Did I ruffle a few feathers? :)

jones/bhandari djones at uclink.berkeley.edu
Thu Sep 21 23:01:28 MDT 1995

>.  And since we've not had a government in history that is
>"class-neutral," it is difficult to conceive of one.

How does this conclusion square with Hayek's political theory?

> Nevertheless, I
>think it is a mistake to view such intervention as necessary to social
>cohesion.  My whole point is that it engenders internal contradictions;
>corporations and individuals in search of more control turn to an agency
>whose actions create a dynamic that inevitably leads to LESS control over
>peoples' destinies.  State action discoordinates the price structure, and
>ultimately undermines and distorts economic development

I am not raising the question of the long-term consequences of different
forms of state intervention.  It seems to me that you are assuming the
potential of foresight to the system, that if capitalist actors were aware
or forced to take into account the long-term consequences of  different
forms of government interventions (debt-financing, interest and exchange
rate manipulations, military contracts, subsidies, tarriffs,etc.), then we
could build a consensus to limit the government on our way to free market

My suggestion (I did not make an argument) was simply that, no matter the
long-term consequences, capitalists find themselves dependent upon the

In other words, the problem for capital is in the here and now, in
particular in the realization of tendentially overproduced fixed capital
and its amortization and turn-over through any  (especially inflationary)
means necessary, even if this makes difficult the continued possibility of
using same interventions again.  I do think it is important to show why and
how such interventions are destabilizing in the long run (indeed this is
exactly what Mattick's crtique of Keynesianism aims to do), but this does
not mean capital in the here and now can at all forgo the possibility of
using the state to preserve and advance itself.

 Now Walter Daum adds an essential element to this discussion.  He argues
that the capitalist state cannot allow deflation to wipe out inefficient
firms because of the upheaval which such a crisis would cause  (severe
deflation also is very threatening to even the most efficient capitals
given their massive investment in new machinery).  But such intervention
can only lead to inflation and slower accumulation due to inefficient
overall capital structure.  And at some point, capital will be forced to
ever more violent means to restore profitability.  But the essence of the
problem--and perhaps this is where our disagreement is--is not in the
state; it is in the problems created by the predominance of fixed capital
in the sphere of production.

I am quite unimpressed by what I have to say; what is needed here is a
detailed institutional history of government intervention *in the context*
of capital structure. And believe it or not, I have not been trained to do
this in ethnic studies.

>  Without markets and a structure of relative prices that are
>helpful to entrepreneurial actors, calculational chaos is inevitable.

But I am not convinced that with markets and a structure of relative
prices, we can avoid chaos.  Of course I am drawing upon Grossmann's
critique of the regulative function and long-term equilibriating tendency
of the price mechanism.

>  The investments are
>Mal-investments, and when the boom is over, and consumer demand does not
>materialize, the investing firms are usually forced to liquidate, causing
>a predictable downturn.

It seems to me that there are some important comparisons to be made between
Hayek's understanding of the sources of disequilibrium between departments
in the course of accumulation--especially if the market rate of interest is
allowed to get ahead of the natural rate (which does raise all sorts of
interesting questions about credit in an advanced capitalist economy)--and
Marx's analysis of disproportionality.  There is a very short note about
this in Sydney Coontz's Productive Labor and Effective Demand, including a
critique of Keynesianism. London: 1966.

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