[Marxism] Venezuela: The political economy of inflation and invest ment strikes | Links International Journal of Socialist Renewal

Jim Farmelant farmelantj at juno.com
Mon Feb 10 05:27:02 MST 2014

 Michael Lebowitz addressed some of the issues discussed here a decade ago in his article. "Ideology and Economic Development". There, he noted:

"If the capitalist sector is the only sector identified for accumulation, however, then in theory and practice the implication is self-evident: a “capital strike” is a crisis for the economy. All other things equal, a government cannot encroach upon capital without negative-sum results. This has always been the wisdom of conservative economists.

"Yet, it is essential to understand that the conclusions of the neoclassical economists are embedded in their assumptions—and particularly relevant here is the assumption that all other things are equal. Consider two simple examples, rent control and mineral royalties.8 If you introduce rent controls (at an effective level), the conservative economist predicts that the supply of rental housing will dry up and a housing shortage will emerge. Likewise, he will tell us that if you attempt to tax resource rents (notoriously difficult to estimate), investment and production in these sectors will decline, generating unemployment. Both those propositions can be easily demonstrated—and they can also easily be demonstrated to be entirely fallacious with respect to the necessary conclusion.

"Assumed constant in both cases is the character and level of government activity. Clearly, rent controls may reduce private rental construction—but if the government simultaneously engages in the development of social housing programs (e.g., the fostering of cooperatives and other forms of nonprofit housing), there is no necessary emergence of a housing shortage. Similarly, taxing resource revenues may dry up private investment in mineral exploration but a government corporation established for exploration and production in this sector can counteract the effects of a capital strike. Obviously, all other things are not necessarily equal. Why should all other things be equal if a social democratic government rejects the logic of capital?"

"Thus, we need to be aware of the limits of the conservative economist’s logic. However, that does not at all mean that these arguments can be ignored! Because what the conservative economist does quite well is indicate what capital will do in response to particular measures. It is an economics of capital. And, nothing is more naive than to assume that you can undertake certain measures of economic policy without a response from capital; nothing is more certain to backfire than introducing measures that serve people’s needs without anticipating capital’s response. Those who do not respect the conservative economist’s logic, which is the logic of capital, and incorporate it into their strategy are doomed to constant surprises and disappointments.

"Understanding the responses of capital means that a capital strike can be an opportunity rather than a crisis. If you reject dependence upon capital, the logic of capital can be revealed clearly as contrary to the needs and interests of people. When capital goes on strike, there are two choices, give in or move in. Unfortunately, social democracy in practice has demonstrated that it is limited by the same things that limit Keynesianism in theory—the givens of the structure and distribution of ownership and the priority of self-interest by the owners. As a result, when capital has gone on strike, the social-democratic response has been to give in."


Jim Farmelant
Learn or Review Basic Math

---------- Original Message ----------
From: glparramatta <glparramatta at greenleft.org.au>
Subject: [Marxism] Venezuela: The political economy of inflation and investment strikes | Links International Journal of Socialist Renewal
Date: Mon, 10 Feb 2014 19:55:23 +1100

By *Oliver Levingston*

February 10, 2014 -- /Links International Journal of Socialist Renewal/ 
-- This paper adopts a Marxian class analysis to dispute the orthodox 
critique of high inflation in contemporary Venezuela. It draws a 
parallel between the 2002-03 oil industry lock-out and the capital 
strike in the Venezuelan foodstuffs industry today. In each case, 
capital has suspended production to bid up the price of basic goods and 
create widespread shortages.

Orthodox economists have cited worsening output and rising inflation in 
the aftermath of the capital strike to demand fiscal austerity and 
restrictive monetary policy.

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