[Marxism] Global public goods

Rakesh Bhandari bhandari at berkeley.edu
Mon Jul 10 10:17:18 MDT 2006


I guess this message was lost...I appended a bit
on the horrific Herrnstein and Murray.Mass unemployment
in the US will emerge once the global savings glut evaporates
or is redirected away from the US bond and real estate markets;
US 'prosperity' such that it will have proven to be fictitious.


Dear Ismail,
The main legitimation of inequality occurs outside of economics proper.
The favorite anti Keynesian economic explanation for unemployment
is the skills mismatch  hypothesis (more important
than the efficiency wage and sticky wage explanations)--
technological change is skill intensive, the workforce
remains unskilled. The explanation is bogus, but let's work with it,
for there is a lot of evasion once it's asked just why this is.
For it's not just a matter of education opportunity and retraining
opportunity since these are not availed
or truly taken advantage of-- too many of the poor, we are then told,
may have too steep a present time preference; they are thus unwilling
to forgo income to educate themselves. But why this preference?
We are then led to the givens of differences in individual preferences.
But then there are all the common sense, albeit unstated,
assumptions of biocultural differences between groups
which accounts for most of the variance. That is, the main
justification for inequality is unstated social Darwinist common sense. But
inequality is not in our genes as Lewontin, Rose and Kamin long ago argued
(see also Jonathan Marks--he has some wonderful pieces on his website
http://personal.uncc.edu/jmarks/.)
Of course economic and social inequality can be expressed in and reproduced
through biological inequality once we consider the effects of 
prenatal and perinatal
care. See here the writings of Patrick Bateson or Peter Dickens.
In many ways the critique of social Darwinism is more important
for progressives than the critique of political economy. Marx's
Capital is not a bible.

Rakesh

Where Marx understood unemployment in terms of a race between 
mechanization and the rate of accumulation--that is, the more capital 
intensive new investments are, the higher the rate of accumulation 
has to be absorb the technologically displaced and growing 
population--economists have tended to understand the dynamic as a 
race between the skill-intensity of technological change and the 
education level of the workforce. This is often referred to as the 
structural mismatch hypothesis. According to Galbraith, economists 
hope that the incentive of relative wage inequality, coupled with 
some educational initiatives, will induce upgrading by the unskilled. 
Murray and Herrnstein articulated the belief that the unskilled, 
among whom minorities are for them non-coincidentally 
over-represented, are genetically incapable of being "upgraded", at 
least at a "reasonable" cost; thus,  head start and other educational 
ventures are a waste of tax money (which given Murray's self 
proclaimed libertarianism should probably be returned in the form of 
breaks and relief). They also expressed the belief that due to the 
congenital dullness of the unskilled, the educational monies required 
would necessitate an excessive tax burden on the skilled and wealthy 
and thus discourage them from improving themselves to earn higher 
income that would just be taxed away, anyway.  The authors were 
simply saying that instead of throwing money at the so-called 
cognitive underclass, the state should focus more on those who can be 
trained to function in the new more skill-intensive economy and 
encourage the assortative mating of the cognitive elite class....

Another assumption... is, as already stated, the belief that the 
fundamental social problem lies in the mismatch between the demands 
for the skilled labor and the preparedness of workers for such tasks. 
Attention is thus shifted to the supply-side, i.e. in improving the 
supply of a better quality workforce as the most efficient means by 
which to reduce unemployment and inequality. Government-led stimulus 
of demand through both direct job creation via deficit financing and 
income redistribution to the poorer classes which a higher marginal 
propensity to consume were discredited as policies by which private 
investment, supposedly foundering on the lack of growing markets, 
could be revived. Just as demand management had been politically 
discredited, The Bell Curve authors were attempting to discredit 
supply side management and thus counsel government acceptance of ever 
higher levels of inequality and unemployment.
This shift from demand to supply side management was well 
characterized by Nicholas Spulber:
Speaking for himself and for 'many Democrats', Lester Thurow affirmed 
in the mid 1980s that the New Deal was dead, and that what the 
Democrats needed henceforth was a 'new vision to replace the old New 
Deal goals.' He defined these old goals as aggregate demand 
management, a social safety net, equal access to education, and 
economic opportunity. The new vision which he offered to the 
Democrats as a guide over the next 20 to 30 years was the 'the 
problem of competitiveness in the world economy,' a long-term problem 
equivalent for him to the 'problems that the Roosevelt Administration 
set out to conquer in the 1930s.'
The interest in recalling these quotations is that they accurately 
summarize the positions of at least a part of the leadership of the 
Democratic Party--let us call it the center--that was defeated in the 
presidential race of 1984 but victorious in 1992. What the shift from 
the old vision implies is a departure from Roosevelt's emphasis on 
consumption and income redistribution, away from the increase in 
demand--in the language of the 1930s, the increase of the 'purchasing 
power' of farmers, workers, the needy and the old--toward a 
significant increase in investment. This shift would at first blush 
seem a Democratic conversion to the main principle of the Republican 
credo, as reaffirmed in the early 1980s by President Reagan. Indeed, 
Reagan was the first to initiate and to implement a shift away from 
the welfare tenets of the New Deal . But the similarity stops there. 
The Republicans had always stressed that the government should step 
aside in virtually all respects, leaving the key task of investment 
to the private sector, via the higher savings of the higher income 
receivers. Contrawise, the Democratic shift to investment posited 
from the beginning first of all a more activist government than ever, 
a government active with respect to the allocation of this 
investment, a government expanding its relationship with business, a 
government directly concerned with the level of savings, the volume 
of R&D, and quality and skills of the labor force. This new 
"competitive problem' which commanded all these adjustments required 
that we learn from the Japanese whereto go and from the French what 
dirigiste instruments to use. It required a government capable of 
'practicing triage and killing off weak companies unable to develop 
the new products to fight off Japan's Komatsu." The centrist 
Democrats have thus abandoned demand policies aiming to control the 
business cycle in favor of investment policies aiming to control 
economic growth. Both policies proceed from the dubious assumption 
that 'fine tuning' is possible: on the demand side by the use of 
macromeasures; on the investment side, by micromeasures."

In short, Herrnstein and Murray were making an argument for the 
abandonment of  supply side intervention on the skills of the 
minority poor, aimed at full employment and attenuated income 
inequality. The state form which they found suited to a complexifying 
economy populated by races of unequal types could be accurately 
characterized as a punitive racial state. 
Their intervention is best understood as an attempt to switch 
ideology from a depiction of the economy as a self-adjusting full 
employment machine  to a more hard-nosed Social Darwinism which 
admits the possibility of large scale permanent unemployment and 
seeks reconciliation with it. Marxist criticism has tended to assume 
that the most important expression of "bourgeois ideology" is 
classical economics and even more so what Marx called vulgar 
economics (Marx's magnum opus was subtitled A Critique of Political 
Economy, after all). Ricardo had initially argued that the 
introduction of machinery could not create unemployment; Marx devoted 
a section of  Capital, Volume 1 to the critique of this compensation 
theory which Ricardo himself later qualified. While neo-classical 
micro-economics does provide an explanation for persistent 
unemployment--for  example rigidities in the labor market caused by 
efficiency and otherwise "sticky" wages or obstacles to investment 
created by imperfect competition --its main message is the 
Panglossian one of the ability of a market economy to return to a 
full employment equilibrium after "shocks" such as technical change 
or global trade (assuming of course that wages are not so high to 
interfere with new investments and labor is willing to move into and 
train itself for whatever the dynamic sectors happen to be).    This 
micro economic theory has tended to be in conflict with Keynesian 
marco economics which finds full employment only one of and an 
unlikely equilibria. The attempts to keep micro and macro together in 
terms of what was called the neo classical synthesis struck even many 
within the profession as hopelessly confused and contradictory. 
Macroeconomics thus laid out the practice of using fiscal and 
monetary policy to remedy what microeconomics seemed to make 
impossible--unemployment equilibrium, but such contradiction did not 
prevent the neo classical synthesis from remaining the core of 
economics as presented in the leading textbooks, Paul Samuelson's 
above all others.   As Deane put it:
While the prevailing orthodoxy conformed to what was generally 
thought of as Keynesian economics--as it did for most of the 1950s 
and 1960s--the standard undergraduate introductory text expounded the 
fundamental principles of the discipline in two compartments. Part I 
typically described a macro-economic model inspired by Keynes's 
General Theory. Part II presented neo-classical micro-economic theory 
leading to the traditional conclusion that, in freely competitive 
markets, the operations of the price system tend over the long run to 
maximize aggregate output. This sat uneasily with the Keynesian 
message that in an uncertain world, effective demand tends to fall 
short of the level required to bring all available labour and capital 
into productive use. 

Murray and Herrnstein were perfectly willing not to defend a market 
economy on the grounds that it maximized welfare by making the best 
use of all available resources; that is, they had no commitment to 
the ideological core of neoclassical mico-economics.  For them, 
unused labor was not only likely but likely only to grow with time. 
They prided themselves on being able to look at a market society 
without rose-tinted glasses. They positively embraced the thesis that 
process of adjustment to technological change and outsourcing will 
sink many people into undisguised and disguised unemployment.  They 
sacrificed the vision of the harmonies of neo classical economics for 
the brutal "truths" of Social Darwinism, i.e. the idea that with 
"skill intensive technological change" and "rising organizational 
complexity" many people (disproportionately from  some racial 
minority groups) are simply unfit for (and thus a drag on) the modern 
world. 
And in this way they returned to early twentieth century  when as 
William Darity has revealed the American economics profession was on 
the whole committed to the so called black disappearance hypothesis. 
Herrnstein and Murray were interested in the disappearance of the 
putatively congenitally unfit more through incarceration and 
restrictive immigration policy than eugenics per se...


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