Marx against Keynes
Almost without exception,
the bourgeois media have been forced to come round to the view that the current
capitalist economic crisis is going to be at least as serious as that which
started in 1929. Ambrose Evans-Pritchard, International Business Editor of the
Daily Telegraph, contemplating the effects of the economic downturn in
Germany and Spain quotes Jacques Cailloux of RBS as saying that “the pace of
contraction in Europe is now disturbingly close to levels seen in the Great
Depression … Even the worst case scenarios people talked about now look too
optimistic”. But, he adds, “at least the authorities have done enough
to prevent the vicious downward spiral from accelerating. We haven’t seen the
sort of run on bank deposits or mass bankruptcies that occurred in the 1930s”.
The reason we have not done so (although there is
still time!) is the massive government interventions that have saved major
banks from the ignominious collapse that overtook Lehmann Brothers. The
repercussions of that collapse acted as a lifeline for other insolvent banks
and brought national governments rushing to the rescue. As a result, “We
are all Keynesians now”, to quote the words of Richards Nixon uttered 3
decades ago when he was President, words that are echoing everywhere in
bourgeois circles today.
“The phrase rings truer
today than at any time since, as governments seize on John Maynard Keynes’s
idea that fiscal stimulus – public spending and tax cuts – can help dig their
economies out of recession.
“The sudden resurgence
of Keynesian policy is a stunning reversal of the orthodoxy of the past several
decades, which held that efforts to use fiscal policy to manage the economy and
mitigate downturns were doomed to failure. Now only Germany remains publicly
sceptical that fiscal stimulus will work ….[1]
“The incoming
administration of Barack Obama is preparing a two-year fiscal stimulus package
with a reported price tag of $675bn-$775bn, which many Washington-based
analysts believe could swell to $850bn (£580bn, €600bn) or even $1,000bn –
between 5 per cent and 7 per cent of national income.
“Gordon Brown, UK prime
minister, told reporters in late December that if monetary policy was impaired
– in large part because of problems within the financial system – ‘then
governments have to use fiscal policy, and that has been seen in every country
of the world’.
“Launching France’s fiscal stimulus, President
Nicolas Sarkozy said: ‘Our answer to this crisis is investment because it is
the best way to support growth and save the jobs of today – and the only way to
prepare for the jobs of tomorrow.’ ” (Chris Giles, Ralph Atkins and Krishna
Guha, ‘The undeniable shift to Keynes’, Financial Times 31 December
2009).
Even impeccable right wingers like Roger Bootle, Managing
Director of Capital Economics and economic adviser to Deloittes now proclaims:
“We now find ourselves
in Keynesian conditions. So this is the time for Keynesian solutions. What are
the implications? There is nothing anti-Keynesian about trying to get out of
the current position through lower interest rates. For anyone who believes in
markets and is wary about state action, this must be the first resort. But
don’t be surprised if this does not work.
“In that instance,
don’t be shy about allowing huge increases in government borrowing to stave off
depression. Finance must not be confused with economics. Debt has to be
serviced all right, and this has costs, but idle men and machines are real
costs which are never recoverable and hence are borne forever” (‘We now
face Keynesian conditions and need truly Keynesian solutions’, Daily
Telegraph, 28 October 2008).
President Obama has jumped right on the Keynesian
bandwagon:
“Obama has explicitly
drawn on folk memories of FDR’s New Deal, telling television viewers to “keep
in mind that in 1932, 1933 the unemployment rate was 25%”.
“Obama is probably
right to assume that those same memories have it that the massive state
interventionism of the New Deal triumphantly restored America to full employment. That’s why he felt comfortable in asserting, on the eve of the
launch of a $2 trillion (or so) injection of taxpayers’ money, ‘There is no
disagreement that we need . . . a recovery plan that will help to jump-start
the economy’ ” (Dominic Lawson, ‘Obama’s new deal is the same old blunder, Sunday
Times, 15 February 2009).
Let us not forget our own Gordon Brown who has been
hailed as the saviour of the western world through his advocacy of a worldwide
coordinated return to Keynes:
“In a panel discussion
[at Davos] of less than an hour, Mr Brown did something that had seemed
impossible only minutes before – he offered a way out of the crisis. While the
oracles and lemming-leaders were unimpressed by Mr Brown’s message, the
lemming-followers had adulation written on their faces as they filed out of the
Congress Hall.
“How did he do it?
First, Mr Brown explained that recessions were a natural feature of capitalism
and that they rarely lasted for more than a year or two. But surely this
recession felt different? Yes, but mainly because this one was “the first
crisis of the global age”. As a result, global solutions were required. He
added that a certain British economist had explained why such recessions
happened and how they could be overcome. His name was John Maynard Keynes, and
the Prime Minister described poignantly how he had seen a document in the
Treasury archives in which the young Keynes’s proposals for saving Britain from
the Great Depression were dismissed by the Chancellor in only three scribbled
words: ‘inflation, extravagance, bankruptcy’. Finally, Mr Brown moved on to a
three-stage response from governments around the world. The first stage was to
stabilise the financial system and prevent bank failures. After Henry Paulson’s
catastrophic blunder in bankrupting Lehman, this had been achieved. The second
stage, now in progress, is to counteract the collapse of private economic
activity triggered by the near-failure of every bank in the world with huge
doses of monetary and fiscal stimulus. The third stage will be to restore the
growth of credit by forcing banks to increase their lending” (Anatole
Kaletsky, ‘Why I would back the Prime Minister for a Nobel Prize, The Times,
2 February 2009).
What
exactly IS Keynesianism?
Roger Bootle (op.cit.) has usefully summed up
Keynes’ major conclusions in the following terms:
“I can reduce Keynes’
view to seven essential propositions.
“1. The [capitalist]
economic system is naturally prone to periods of depression.
“2. When one occurs,
the system is not necessarily self-correcting.
“3. Such depressions
are not the result of individual choice. On the contrary, individuals en masse
can become trapped in a depression which is in no one’s interest but which, as
individuals, no one can counter-act.
“4. This represents
pure waste. Unemployed workers want to work, and businesses want to use their
productive capacity. If they did, then the things they produced would be
available for all to buy, and the incomes they received would enable them to
purchase the products of others.
“5. For individuals it
may be appropriate to react to difficult times by saving more. Yet collectively
this is a disaster. One man’s saving is another man’s reduced income. Extra
borrowing by the Government, if it encourages more output, can be self-financing.
“6. The key is
aggregate demand. In normal circumstances it is possible to influence this by
changes in interest rates. But there is a level below which interest rates
cannot go and at that point conventional monetary policy is powerless.
Moreover, even if interest rates can be lowered this may have no effect if
people cannot or will not borrow.
“7. At this point,
aggregate demand can only be boosted by the Government borrowing more, either
to spend directly or to give to others to spend via tax cuts or the like.”
To answer this question in more depth, however, and
in order to understand Keynes’ underlying assumptions, we have drawn on a
pamphlet by the erstwhile CPGB’s John Eaton, written in 1950 and entitled Marx
against Keynes.
“The pre-Keynesians argued
that every product that went to market created a purchasing power corresponding
to its value, since production costs and other incomes generated in the
processes of production and distribution (wages, cost of materials, rent,
interest, salaries, profit, etc.) exactly equalled the total value of the
product sold. (This doctrine is generally known as ‘Says’s Law’…
“Keynes opposed the
view that the capitalist system necessarily generated enough purchasing power,
or … effective demand … to keep all factors of production employed.”
(pp.30-31)
And further: “The
Keynesian theory of employment runs as follows:
“Expenditure takes two
forms – investment expenditure and consumption expenditure. The latter depends
upon (i) incomes received, coupled with (ii) the extent to which these incomes
are spent or saved; for example, if incomes totalling, say, £10 billion are
paid out and of these 90% is spent on consumption and 10% is saved, effective
demand arising from consumption is £9 billion.
“But, says Keynes, the
mere fact that people aim at saving 10% of their incomes does not mean that
this balance of ‘unspent’ or ‘saved’ incomes … is forthwith and necessarily
spent on investment goods.
“In fact, the decision
to spend income on consumption is quite separate and distinct from the decision
to increase expenditure on capital equipment, etc. This latter decision is
taken by the capitalist …; and it is taken in the light of the prospects of
making a profit.
“The essence of the
Keynesian theory of employment is then this: the level of employment is
determined by the total effective demand, which means total purchasers of
consumer goods plus investment expenditure. In so far as income not
spent on consumption fails to be matched by expenditure on investment goods,
there is a falling off of total demand and therefore of output and employment
as a whole, which, of course, brings with it a reduction in incomes.” (pp.
33-34)
Also: “It follows from
this line of reasoning that to maintain full or high employment and output it
is necessary to maintain investment expenditure at the right level. If this is
not done, economic activity falls, incomes paid out in the form of profits and
the wage bill dwindle. In short, effective demand in the form of consumption
expenditure falls short of the level necessary to maintain full employment and
output.
“Full employment can,
however, be maintained – says Keynes – if the State takes special steps to keep
investment expenditure at the right level; this, he says, it may do by (a) controlling
the rate of interest; (b) itself undertaking investment or public works
expenditure; (c) exercising some general control – about which Keynes is
nowhere very precise – over all forms of investment.” (page 38)
And “Keynes … also advocates measures designed
to increase the ‘propensity to consume’. These measures include (i) increasing
purchasing power … and (ii) taxation designed to redistribute incomes in
favour of the lower income groups (who save less). However, the emphasis on
the second group of remedies is less marked.” (Page 39).
Keynes’ fatal flaw
The fatal flaw in Keynes is that, having failed
correctly to identify the cause of the crisis, his ‘solutions’ amount to
nothing more than the blind treatment of symptoms. His remedies do not avert
crises – at best they ‘manage’ them in such a way as to enable the bourgeoisie
to maintain control over the indignant masses whose livelihoods are being
destroyed. Saving the banks, for instance, is not just a question of handouts
to disgustingly rich bankers. It is also, and above all, a question of
ensuring that ordinary masses continue to receive their wages from their
employers’ bank accounts so long as they remain employed, and are in turn able
to withdraw these wages from their own accounts when they wish to spend them.
It is fair to say that if bank account holders in their millions suddenly found
themselves cut off from the cash that funds their everyday existence, riots
would certainly ensue. It remains to be seen, however, whether the rescues
will work in the long term.
Keynesianism is based on false premises, and cannot
therefore lead to consistently correct predictions. As Eaton says on page
29-30:
“Keynes does not
abandon the basic bourgeois premises. He accepts the subjective value theory
of his bourgeois predecessors (the ‘marginal utility theory’) and rejects the
labour theory of value of Adam Smith, Ricardo and Marx.
“The essential point of
the subjective value theories is that they focus attention on buying and
selling – the process of exchange and distribution –and fail to explain the
relationship of men in the process of production. Whereas the labour
theory of value shows how, before goods enter exchange, value has already been
embodied in them by the expenditure of productive labour [a value
expropriated by the capitalist], according to the subjective theories goods
acquire their value only in the process of exchange…
“The practical value of
the bourgeois value theories and in particular their application in the
bourgeois wages theory, is, then, that they hide the nature of capitalist
exploitation.”
What is this ‘marginal utility’ theory that Keynes
adopts, and why does it matter that he rejects the labour theory of value?
Keynes agrees with the laissez faire economists
that “the wage is equal to the marginal product of labour”. … The
theory … seems to say that the worker is paid for what he produces.
If this were so, then the argument that the worker is exploited would fall to
the ground …
“On closer examination,
however, we find that the ‘product’ in the expression ‘marginal product’ has
not got the plain meaning of ‘produced by labour’. The bourgeois economist
argues that a number of ‘factors of production’ contribute to the productive
process, such as machinery, money at the bank, stocks of materials, the
enterprise and imagination of the board of directors, the factory building, the
land on which it stands, as well, of course, as the workers. … The reward
that each unit of each factor of production gets, says the bourgeois economist,
equals the marginal product, which is the additional output that would result
from adding one unit (the ‘marginal’ unit) of one factor of production…
“Some bourgeois
economists have said in so many words that this marginal productivity theory
shows that the worker gets paid the due value of what he produces. This is
playing with words, for the activity of producing in the economic sense of the
term is nothing but the activity of the human being engaged in production,
namely labour. If labour were really rewarded with the full value of what it
produces, nothing at all would go to the owners of Capital and Land. …”
(p.44-45)
In other words, the ‘marginal utility’ theory, by
refusing to accept that value is exclusively produced by labour and that
capitalist profit arises from the expropriation of a part of the product of
that labour, completely obliterates the antagonistic contradiction between the
bourgeoisie and the working class – between profit and wages.
This enables bourgeois economists to ignore the
fact that the greater the profits expropriated by the bourgeoisie, the lower
the wages (and therefore the lower the consumption power) of the working-class
masses.
The result of this?
“In the period of
monopoly capitalism the contradiction between productive capacity and the
purchasing power of the masses becomes more and more acute, for three basic
reasons: (1) accumulation … becomes progressively greater; (2) wages and
middle class incomes are squeezed by rising prices; (3) average technique and
intensity of work (that is, output per man) is high and tending to rise, so
that the workers’ share in what they produce in terms of goods tends to fall.
Markets are insufficient.
“This leads to
desperate struggles between the monopoly groupings which attempt to establish
monopoly domination on a world scale. Two world wars have resulted from their
antagonisms” (p.100-101).
And naturally the bourgeois economists are unable
to see that “The cause of crisis is the contradiction in capital itself, the
contradiction, inherent in the worker-capitalist relationship, between social
production and capitalist appropriation of the product.”(p. 104-5)
Because of this, “Keynes in effect argues that
there is no necessary connection between production for profit and economic
crisis. The Marxist standpoint by contrast is that economic crisis is
inseparably bound up with the profit system.
“The basic cause of crisis is that the personal
incomes received by the masses of the people are continually being reduced
relatively to the expansion of production capacity which takes place in the
course of every boom.” (p.87-88)
As a result of Keynes’ basic theoretical errors –
entirely dictated by the bourgeois class interests he serves – Keynes has no
real answers to capitalist crisis.
Where Keynesian ‘remedies’ have been applied in the
past as a cure for crisis, invariably inflation has intervened, causing the
decimation of the purchasing power of wages, savings, pensions. The winners
were the indebted who found their debt burdens lightened. Generally for the
masses of people, however, living standards fall regardless of the application
of Keynesian remedies. The fact is that:
“More government spending by Hoover and
Roosevelt did not pull the United States economy out of the Great Depression in
the 1930s. The sorry facts bear this out. The unemployment rate in the US was still 19% in 1939 [as opposed to 25% in 1933]. Over the following four years the number of
unemployed workers declined dramatically, by more than 7m. This had a very
particular reason: the number of men in military service rose by 8.6m.”
(Dominic Lawson, op.cit.).
Nevertheless, Keynes is still flavour of the month
with the bourgeoisie and its politicians who, like Obama, have all kinds of
reasons for ignoring inconvenient lessons of the 1930s and for rewriting
history, even if it is just an example of the triumph of hope over experience.
The expansion of the boom years has under
capitalism to be balanced by contraction in the recession years. The only
problem is that not a single bourgeois can afford to carry on in business at a
reduced scale, allowing losses to eat away at his profits. Not a single
capitalist can resist trying to maintain some profitability, or at least
reducing his losses, by dismissing as many of his workforce as possible. If
the bourgeois state gives these people employment, not a single bourgeois is
willing to pay taxes to finance the state to employ them, leaving the state
with only the options of printing money (leading to inflation) or borrowing
money (leaving it to future generations of taxpayers to repay the debt – at the
expense of their ability to spend money on consumption and investment alike and
therefore delaying the possibility of economic recovery).
Keynesian remedies theoretically could facilitate a
more orderly recession but in practice contradictions between different sectors
of the ruling class and between different imperialist and capitalist powers
become so acute that they develop into antagonisms, principally because of the
uneven impact of crisis on different capitalists and imperialists.
“In a capitalist boom
such as we have been going through, great disproportions develop between the
department of industry devoted to production goods and that devoted to consumption
goods and also between the various industries in each of these departments.
“The production goods
sector is very often developed far beyond the point that is necessary to supply
all the varied sectors of industry with new equipment. This flows from the
fact that the economy is not centrally planned and the extent to which the
various sectors of industry have expanded depended on the rate at which profits
could be made, capitalist speculations, the availability of supplies to enable
expansion to take place in various industries, and other chance factors.
“These disproportions
remain concealed as the boom develops. It is only when the boom is collapsing
that their extent is revealed.
“When these
disproportions have been carried to extreme lengths in the production goods
section, no amount of juggling with purchasing power – or any other central
controls – will induce the capitalist class to place sufficient orders to
employ those industries to full capacity.” (Eaton, p.129).
In these circumstances, the bourgeoisie finds it
impossible to sing from the same hymn sheet. No company that is capable of
surviving the crisis is willing to have its profitability reduced by measures
designed to save businesses (and their associated employees) that are less fortunate.
In fact every bourgeois wants there to be high spending capacity so he can sell
his products, while paying his own workers as little as possible and reducing
his workforce to the greatest possible extent. Every bourgeois would like the
state to increase its spending – providing jobs and therefore enhancing
workers’ consumption powers, as well as distributing profitable contracts to
bourgeois concerns – but not if that means he has to provide the state with the
finance to do so through higher taxes!
So while every bourgeois clutches eagerly at the
increased consumption that Keynesian remedies promise to provide, they
universally baulk at paying the cost. As a result:
“Unfortunately, even
among those enlightened enough to see the need for a powerful stimulus, there
are internal disagreements between those who emphasise the monetary and
financial side and those who emphasise fiscal policy. And there are divisions
within divisions. There are divisions between those who emphasise interest rate
cuts followed by so-called quantitative easing and
those who call for a reconstruction of the banking system. Among those who
favour a fiscal stimulus there are divisions between those who urge more public
spending and those favouring tax cuts.” (Samuel Brittan, ‘Economic
dominoes are still falling’, Financial Times, 14 February 2009).
This contradiction between what every bourgeois
wants for himself and what he wants for others also explains the agonising of
Joseph Stilgitz in ‘Give us more bangs for our bailout bucks’, The Times, 27
January 2009:
“A strong stimulus is
one that delivers a big bang for the buck – and quickly. Tax cuts work quickly
but, in times like these, are relatively ineffective. With an overhang of debt
and asset values declining, most of last February’s US tax cuts were not spent.
Yet, remarkably, some are arguing that a substantial fraction of the Obama
stimulus should take the form of a tax cut. The first focus should be on
preventing further spending cutbacks; with states and localities limited to
spending what they receive in revenues, and with tax revenues falling
precipitously, making up for this shortfall is the natural place to begin.
“Second, spending
should have as positive a long-run impact as possible. To be sure, the spending
will lead to a rise in indebtedness. But if it creates an asset, whether human
capital, infrastructure or new technologies, then the nation’s balance sheet
may even be improved. Tax cuts aimed at promoting consumption simply increase
liabilities, with no asset to match.
“Carefully designed
business tax cuts, linked to higher investment, can provide a big bang for the
buck and raise productivity. Unfortunately, some of business tax cuts being
discussed in the US are likely to have minimal effect on investment.
“It is remarkable how
countries can be so penny-wise and pound-foolish. Politicians squabble for
weeks over how or whether to spend a relatively small amount. Yet, in almost a
blink of the eye, a $700 billion blank cheque was given to bail out banks. We
need to put that in proportion: it is greater than all of the foreign aid from
rich to poor countries for seven years. It could put US social security on a
sound footing for a century.
“The hundreds of billions given to the banks
have not done what was promised. Credit is not flowing. Part of the reason is
that the bailout was not well thought through. As we were pouring money into
the banks, they were pouring money out…”
At the end of the day, the Keynesian ‘stimulus’ has
to be paid for. The US stimulus being promoted by Obama “will be expensive,
more expensive than the Iraq and Afghanistan wars combined and Nancy Pelosi,
Senate majority leader [sic], has called it a mere ‘down payment’”
(Christopher Caldwell, ‘Is the stimulus Obama’s Iraq, Financial Times, 31
January 2009).
The bourgeoisie does not want to pay for the
stimulus. The alternatives are to borrow money and make the working class
repay the loans through a programme of high taxation on low incomes – cutting
future consumption – or printing money (or “quantitative easing”, to use the
current fashionable euphemism). Indeed, to ‘allow’ a moderate amount of
‘controlled’ inflation seems to Tim Leunig (‘Coordinated inflation can bail us
all out’, Financial Times, 16 February 2009) the ideal answer:
“It would help
government finances by inflating away 10 per cent of total government debt.
This lowers the interest burden for future taxpayers. Since taxes are levied
primarily on income, this has both equity and efficiency benefits. It is (more)
equitable as the cost of recession will be borne by wealth holders as well as
income generators, and it is (more) efficient in that it reduces the extent of
incentive-reducing tax rises on income in the future.
“Companies will benefit
in two ways. First, a portion of their debt will disappear, with the benefit
being the largest for those companies that have debts with fixed interest, such
as corporate bonds.
“Second, while real
wages seem to be downwardly flexible, nominal wages are less so. Higher
inflation allows more companies and workers to agree to real wage cuts than
would otherwise be the case. This is both useful for those firms that are
currently uncompetitive, and preferable for society, because wage cuts are more
equitable than unemployment.
“A rise in inflation
also means that declines in real house prices translate into less negative
equity, freeing up the housing market. This is beneficial for labour mobility
and helpful to the real economy because additional house sales spur economic
activity.
“Banks would gain in
three ways. Inflation reduces future bad debts by making debt servicing easier.
It makes defaults less costly because real collateral is more likely to exceed
nominal debt. Finally, it makes existing bad debts less onerous on the balance
sheet. This reduces the need for government recapitalisations and “bad banks”
and increases the ability of governments to sell recently acquired banks. This,
in turn, reduces the debt burden on future taxpayers.
“An extra 2 points of
inflation for five years is not a “get out of jail free card”. Bank
shareholders, rightly, will still lose greatly from their managers’ decisions.
Future taxpayers will, inevitably, still bear most of the cost of
counter-cyclical government spending.
“It is not costless.
Regrettably, prudent savers will see their assets reduced. That might be the
price society has to pay to keep the banking system afloat without crippling
future taxpayers.”
Tim Leunig’s proposals, however, would certainly
draw howls of rage from companies that are managing to turn a profit despite
the recession, who will certainly not want to find that profit reduced or
annihilated by inflation – not to speak of millions of those living on fixed
incomes such as pensions.
Enhanced
contradictions lead to war
The bourgeois economists of today, while no longer
as triumphalist as at the time of the collapse of the USSR and the eastern bloc
of erstwhile socialist countries, while no longer as foolish as to jubilantly
pronounce the death of Marxism as they then did, are still unable or unwilling
to accept the truth that it is impossible to get rid of the crises of
overproduction while capitalism lasts. Under this system of production, the
expansive force of modern industry comes up against the resistance offered by
the limited capacity of consumption, by the limited capacity of the market to
absorb the products of industry, owing to the impoverishment of the masses. As
the expansion of the markets cannot keep pace with the expansion of production,
collision becomes inevitable and, failing the overthrow of the capitalist
system, these collisions become periodic. This has been the case since 1825,
the year when the first general crisis of capitalism broke out.
Neither Keynesianism nor monetarism, neither
inflation nor deflation, offer any solution to the problem of the crises of
overproduction under capitalism. They merely offer temporary palliatives,
which, far from being the cure they are presented as by the bourgeoisie and its
intellects, only make the malady worse by “paving the way for more extensive
and more destructive crises, and by diminishing the means whereby crises are
prevented” (Marx and Engels, The Communist Manifesto, p.38).
Neither Keynesianism nor monetarism is able, in the
final analysis, to do away with the continuing impoverishment of the masses
under capitalism – an impoverishment which serves to undermine consumer
spending and economic growth, thus inevitably bringing to a shuddering halt any
recovery engineered through a combination of monetary and fiscal tricks and
precipitating yet another crisis, for the “…last cause of real crises
always remains the poverty and restricted consumption of the masses as compared
to the tendency of capitalist production to develop the productive forces as if
only the absolute power of consumption of the entire society would be their
limit” (K Marx, Capital, Vol III, p.484).
The crisis of capitalism is propelling various
imperialist countries, on the one hand to wage wars for domination against the
oppressed countries, as for instance in Iraq, Afghanistan and Palestine, and on
the other hand it is serving to intensify inter-imperialist contradictions to a
new pitch. In the end, these contradictions, which in the final analysis boil
down to a struggle for the redivision of the world, cannot be resolved amicably
and peacefully. The leading powers involved in this life-and-death struggle
are bound, unless stopped by a series of proletarian revolutions, to come to
blows with each other.
Capitalism by its very nature is inextricably bound
up with crises of overproduction and with war. Neither crises in industry nor
wars in politics can be eliminated without the overthrow of capitalism.
The productive forces of modern industry long ago
outgrew the capitalist mode of using them. Only the proletariat, through the
seizure of state power, the transformation of the socialised means of
production into public property, the organisation of “socialised production
upon a predetermined plan”, can free the means of production from their
character as capital, and thus rid society of the tyranny of the
periodically-recurring crises of overproduction and imperialist wars. “To
accomplish this act of universal emancipation,” to quote the
never-to-be-forgotten words of Engels, “is the historical mission of the
modern proletariat. To thoroughly comprehend the historical conditions and
thus the very nature of this act, to impart to the now oppressed proletarian
class a full knowledge of the conditions and the meaning of the momentous act
it is called upon to accomplish – this is the task of the theoretical
expression of the proletarian movement, scientific socialism” (Anti-Dühring,
p.395).
If any proof be needed of the above analysis of
Marx and Engels, it is furnished by a comparative study of the economies of the
leading capitalist countries, on the one hand, and that of the socialist USSR,
on the other hand, during the Great Depression, which started in 1929 and
lasted more than 10 years – well into the Second World War. Between 1929 and
1933, the US economy shrank by a third. Only in 1937 did the physical volume
of production reach the levels of 1929 – only to slide again. In the 10 years
between 1930-1940, only once (in 1937) did the average number of US jobless
during the year drop below 8 million. In 1933, a quarter of the labour force
(13 million) in the US were out of work. The rest of the capitalist world too
was in the grip of an unprecedented depression, suffering from similar levels
of economic contraction and rising unemployment.
In comparison with the doom and gloom, despair and
despondency engulfing the entire capitalist world, the USSR, the land of socialism, alone stood as a shining beacon of rising production, rising
employment and working class power, beckoning the world proletariat, by its
sheer existence, to overthrow capitalism. As the capitalist crisis wreaked
havoc on the economies of all the major capitalist countries, year by year the USSR registered world-historic increases in industrial production. From 1929 to 1933,
Soviet industrial production more than doubled, while unemployment disappeared
completely, never to return while the USSR lasted.
In the end, imperialism could find no way out of
the crisis other than through the horrors of the Second World War, which
brought untold destruction and wiped out 55 million workers and peasants,
including 27 million from the USSR, which led, and made the greatest sacrifices
in, the successful fight against Hitlerite fascism.
Conclusion
It can be seen that Keynes based his belief that
crisis could be averted on false premises and failure, or more correctly
unwillingness, to understand the antagonism between wages and profits, let
alone the necessary implication of this, which is the relative impoverishment
of the working masses and of the oppressed countries, which will erect a
barrier that will sooner or later prevent the bourgeoisie from selling the
products of their ever expanding industries. John Eaton’s book referred to
above explains all this very well, although he in turn exhibits traces of
erroneous understanding in that he seems to believe that Keynesianism is
incapable of increasing the share of the working class in the national wealth –
at least temporarily. From the end of the Second World War to the mid-1970s,
however, what is known as the ‘Keynesian consensus’ in fact delivered a higher
proportion of national wealth to the working masses, in the form, for instance,
of free education and health services and unemployment and welfare benefits –
however grudgingly conceded. It is the extraction of superprofits by
imperialism from the oppressed countries of the world that has made this
largesse even possible – and it was the imperialist bourgeoisie’s fear of
proletarian revolution as long as the living successes of Soviet Russia and
other socialist countries were threatening to lead the working masses to
revolution that motivated the bourgeoisie to distribute that largesse. Even
today in the midst of crisis, benefits still accrue to the working masses in
imperialist countries that are certainly not available to the exploited and
oppressed masses of the third world. In the context of Eaton’s book, this is
not a very important point; but in the wider context of understanding the
strength of opportunism in the working-class movements of the imperialist
countries and resisting its call, then the error is potentially fatal. Even at
the time of writing, John Eaton was unable to see the treacherous and
reactionary role of the ‘left’ wing of the Labour Party, although he was still
capable of seeing that the only way out of recurrent crisis was to overthrow
capitalism and establish a socialist planned economy under the aegis of a
working-class state – ideas that his party, the CPGB, were gradually to
abandon.
With these reservations, however, we do not
hesitate to recommend his pamphlet to the modern reader who will find there
many arguments extremely relevant to the present situation, to explain the
attempts by the bourgeoisie to put Keynesian remedies into effect and to arm
the working class against being deceived into believing that these will
safeguard their interests. Our job is to ensure that Keynesianism is not used
to draw the working masses into pursuit of a futile reformism and away from the
road to proletarian revolution – their only salvation.
NOTES
[1.] Notwithstanding its sceptical public
stance, the German government too has poured in a lot of money to prop up and
bail out its bankrupt financial institutions.