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.

Giorgos Stamatis-The economic crisis and the delusions concerning its overcoming (Pt. 1)

Giorgos Stamatis

The economic crisis and the delusions concerning its overcoming

Theseis 15, April-June 1986

Translation: In Defense of Greek Workers

The economic crisis that is hitting capitalist countries today broke out in the beginning of the 1970s. It is therefore well into its second decade.

I will not here deal with its causes, but with certain of its aspects that I think are of particular interest.

The crisis itself was initially expressed in the form of a decrease of the rate of the employment of labor, that is to say, in the form of an increase of unemployment; and in the form of the decrease of the rate of the employment of capital. The decrease in the rate of employment of labor and of capital had stagnation as their immediate consequence, and sometimes also resulted in the decrease of the GNP.

According to the view and practice that was dominant until the end of the 1960s, governments in such cases must respond through an anti-cyclical policy, i.e. they must implement measures to increase demand for local products; the most important of these measures is the increase of public spending itself. This policy is known as the Keynesian policy of fighting the economic crisis. But in this case, in the case of the crisis that began in the 1970s, it was as if what was taken for granted was exactly the opposite: the former supporters of Keynesian economic policy suddenly advocated a pro-cyclical policy of cutting public spending, especially of social spending, and of reducing demand, while governments did their best to apply an "austerity" policy, as it became known [1].

"Let's save capitalism now, we can have socialism later": Don't consume after expiry date

Lapavitsas, state-of-the-art "socialism" in 2015:

Let me come clean on this. Keynes and Keynesianism, unfortunately, remain the most powerful tools we’ve got, even as Marxists, for dealing with issues of policy in the here and now. The Marxist tradition is very powerful in dealing with the medium-term and longer-term questions and understanding the class dimensions and social dimensions of economics and society in general, of course. There’s no comparison in these realms.

But, for dealing with policy in the here and now, unfortunately, Keynes and Keynesianism remain a very important set of ideas, concepts, and tools even for Marxists. That’s the reality. Whether some people like to use the ideas and not acknowledge them as Keynesian is something I don’t want to comment upon, but it happens.

So I cannot blame Varoufakis for that, for associating himself with Keynesians, because I’ve also associated myself with Keynesians, openly and explicitly so. If you showed me another way of doing things, I’d be delighted. But I can assure you, after many decades of working on Marxist economic theory, that there isn’t at the moment. So yes, Varoufakis has worked with Keynesians. But that isn’t really, in and of itself, a damning thing.