[Marxism] Marxism and Keynesianism

Louis Proyect lnp3 at panix.com
Mon Jul 18 12:18:03 MDT 2011

An interesting comment on this:

Like with every capitalist theory of economics, Keynesianism is 
based on the assumption of limitless growth.  The idea is supposed 
to be that there always exists somewhere in the economy a place 
where profitable growth can be achieved by an investor who is 
daring enough.  From a Keynesian perspective, the only thing which 
holds back economic growth is that investors are reluctant to be 
daring.  But if the managers of the monetary system can somehow 
inject loose cash or credit into the economy then this should lead 
to a greater willingness by investors to explore the previously 
untouched possibilities and thereby result in new consumer goods 
and services appearing on an expanding market.

Unfortunately, the world economy is reaching its limits rather 
quickly right now.  Before the 1970s economists had maintained 
that high inflation and high unemployment could not occur 
simultaneously because a rise in unemployment would undercut 
consumer purchasing power and thereby force a drop in prices.  The 
1970s proved this wrong with stagflation, and Keynesianism was at 
the root of that.  Businesses over 25 years had grown used to 
assuming that the federal government would always attempt to pump 
money into the economy to offset unemployment.  As long as the 
economy was really growing this was an all right assumption.  But 
when economic saturation hit and businesses began to cut back on 
jobs they also now began to anticipate an expected increase in the 
money supply for which they were not prepared to respond by 
restoring jobs.  Consequently, high inflation occurred alongside 
of high unemployment.

That stagflation in the 1970s was the decisive failure of 
Keynesianism, a failure that was centered precisely in the most 
advanced industrial countries.  The subsequent promotion of Milton 
Friedman's neoliberal theories of economics came about in response 
to this recognition by the upper classes that Keynesianism no 
longer worked.  We've had attempts to dust off Keynesianism in 
some intellectual circles since the disaster of the Bush II years. 
  But no politician with real authority is actually attempting to 
advocate Keynesian solutions.  They know that this has already failed.

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