Tony Sullivan's List: economy

• Chris Harman’s article in this journal “The Crisis in Bourgeois Economics” traces the development of and criticises both neoclassical and Keynesian economics.

• The neoclassical school broke with the classical economists over what economics should be about. As Harman explains:

   

  What mattered to them was not the creation of wealth and its distribution between classes, but rather showing that the fixing of prices through the market, without conscious human intervention, automatically led to the most efficient way of running an economy. And so they abandoned the old view of value, with its concentration on the objective necessity of labour for production

• capitalists decide how much to supply at every price. Demand and supply curves are constructed and the point at which they intersect is the equilibrium—the price where the amount that consumers want to buy is exactly the same amount that capitalists are willing to supply. If “consumer choice” or the costs of production change then these curves shift and there is a new equilibrium.

   

  Labour and employment are treated in exactly the same way as apples and oranges on a street market. If workers demand higher wages (than the equilibrium) then fewer of them will be employed and there will be unemployment. However, if they were prepared to accept lower wages then supply and demand would once again coincide and full employment would return.
• The main tenets of post-Keynesianism
• the major flaw in post-Keynesian thinking is that the state is seen as neutral with the potential to be harnessed and to deliver reforms that are more widely in the interests of working class people.
• three strands of thinking that have dominated radical economics and importantly influenced progressive thinking and anti-austerity organisations
• To force financial markets to play a more limited but more productive and less dangerous role in the economy, we need a combination of aggressive financial regulation coordinated across national markets as well as nationalisation of financial institutions where appropriate
• The argument for the falling rate of profit
• two problems with the financialisation account. First finance and credit are viewed as the direct causes of the 2008 crisis and as such seen as providing an alternative explanation of the crisis. Second, and related, finance is seen as an autonomous driver that is external to capitalism rather than an integral part of it.
• finance as a driver of overaccumulation—in other words it enables capitalists to grow more rapidly than otherwise
• increase in risky investment behaviour when the person making the decisions will not suffer the losses

• Marx argued that a decline in the rate of profit leads to a crisis ­indirectly by encouraging speculation and over-production:

   

  If the rate of profit falls…we have swindling and general promotion of swindling, through desperate attempts in the way of new production methods, new capital investment and new adventures, to secure some kind of extra profit, which will be independent of the general average [profit determined by the average rate of profit] and superior to it.76

   

  When debts finally cannot be repaid a crisis erupts and then that crisis leads to stagnation:
• Financialisation therefore concentrates on the proximate causes of the crisis rather than the longer-term underlying weaknesses in the capitalist system that enabled the financial sector to trigger an especially deep and long recession with persistent after-effects.
• underconsumptionists wrongly invert the order of causation:
• The capitalist decreases his investments and the resulting stagnation of production appears as overproduction.

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