underconsumption again--and Luxemburg

boddhisatva foucault at eden.rutgers.edu
Tue Jan 31 22:46:42 MST 1995

		Mr. Keen,

	 In comparing your analysis to Mr Iacocca's polemic, I mean to alert
you to the fact that you do indeed slight the socialist worker's capacity for
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.  The second is that the removal of the need for
protection from overconsumption, will have the tendency to supress innovation
structurally.  The first assumption is the supply side theory told from the
other end.  It maintains that increased demand cannot readily translate
itself into capital investment.  This is easily answered by pointing out that
we are talking about a socialist economy, where the workers are the
stockholders.  With their income rising, their marginal propensity to consume
will be reduced and their propensity to invest increased.  Furthermore, with
newfound responsibility, they will have the same impetus to create
profitability as the capitalists presently do.

	In answering your second point, which is more germane, I will modify
my previous statement to say that the proletariat will have NEARLY the same
impetus to innovate for profitability.  With overproduction worries
structurally allayed, theory definitely predicts complacency that would lead
to events you have cited.  This plays to a point I have made in previous
posts, that a non-employee capital market will remain necessary after the
revolution.  If investment, not in control of firms, but for profit
participation through minority ownership is allowed, the flow of
capital from antiquated industry to that which is more profitable, is
assured.  Greed is, once again, good, although not an unqualified
good.   You may well ask, "Who's the supply sider now ?"



p.s.  My handle is not "peace", but "boddhisatva", although, clearly, the one
would not reject the other appelation.


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