marxism-digest V1 #2692

Philip Ferguson plf13 at
Wed Oct 4 18:54:28 MDT 2000

Me earlier:
>>arms spending cannot create boom conditions.  Arms spending is
>>*predicated* on their being masses of surplus-value to draw from.

>Well the conventional view is that deficit spending can TEMPORARILY
>stimulate demand. For example, you put people in uniform, they have more
>money to spend, the shops make more sales, etc etc.  All my empirical
>observations seem to confirm this, as does all bourgeois economic opinion
>from "left" to right, and I always thought Marxists didn't dispute it as far
>as it went. This pump priming does however soon create inflation, which
>undermines the boom. Because, as you say, it's not real wealth creation; and
>this is where Marxists disagree with bourgeois economics. Anyway that's what
>I'm talking about in the current exchange. I take it you think this doesn't

I pointed put ealrier on that there is a big difference between a bubble
and a boom.  Yes, of course, deficit spending can create a bubble.  But I
don't think it is helpful to call this a boom.  When the bubble - quickly -
bursts, the position is *worse*.  A genuine boom, like the postwar boom, is
a protracted period of economic growth.  It involves real wealth creation.

Maybe we are not entirely in disagreement here.  But I thinbk it much more
useful to refer to deficit spending as creating a 'bubble' or an
'artificial boom' or something else that indicates it is not a *real boom*.

>>Are you arguing there were two different booms?  One after WW2 and another
>>under the impact of Vietnam War spending?
>Yes. There was:
>1. A longterm expansion of the system caused by the PAE,

Eh?  I thought we had agreed that the postwar boom was *not* caused by arms
spending.  Otherwise, we are back to this strange idea that deductions of
part of surplus-value actually leave us with more surplus-value!

>which was running
>out of legs by the late sixties, as evidenced by declining profit rates -
>and as predicted by Kidron and Harman.

Show me where Harman and Kidron predicted this.  I quoted Kidron in his
book stating that PAE was a *permanent offset* to the falling rate of

>2. An additional TEMPORARY and very unhealthy revival due to the "Keynesian"
>effects of the Vietnam War.

Nope.  This was the fag end of the postwar boom.  Keynesian methods of
pump-priming were used, and put some more money into the economy - the
effect of which was inflation, for the reasons I outlined.  I think it just
muddies the waters to refer to this as a boom.  We need to be more precise
about what a real boom is.

AS we seem to agree, the effect of this was to make matters worse - and
very quickly.  So much for Kidron's idea of a *permanent offset*.

>It is true that the two phenomena overlap in practice, but they are
>conceptually distinct.
>You may ask why the Vietnam War didn't have a healthier effect along PAE
>lines. The answer is the limitations to the PAE which Kidron identified and
>which by the late sixties were making themselves felt.


In 1970, repeat 1970!, Kidron argued in his book that PAE was a *permanent
offset* to the falling rate of profit.

>>result of the war spending on Vietnam ... great for the Japanese economy
>But obviously that had flow on effects for the world system, including the

Its flow-on effects for the US were all negative.  US decline in relation
to Japan.

>>But for the US capitalist class as a whole (as opposed to the arms
>>capitalists), the war spending was a disaster.  Deficit spending had to be
>>used to finance the war and the government's social programs, inflation
>> >rose rapidly the rate of profit in the
>>arms sector falling even faster than in other commodity production, the
>>economic decline of the USA relative to Japan and Germany and so on.
>Yes I don't disagree. It created a TEMPORARY revival but with disastrous
>consequences later on, because of the factors you mention [all of which
>Kidron foresaw - they are among the reasons he thought the PAE could not
>work beyond a certain point].

And yet, on the eve of the greatest slumpo since the 1930s, Kidron argued
that PAE meant a *permanent offset* to the falling rate of profit.  Even
the title of the theory - PERMANENT arms economy - points this up

Philip Ferguson

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