More than Keynesianism

Danny Finkelstein in the Times says there's a good reason for John McDonnell's confusion on the fiscal charter:

Fundamentally, he is a socialist, not a Keynesian...The deficit may have been central to political debate over the last seven years, but it isn't central to him. So he has been careless because he regards this as a side issue.

I don't know whether this is an accurate description of Mr McDonnell. But Danny is alluding to something important here - that from a socialist point of view Keynesianism, in the sense of counter-cyclical deficit financing, is not enough.

One reason for this is simply that it does little to address what socialists regard as key defects of capitalism - its tendencies towards inequality and alienation. Danny's right to say that Keynesianism was a way of saving capitalism, not abolishing it. Sure, full employment can help ameliorate these evils by increasing workers' bargaining power. But as Kalecki famously said, full employment is not sustainable within capitalism.

A second reason - which is more pressing today than for years - is that mere counter-cyclical policy does little to increase long-term trend growth; sure it might do so by reducing the fear of recession and thus improving animal spirits, but it's also possible (pdf) that stabilization policy dampens it. Combating the threat of secular stagnation requires more than counter-cyclical policy. Keynesianism in its alternative sense of socializing investment might be part of the answer here - and in fairness this is what Corbynomics is. But only part. There's also a need for policies to raise productivity - and these might require measures to reduce inequality and increase worker ownership.

But there's a further reason why Keynesianism is not enough. Counter-cyclical fiscal policy is insufficient to fight recessions simply because recessions are unpredictable and so we cannot rely upon even a government of intelligence and goodwill to loosen policy at the right time. Anti-recessionary policy requires other institutions. These might include: nationalizing banks to prevent destabilizing credit cycles; a generous welfare state (citizens income!) to act as an automatic stabilizer; and/or Shiller-style insurance markets.

I say all this partly to answer Danny's accusation that socialism is "hazy". Lenin defined communism as "Soviet power plus electrification": I'd define socialism as citizens income plus worker ownership and control.

But I'm also speaking to the left here. It's not enough to be "anti-austerity", and certainly not enough to simply want to shift austerity onto companies and the rich - not least because pre-tax inequality matters too. Good counter-cyclical policy should of course be part of intelligent leftism. But it can only be part.

Comments

[Luis Enrique]

how much worker ownership do you have in mind?

[e]

If the “new politics” can engage “disenfranchised” voters, the likes of DF might be given cause to re-evaluate the nature of deficits, alongside the importance of principles and morality; and necessity being the mother of invention, citizen’s incomes and worker cooperatives could get the hearing they deserve.

[Blissex]

«The deficit may have been central to political debate over the last seven years,»

Only in the delirious "mediamacro" bubble to which SimonWL and our blogger both belong; in particular as SimonWL seems to believe in New Keynesianism for which "austerity" is the central concern.

For most voters that matter "austerity" is irrelevant, and for many it is something they rather like, for other people of course.

The central aspects of politics in the past "private Kenesianism" decades have been bigger house prices in the South and lower interest rates for remortgages. Those move votes that matter in marginal seats.

[Blissex]

«I'd define socialism as citizens income plus worker ownership and control.»

Amusingly *partial* «worker ownership» is a goal of toryism too, to make them complicit in the system, turning them even more into nasty rentiers.
Mass landlordism and house speculation has already succeeded on an awesome scale.

As to «worker control» that is a dream. Who/which class controls the levers of industry depends a lot on material conditions.

Also consider one special big case of «worker control»: the civil service, should it be controlled by workers or voters? :-)

[Bob]

Basic Income is a dream. Look at what has happened to unemployment benefit. They keep rolling back the State Pension.
Lefties just don't seem to understand why programs like Benefit Street get made.

[Bob]

"But as Kalecki famously said, full employment is not sustainable within capitalism."
MMTers have written extensively on precisely this. Bill Mitchell has an excellent book on it - Full Employment Abandoned:
http://www.e-elgar.co.uk/Bookentry_Main.lasso?id=1188

[Bob]

More than Keynes = Post Keynes.
We need modern medicine not Galen and Hippocrates
MMT not Marx and Keynes.
A lot of Keynes' work is obsolete 1920s philosophy :)

[Magpie]

To be honest, I'm a fan of Finkelstein. Well, I like Dracula better.

But Finkelstein beats the Werewolf, hands down.

------

"More than Keynes = Post Keynes."

That's not what Keynes really said.

[Magnus]

I fail to see how being anti-austerity at all conflicts with objectives for a fairer society.

Being anti-austerity is bad, whether you're McDonnell, Osborne, Nietzsche or Rawls.

It's only a question of prioritization if objectives are mutually exclusive. They're just not in this instance.

[Bob]

"Being anti-austerity is bad,"
"Austerity" is needed when demand side inflation is an issue and we are close to full capacity.
Not when resources are being wasted needlessly.

[An Alien Visitor]

"I'd define socialism as citizens income plus worker ownership and control"

To answer Louis and Blissex, I am reading this as total control. So not quite what the Tories have in mind.

[Blissex`]

«I am reading this as total control. So not quite what the Tories have in mind.»

So the workers in the NHS should have total control over their hospitals? The workers in the Treasury over the national budget? The workers in the Foreign Office over the foreign policy? Those in the Ministry of Defence over which wars they start?
What about the coordination issues?

The well-tested and effective leninist way of solving the problem of what "total control" means is simple: the party, being the vanguards of the workers, has "total control" over the NHS, the Treasury, the Ministry of Defense, and attempts to undermine that "total control" are attacks on the rights to freedom and self management by the workers.

It doesn't end well :-).

[Bob]

Right on Blissex. This is crazy Marxist stuff.
MMT has described how to solve this problem- virtual machine capitalism- running capitalism on top of socialism:
"Because they are working, the number of people on a JG becomes less of a social issue - no more 'bring down unemployment', no more 'shirkers'. Therefore normal businesses can be allowed to go bust, not pay redundancy, etc because the JG will catch people who lose their jobs during a retrenchment. That disciplines the spending and wage channels since there need be no bailouts or the 'special industries' that pump-priming requires. Overpaid workers get an imposed wage cut when they are forced to move to the JG as do greedy bosses. 'Corporate confidence' is no longer of overriding concern."

[Bob]

"What about the coordination issues?"
They don't exist in Chris' world. Hence the support of Basic Income.

[Blissex]

«Right on Blissex. This is crazy Marxist stuff»

As long as it is marxist it is a bit wistful but it is fine, it is the leninist bit that starts to get a bit worrying :-).

«therefore normal businesses can be allowed to go bust, not pay redundancy, etc because the JG will catch people who lose their jobs during a retrenchment»

That's more or less how Denmark is supposedly setup: low but viable income for those who are unemployed for some reason or another, voluntarily or not, and fierce competition for those who want more.

«"What about the coordination issues?"
They don't exist in Chris' world. Hence the support of Basic Income.»

Our blogger may be more realistic than you think in several cases. Denmark is supposedly pretty close to that part of his ideal and works pretty well. Perhaps it is a "high trust" society.

But even if there are shirkers that prefer a modest life on benefit why not? As long as it is an option open to anybody. After all the UK taxpayers can afford to pay enormous amounts in corporate welfare to the City spivs who by most accounts produce net losses over the cycle.

But the ruling classes in countries like the UK and the USA, who don't pay taxes, are still very much against the middle class paying taxes for a social welfare system. Given that the ruliong classes don't pay taxes, why are they against the middle classes paying them for a social welfare system?

The best reason I can think of is that the ruling classes think that unemployment and poverty need to be so vile and horrible that the middle classes be absolutely terrified of losing their jobs, and thus be bend-over corporate servants. The southern middle classes apparently enthusiastically agree with that. Apparently having largely become landlords makes them overconfident in their "Blow you Jack! I am allright" attitude.

[Bob]

Becayse you have the political reality of operating a social security system in the real world with real human beings. It's not a matter of mathematics or accounting. It's got nothing to do with tedious technical economic issues about the nature of value.
It is simply a matter that the default Basic Income Job - "spend the money I'm given" - is not seen as sufficient recompense by the rest of society - even when the payment is universal. That makes it a non-starter.

Much is made of all the 'trials' and 'pilot projects' of basic income. You'll note that none of them ever get any traction after that. This is why. It's a political turkey.

Receiving money when you don't need it is seen as morally reprehensible, as is spending money and doing nothing of perceived value. Politically they get removed when they show up, or slowly chipped away at best. We've seen this in the UK since the Second World War - increasingly since the 1970s. Even the Universal Pension is moving the wrong way. The age at which you receive the pension is ever increasing despite having a clear contribution element that people can relate to.

Although many may benefit from being 'freed' from work, there are known detrimental effects to health amongst a chunk of the population that already receive income guarantees (the retired). Unemployment can transform into social isolation, despair and depression unless there is active assistance finding something useful to do. That doesn't happen spontaneously. It has to be provided actively by the social support system.

[Bob]

"But even if there are shirkers that prefer a modest life on benefit why not? As long as it is an option open to anybody."
It can't though can it.
Some people have to work and produce stuff.

[Bob]

http://t.co/a6ClMwFicu
Chris, you may find this paper interesting. It explains the Job Guarantee in detail.

[Magpie]

Chris: "I'd define socialism as citizens income plus worker ownership and control."

Let's parse this contentious sentence, for those who don't read well.

(1) Chris (not Marx, not me, not anyone else, but Chris) defines socialism that way. You may agree, you may disagree (personally, I disagree, but that's besides the point).

Bob: "Right on Blissex. This is crazy Marxist stuff."

No, it isn't. It's Chris-tist stuff. Read Chris before braying.

(2) Blissex: "So the workers in the NHS should have total control over their hospitals? The workers in the Treasury over the national budget? The workers in the Foreign Office over the foreign policy? Those in the Ministry of Defence over which wars they start?"

Okay, fine. I'll grant you, Blissex, that Chris was sloppy; although to be fair -- and you deliberately ignore it -- he did mention ownership (check above), which suggests he had in mind private business (leaving out the public entities you mentioned, like the NHS, the Treasury, the Foreign Office, or the Ministry of Defense). In other words, he was writing about private businesses, which don't coordinate with anyone else (and you forget that coordination problem).

Now, you Blissex, may insist on being maliciously punctilious.

Again, I'd say fine. But now, on the same spirit, I'd remind you that the NHS, the Treasury, the Foreign Office and the Ministry of Defense are British public bodies. Therefore, your argument does not apply anywhere else in the world.

----------

People, for God's sake, give us a break.

[chris]

@Bob - I agree that a JG is a good counter-cyclical tool. However, I'm not sure it is compatible with capitalism; on the one hand, it helps sustain agg D and hence profits. But on the other, if the state jobs are good and high paid, it would tend to bid up private sector wages and squeeze profits.
Also, I'm not sure that MMT, for all its virtues, solves Marxists' problems with capitalism: the inequality (of power as well as income) and alienation.
@ Luis: the appropriate form of worker control will vary from business to business. I would envision much more than mere tokenism - eg workers electing CEOs? The qn is how to encourage it: giving coops preferred bidding status in govt procurement, tax breaks etc. I don't pretend to have all the answers> I'm just suggesting things that the Left should think about more.