international trade which creates the setting for such ‘accidents’, from which it has no means to defend itself except by destroying prosperity and depriving the primary product sellers of their favourable terms of trade.

III

The hopes which accompanied the Keynesian revolution, of reforming capitalism so as to ensure continuous prosperity with full employment, are now all but extinguished. The slide into crisis in the capitalist world has re-established the pre-Keynesian orthodoxy as the conventional wisdom in economic policy-making at both national and international levels. The inevitable consequence of this is a much higher general level of unemployment and recurrent crises, involving a massive waste of resources and considerable human misery.

Important changes in the world economy have taken place over the last two decades, which have ended the era of near-full employment and exposed the inadequacies of the conventional Keynesian analysis. One of the most important of these developments has been the relaxation of tariffs and exchange controls and the resulting large increase in international trade‡ and capital movements; this has increasingly exposed national economies to the ravages of uncontrolled capitalist competition, in the way that they were exposed before the 1930s.

While the USA remained the predominant world economic and political power, and effectively acted as the world central bank, some semblance of order in international economic relations was retained. The use of the dollar as a reserve currency and the eagerness of the USA to lend abroad allowed international liquidity to expand to meet the needs of the growing volume of trade and facilitated post-war reconstruction and structural adaptation in the capitalist world. But with the emergence of Japan and western European countries as strong competitors to the USA, and the deterioration of the USA’s balance of payments, unhindered capital movements became a major destabilising force. The IMF proved totally inadequate to its appointed task of protecting national economies from external shocks and assisting the correction of more permanent imbalances in payments. In fact, by establishing rules which threw the burden of adjustment mainly onto deficit countries, the IMF institutionalised an important element in the process of unequal development among capitalist countries.

Faced with growing international pressures, the governments of debtor countries have been obliged to adopt the deflationary policies acceptable to their creditors (including the IMF); policies which conflicted with the avowed aim of maintaining full employment and with the real-wage demands of the working class. Thus democratically elected governments of debtor countries, where the working class is well organised, have walked a knife edge between the international and internal disapproval of their economic policies. But the frequently imposed deflationary policies progressively weakened the competitive position of such economies, increasing their indebtedness and reducing the opportunities for advances in real wages. Unable to meet either internal or external demands, economic policy vacillated wildly; consequently growing economic crisis has been accompanied by increasing political instability and further destabilisation of the international economy.

The world market system has run into a second, and much more general, impasse, caught between two interlocking conflicts—the demands of workers in the industrial countries for higher real wages and the demands of the third world for improved terms of trade.

So long as unemployment and slow growth continue, the relative prices of raw materials are kept down and this somewhat mitigates inflation in industrial countries. As soon as a revival begins, prices of raw materials and foodstuffs begin to go up and real wage demands become harder to resist; the authorities nervously pull back and the revival is checked. The orthodox economists, still repeating incantations about equilibrium, encourage the authorities to pursue these deflationary policies—the very same that Keynes in the thirties used to describe as sadistic.

It is ironic that after the great technical achievements brought by the age of growth, all we are offered is a return to large-scale unemployment and poverty in the midst of plenty, in an age of frustration. Kalecki was right to be sceptical; the modern economies have failed to develop the political and social institutions, at either domestic or international level, that are needed to make permanent full employment compatible with capitalism.

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† See Robinson (1962); K. J. Coutts, W. A. H. Godley and W. D. Nordhaus, Industrial Pricing in the United Kingdom, Cambridge, CUP, forthcoming.

‡ Exports of OECD countries as a whole increased from 11% of GDP in 1954 to almost 17% of GDP in 1973.

References

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Kahn, R. 1976. The historical origins of the IMF, in Keynes and International Monetary Relations, ed. H. P. Thirlwall, London, Macmillan

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Keynes, J. M. 1946. The balance of payments of the United States, Economic Journal, vol. 56

Keynes, J. M. 1972. The economic consequences of Mr Winston Churchill, in Collected Writings of John Maynard Keynes, vol. 9, Essays in Persuasion, London, Macmillan

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