Giorgos Stamatis-The economic crisis and the delusions concerning its overcoming (Pt. 2)

Pt. 1.

The measures recommended by capitalists and by governments in order to overcome the crisis, i.e., low wages, the funding and privileging of production and of investments, tax deductions for profit and cuts in the social spending of the Public sector, increase profit or even the rate of profit beyond any measure of doubt, but they do not contribute to the reduction of unemployment, whether by increasing the rate of capital employment or by increasing investment. For they do not increase either of these two. This is because the underemployment of capital means that demand is low when compared to the production potential of the given capital. So, as long as demand remains low, capitalists will not increase their investment. The measures I cited above do not increase either the rate of the employment of capital or the investments, or the employment of the labor force; they only increase profit. 

But it is said that increased profit means increase of investments and thus increase of the employment of the labor force. This is incorrect. For capitalists invest only when the expected future demand and expected future profit is high, not when the profits of one or more years are high as a result of state funding, tax deductions and low wages rather than of increased demand.

Let us however momentarily accept that these measures lead to an increase of investment.

As we know, there are two types of investment: investment on the expansion of the production force and investment on the rationalization, restructuring or shrinking of this force. The first type increases the employment of the labor force, whereas the second type leaves it either unchanged or, more usually, decreases it. In times of crisis, therefore, and because of low demand, capitalists will certainly not undertake expansionist investment, but investment in the rationalization, restructuring and shrinking of the production forces. Hence, investment will result in the increase rather than the decrease of unemployment. 

I have referred to above to some other facets of the economic crisis, beyond those of the underemployment of the labor force and of a capital. I am speaking of those facets of the crisis that governments evoke to ground the necessity of an austerity policy that exacerbates unemployment, i.e, the deficit of the income-expenditure accounts of the Public sector and of Public institutions (Social Security, etc.), the deficit in the balance of external payments, and inflation. Just as unemployment constitutes the form of the crisis for wage labor and the underemployment of capital constitutes the form of the crisis for capitalists, so the deficit in the income-expenditure account and the deficit in the balance of external payments constitute the crisis for the state. At least the first of these two deficits is a consequence of the underemployment of the labor force and of capital. Because the immediate consequence of the underemployment of the labor force and of capital, stagnation in the GNP, means a decrease of the resources of the Public sector (taxes, contributions for social security, etc.) and at the same time, increase of certain obligations (expenses for the unemployed, etc.). 

Hence the crisis does not only concern the economy as such, but also state finances. The Keynesian view, according to which the economic crisis harms the economy but not the state and its own ability to intervene and to implement measures for the overcoming of the crisis, has no ground in reality.

Reality is as follows: While there is unemployment and underemployment of capital, the state is in no position to adopt measures for their overcoming, but is forced to deal with the problems the crisis causes to the state itself. And the measures it is forced to adopt in order to solve these problems increase rather than decrease unemployment and the underemployment of capital. In other words, they constitute, more or less, a pro-cyclical economic policy that exacerbates the crisis. It would be worthwhile to examine the economic measures adopted this past October [1985] from this perspective [4]. Because they are measures of economic policy that showcase all the features we have discussed.

Nonetheless, governments present the measures they adopt to lessen the consequences of the crisis for the state itself and for capitalists as measures against the economic crisis as such. That is what the Greek government did concerning the measures it adopted this past October. 

The perception that the state is able to influence the economic conjuncture toward a specific direction in the interests of society at large was cultivated during a period when the economy was booming -- the postwar period. But this perception is useful for governments; it allows them to exercise a class economic policy while presenting it as an economic policy against the crisis generally and as an economic policy in the interests of society generally. It was useful for governments when things were good, and remains useful to them now that they aren't so great. 

Yet today, when economic policy measures don't work (as they seemed to work in the past) to achieve the goals for which they are said to exist, governments face a certain amount of problems. If they continue cultivating the perception that problems of the economic conjuncture and of demand can be handled, then they find themselves in the unpleasant situation of having to explain to those who share this view why their measures aren't working; if they stop cultivating this perception, then it will most probably become obvious that the reason why the measures exist is to serve other goals, beyond the stated goals of overcoming the crisis generally, and that they do achieve these goals, at lease to a higher percentage than they attain the goals they are supposed to have. To prevent this realization, governments must therefore legitimate their measures in a different way. They would then have to deal with a problem, if not a crisis, of legitimation.

Today, we can already observe some precautionary reactions to this dormant legitimation crisis that haunts economic policy. So, for instance, the Greek government, during the discussion of economic measures this past October chose the tactic of a forward advance and of adopting honesty, confessing that the measures it adopted will possibly decrease the GNP and the employment of the labor force, and hinting that this is a regrettable but unavoidable, temporary and already considered consequence of its measures. This way, the government decreases the expectations of the public concerning the ability of the state to handle the economic crisis, but does not put the fundamental perceptions in doubt.

The representatives of neoliberalism deal with the problem in a different way: they decrease the pressure of the expectations of the public by questioning the views on which these expectations are founded, for instance the view that the state is able to effectively deal with the economic conjuncture: 

"Liberal positions question an entire, hegemonic till now, political logic; they question the logic that the Public sector has the means and ability to solve almost all problems through its intervention."[5]

Here, the burden or resolving problems is transferred from the state to the functions of a market free from institutional limitations and adjustments and to the action of those who act in the freedom of the market -- "free" persons.[6]