underconsumption again--and Luxemburg

Steve.Keen at unsw.edu.au Steve.Keen at unsw.edu.au
Thu Feb 2 01:20:38 MST 1995

Boddhisatva has interpreted the Kornai critique of planned socialism as
being "supply side", stating:

|strategic business.  Your analysis rests on two assumptions.  The first is that
|the positive demand pressure engendered by socialism will pull resources away
|from capital stocks...

In fact, it is a critique of policies of over-emphasis on investment. My own
contribution on this has been to take a look at Fel'dman's growth theories,
which it could be argued buttressed the Soviet focus on "production of the
means of production". The argument Fel'dman made was that, while initially
such a focus would mean a reduced level of output of consumer goods, in
the long run it would result in much larger levels of consumer goods output--
a "socialism of plenty".

In fact, the model he built was predicated upon an abundance of labor. But if
the growth policies succeeded, the abundance of (unemployed) labor
would disappear. Hence growth would be rapid until the full employment
level would be hit. Continued emphasis upon capital goods from that point
on would mean taking resources away from consumer goods output.

The rub is, of course, that no simple division can be made between "capital"
and "consumer" goods (Fel'dman actually spoke of "heavy" and "light"
industry). So a shortage of light industry output would eventually cause
bottlenecks on heavy industry output.

All the above is not hypothetical; Kornai wrote his analysis, not to
dispute the possibility of some future socialism working, but to
interpret why present socialism was failing (he wrote in 1975-1990).

The only point for the future is that we can learn lessons from the past.
But if any attempt to explain past failures is instead interpreted as a
slight on the yet-to-arise socialist worker, the chances for learning
from the past are limited.

Steve Keen


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