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Posted May 20, 2009
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This excellent book examines John Maynard Keynes' key work, The General Theory of Employment, Interest, and Money, published in 1936, seven years into the Great Depression, when one in seven US workers was still out of work.
Keynes' thinking largely broke free of the conventional wisdom, that wrecking the trade unions would make the market work again. But he didn't leave behind all conventional free trade thinking.
Minsky writes, "the missing step in the standard Keynesian theory was the explicit consideration of capitalist finance within a cyclical and speculative context." Minsky shows that private investment is the constant source of speculation, instability, slumps and mass unemployment.
Minsky shows the conflict at the centre of capitalism: "the boom is critical; it builds an ever-more-demanding liability structure on the base of a cash-flow foundation consisting of the prospective yields of capital assets, which are, because of technology and the limited ability to squeeze workers' real wages, at best constrained ultimately to grow at a steady rate in real terms. The debt base, which grows at an accelerating rate during a boom, is not so constrained. Thus, debts require increased servicing as they grow and as financing charges increase."
He observes, "In Keynes' own view his theory implied that the existing order should be replaced by a much more egalitarian economy, based upon a dominance of social control over investment. As the private, profit-motivated decisions to invest cannot guarantee a reasonable approximation to full employment, 'a somewhat comprehensive socialization of investment' (GT, p. 378) will prove necessary." But Keynes breezed over the politics needed to do this. How could we socialise investment without taking power from the capitalist class?
Minsky notes, "Keynes also believed that 'if nations can learn to provide themselves with full employment by their domestic policy . there need be no important economic forces calculated to set the interest of one country against that of its neighbours.'" But if capitalism could do this, it wouldn't be capitalism. Capitalist economies are basically flawed - unstable and unequal, unworkable and unjust.
Posted March 4, 2010
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