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Guglielmo Carchedi’s bad advice for activists

December 16, 2012 Leave a comment

kelley

Keynesian economic policies don’t work, but fighting for these policies will?

Guglielmo Carchedi’s essay on the so-called Marxist multiplier has me bugging. He is handing out bad advice to activists in the social movements and telling them this bad advice is based on Marx’s labor theory of value. The bad advice can be summed up concisely: Keynesian policies do not work and cannot work, but the fight for these policies (as opposed to neoliberal policies) can help end capitalism:

From the Marxist perspective, the struggle for the improvement of labour’s lot and the sedimentation and accumulation of labour’s antagonistic consciousness and power through this struggle should be two sides of the same coin. This is their real importance. They cannot end the slump but they can surely improve labour’s conditions and, given the proper perspective, foster the end of capitalism.

Frankly, Carchedi’s advice is the Marxist academy’s equivalent of medical malpractice. (For the record, Michael Robert’s has his own take on the discussion raised by Carchedi’s essay.)

Read more…

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Anarchists, Libertarians and Marxists need to change the debate on jobs and debt (2)

October 13, 2012 2 comments

We have to change the terms of the debate on jobs and debt. We need to insist a job is nothing more than wage slavery and we don’t need Washington’s effort to create more of it by adding to this wage slavery even with more debt slavery. It is not like we have to argue existing jobs need to go away; why is Washington creating more of them, when existing hours can be reduced to solve the problem of unemployment rather than more debt?

2. Monetary Policy, or what happens when a hyperinflationary collapse of the dollar is NOT the worst possible outcome

The media is abuzz with speculation following the Federal reserves announcement of quantitative easing version 3.0. This version calls for the Federal Reserve to pour unlimited quantities of currency created out of nothing into the market, buying up worthless assets on a monthly basis to the tune of $40 billion per month. The result could be the printing of nearly a half trillion dollars in new, freshly produced, token money being forced into the economy every year until further notice.

The implications of this monetary insanity can be understood simply by reading the opinions of any number of economists and market watchers who are very delicately raising the spectre of a Zimbabwe style hyperinflation. Still subdued but growing talk of such an event has moved from the periphery of “financial advisers” and gold bugs into the mainstream argument of some pretty staid experienced players.

Take, for instance, a recent comment by Art Cashin, a veteran of the stock market who has probably seen every high risk moment in the market since well before Nixon closed the gold window in 1971, up to and including witnessing the market plunge 25% in a single day in 1987.  Cashin oversees the management of more than $600 billion in assets and is not given to losing his head over every minor fluctuation in the S&P 500. A market crash is not Cashins concern, however — he fears hyperinflation. Cashin notes Weimar Republic hyperinflation did not burst out all at once, but was preloaded by continuous money printing that only made its way into the market over time:

“It (the inflationary spiral) was in fact delayed for a couple of years.  But once it started, it could not be taken back.  So here in the United States and in the European Union, there are very few, if any, signs of inflation because people are so concerned (that they are hoarding money).

“[You] will have to keep an eye on the velocity of money.  Watch figures like, here in the United States, the M2 (figure), and see if it begins to grow through velocity, and get very cautious at that point.  There are some potentially eerie parallels (today vs the Weimar Germany era).  The United States trauma was unemployment and deflation (in the 30s), but in Germany in the 20s, it was money that ruined an entire society.”

Events are not yet to the point where Cashin is advising his clients to take their worthless fiat currency and sell it for gold, silver and other precious commodities, but he is suggesting there is such a heightened level of potential for a monetary catastrophe at present to warn people should begin to look for indicators of hyperinflation in the data:

“I think you are certainly at a ‘flashing yellow alert.’  You have in place a variety of things that could begin to react somewhat domino-like.  As I said, there are measures and items that the listeners (and readers) can look for themselves.  Look at, what is the growth in the money supply, M2?  It comes out every week.

If [the M2 measure of the money supply] begins to grow rapidly, then the money that the Fed has created will be seen as moving through the system.  That will create the high risk of accelerated inflation, and perhaps, God forbid, runaway inflation.”

Even if we discount Cashin’s argument as just another example of fringe hysteria, Zero Hedge recently explained, there are voices within the Federal Reserve’s own research department that echo Cashin’s argument:

Yes, it is ironic that the Fed is talking about “common sense”, we know. But the absolute punchline you will never hear admitted or discussed anywhere else, and the reason why the Fed can no longer even rely on its models is that…

Carlstrom et al. show that the Smets and Wouters model would predict an explosive inflation and output if the short-term interest rate were pegged at the ZLB (Zero Lower Bound) between eight and nine quarters. This is an unsettling finding given that the current horizon of forward guidance by the FOMC is of at least eight quarters.

In short: the Fed’s DSGE models fail when applied in real life, they are unable to lead to the desired outcome and can’t predict the outcome that does occur, and furthermore there is no way to test them except by enacting them in a way that consistently fails. But the kicker: the Fed’s own model predicts that if the Fed does what it is currently doing, the result would be “explosive inflation.”

You read that right: if Bernanke does what he not only intends to do but now has no choice but doing until the bitter end, the outcome is hyperinflation. Not our conclusion: that of Smets and Wouters, whoever they are.

And these are the people who are now in charge of everything.

Is there anything worse than a hyperinflation for capitalism?

The warnings by Cashin and the writers at Zero Hedge suggest Bernanke’s Federal Reserve is engaged in an extremely risky gamble on a policy that could lead to the dollar replacing Kleenex as the preferred method of catching sniffles during cold and flu season. I think it is safe to say the Fed would not be undertaking this gamble just to move unemployment a few points. A high risk gamble on this scale with the world’s reserve currency clearly hints what is at stake is likely much worse than a mere outburst of hyperinflation.

So what is worse than a hyperinflation of the dollar? What threat could there be to capitalism right now that risks reducing the dollar to a worthless piece of scrip with no purchasing power whatsoever? How about, a hyperdeflation, an inverse condition where all prices instead of going to infinity and beyond go to zero?

But there is a big problem with this argument: There is not a single recorded instance of hyperdeflation in history, we are told, and logically it cannot happen. Zero Hedge remarks on the question in a caustically titled post “The Monetary Endgame Score To Date: Hyperinflations: 56; Hyperdeflations: 0”:

We won’t waste our readers’ time with the details of all the 56 documented instances of hyperinflation in the modern, and not so modern, world. They can do so on their own by reading the attached CATO working paper by Hanke and Krus titled simply enough “World Hyperinflations.” Those who do read it will discover the details of how it happened to be that in post World War 2 Hungary the equivalent daily inflation rate of 207%, the highest ever recorded, led to a price doubling every 15 hours, certainly one upping such well-known instance of CTRL-P abandon as Zimbabwe (24.7 hours) and Weimar Germany (a tortoise-like 3.70 days). This and much more. What we will point is that at no time in recorded history did a monetary regime end in “hyperdeflation.” In fact there is not one hyperdeflationary episode of note. Although, we are quite certain, that virtually all of the 56 and counting hyperinflations in the world, were at one point borderline hyperdeflationary. All it took was central planner stupidity to get the table below, and a paper with the abovementioned title instead of “World Hyperdeflations.”

The Cato Institute’s paper presents a very powerful empirical argument against the case for deflation and hyperdeflation. Unfortunately it rests entirely on two fallacies that are hidden in its very title: First, hyperdeflation has nothing to do with the fate of any fiat currency, even the world reserve currency, the US dollar. A hyperdeflation is not the death of any particular currency nor even a series of currency collapses — it is the death of money itself.

The second fallacy in the Cato paper will take a bit longer to explain and once explained will show why it is so important to every anarchist, libertarian and Marxist.

Can there be such a thing as a hyperdeflation?

A hyperdeflation might possibly be defined as a situation where prices of commodities declined even as the supply of money increased. As the Cato Institute paper explains — there is no recorded instance of a hyper-deflation in the historical record. Of course, mild and even very severe deflations did occur several times up until the Great Depression; but history has many more examples of hyperinflations, as the Cato paper argues.

The problem with the Cato paper, however, is that its argument rests on the “quantity theory of money” fallacy — which according the Wikipedia states “that money supply has a direct, proportional relationship with the price level.” Which is to say, the Federal Reserve can force prices to increase — create inflation — if it increases the quantity of currency in circulation. In fact, this theory is wrong. The prices of commodities do not depend on the quantity of money in circulation, but on the quantity of socially necessary labor time required for their production. And here, at least theoretically, the case against hyper-deflation falls apart.

Here is the problem at the end of capitalism’s life: If the Marxist writers Moishe Postone and Robert Kurz are correct, the socially necessary labor time of commodities now have two distinct and contradictory measures: its labor time as a simple commodity and its labor time as a capitalistically produced commodity — yielding two quite different potential prices.

To put this in simpler terms, the price paid in a store for a typical commodity like an iPhone is mostly a reflection of the costs of economically wasted labor. The iPhone itself takes very little direct labor to produce, but, if its production is to be profitable, the accumulated costs of waste within the economy requires a massive mark up in the price you pay for it at the checkout counter.

What is this waste? Well, one source is the overhead created by the costly burden of government at present. Since the government doesn’t produce anything, its entire cost is borne by the rest of society. If, for instance, government accounts for about 50% of GDP, this means every product has a 100% markup just to pay for the operating expense of federal, state and local government. So about half the cost of your iPhone goes to cover things like drone attacks on Afghanistan civilians or corn subsidies to agribusiness. These cost don’t appear anywhere unless it comes directly from your wages in taxes, but even in this case the costs must be passed on in commodity circulation and will accumulate there in the costs of each commodity.

So every commodity essentially has two prices: the one that you pay at the checkout counter, which includes all the wasted economic activity in society, and the other, hidden, true price, which is the actual direct cost of producing to commodity. Surprisingly, this latter price is now only a negligible fraction of the total price of an iPhone, a pair of shoes, or even an automobile — the overwhelming bulk of the price of every product you buy consists of the hidden costs of economic waste within society that has accumulated over the past eighty years.

This is why, as I discussed in part one of this series, it now takes as much as seven dollars of debt, or even more, to create a single dollar of wages through fascist state economic policies designed to create jobs. Simply put, this internal discordance in the price of every commodity is a hyperdeflation weapon of mass destruction just waiting for a triggering event. What is making the Federal Reserve risk even the total collapse of the dollar on an insane gamble is the fact that this implosion can be triggered by the mildest hint of deflation. To prevent this event, the Federal Reserve must restart the failed system of debt accumulation that crashed in the financial meltdown of 2008.

Anarchists, libertarians and Marxists have a chance to put sand in the gears of the fascist state and bring it down along with the entire mode of production. All it requires is for us to change the debate over jobs and debt — opposing both Federal Reserve monetary and Washington fiscal policy aimed at expanding still further the system of wage slavery through policies designed to promote economic waste and debt.

But we can do this only if we are willing to take capital and the state head on by demanding an immediate reduction in hours of work until everyone who wants to work has a job, along with the elimination of all public and private debts, and abolition of all taxes.

Anarchists, Libertarians and Marxists need to change the debate on jobs and debt (1)

October 6, 2012 Leave a comment

We have to change the terms of the debate on jobs and debt. We need to insist a job is nothing more than wage slavery and we don’t need Washington’s effort to create more of it adding to this wage slavery even with more debt slavery. It is not like we have to argue existing jobs need to go away; why is Washington creating more of them, when existing hours can be reduced to solve the problem of unemployment rather than more debt?

1. Fiscal policy, or how to create one job on Main Street by borrowing five jobs from Wall Street

In 2011, a congressman made the argument that Obama’s stimulus program had produced jobs at the cost of $278,000 per job. Although the charge was nothing new, it made its rounds on the conservative GOP talking points circuit, and even ended up in the congressional record. This number, of course, was so outrageous by any measure of efficiency that it had to be analyzed by what we might call “clear thinking persons with no agenda”, i.e., the news media.

One “news source” in particular known for its ability to vet these things is PolitiFact.com, and it went after the congressman’s charge. PolitiFact established that the congressman, a Republican, was deliberately distorting facts against Obama’s stimulus program.

At $666 billion, the bill was estimated by the White house to have “saved or created” between 2.4 to 3.6 million jobs. What the congressman did, was employ the low end of the number of jobs “created or saved” and apply it to the total of the bill.

The Obama administration responded that this was unfair, since the money went to more than just creating jobs, it also invested in infrastructure, energy, education etc. Which is an odd response, since obviously the administration included those “investments” in its estimate of jobs “created or saved”. The Associated Press made the further argument that,

“Any cost-per-job figure pays not just for the worker, but for the material, supplies and that workers’ output — a portion of a road paved, patients treated in a health clinic, goods shipped from a factory floor, railroad tracks laid,”

So what AP is stating is that a job created by economic stimulus must account not just for the labor power directly expended, but also the constant capital used up in the course of this expenditure. But then AP performs an almost unnoticed sleight of hand and counts everything  twice. So we count the money spent to build a road in terms of wages and materials, then we count the road as a finished product; we count the wages and material employed to build a clinic, and then we count the clinic as an operating concern.

Once we remove the misleading double counting from our calculation in the argument in the AP version of this story, how this differed from what the congressman said, is unclear. Indeed his criticism was later refined by one conservative media outlet this way:

“He says he never said that $278,000 per job went to salaries, but ‘rather that each job has cost taxpayers $278,000.'”

Five dollars of debt to produce one dollar of wages

So what the worker actually receives of the $278,000 spent to create her job is one thing, and the cost of creating that job is another. Assuming the worker received an average hourly wage of around $19, she would have an annual wage of $38,760, minus taxes. But to receive this $38,760 minus taxes in wages, the taxpayer must pony up $278,000 minus the taxes paid by the worker.

Which is to say, it roughly takes about 7 dollars of spending to create 1 dollar worth of wages using fiscal stimulus. Moreover, this fiscal stimulus must be newly created money, through debt, and, therefore, created out of nothing. If we take the administrations preferred figure of $185,000 per job, this still amounts to 5 dollars of new debt to produce 1 dollar of wages.

Between the GOP and the Democrats, then, there is agreement that it takes somewhere between $5 and $7 of debt to create $1 of wages. For some reason, despite the general validity of the congressman’s claim, Politifact.com decided it was not true on a technicality:

“Contrary to Dewhurst’s statement, the cited cost-per-job figure was not aired by the Obama administration. At bottom, his statement leaves the misimpression that the money went solely for jobs rather than a range of projects and programs, including tax breaks. We rate his claim False.”

There is, of course, another way of looking at this from the point of view of Wall Street banksters. From their point of view, it only takes 1 dollar of wages to create 5 dollars of new debt. Since the banksters are only interested in the accumulation of debt, which sits on his book as an asset, this is a fine ratio.

If the fascist state wants to create one job, it has to borrow the equivalent of five jobs to create this one job. The accumulation of the public debt outruns the income of the members of society who must eventually pay off the debt with their income. For every dollar they get in increased income, their debt obligation increases by five dollars. They must work to pay off this debt, requiring a further extension of wage slavery beyond what is required just to satisfy their needs.

Since after the housing market meltdown citizens can no longer be relied upon to accumulate this debt on their own (they have all become subprime  borrowers) the state now takes on this obligation on their behalf, and raises the funds to service it by slashing their retirement and health benefits, reducing their access to public services like education, and inflating the prices of commodities by depreciating the currency.

This is how the scam works, folks!

You vote for Obama and the Democrats, and they mortgage your life and labor to banksters. They call this mortgaging of your life “progressive fiscal policy”, and sell it to you as a benefit.

However, since the congressman hails from the GOP, an avowed political opponent of the democrat president, he failed to add this additional fact: The argument does not change if, instead of democrat spending, we substitute GOP tax cuts, except that tax cuts are even more inefficient at “creating jobs” than fiscal spending. With GOP tax cuts, as the research suggest, the actual relation between the debt accumulated and the jobs created is aimless and dispersed and rather a bit more difficult to assess. Rather than aiming at some specific form of wage slavery as the democrats do, GOP tax cuts aim solely at subsidizing all wage slavery.

Tax cuts only have some definite targeted effect to the extent they increase the deficit and the flows of state expenditures into the coffers of banksters. While both spending and tax cuts result in a massive expansion of the public debt, in general, the less targeted the accumulation of the public debt, the more it directly favors only the banksters, who, in any case, underwrite this debt. The question is only one of degree, not result.

With democrat spending, the accumulation of debt takes a specific form — a road, a school, or an industry. It is targeted, and, therefore, can be more precisely applied, no matter that is still wasteful. What’s more, as Democrats and Republicans alike already know, the produced product can now be renamed the Obama Bridge-Tunnel Highway to Nowhere, or the Obama Elementary School, or the Obama Green Energy Research Park, or, as is always inevitable, no matter which party incurs the debt, the USS Obama.

If the outrageous cost of creating unnecessary jobs by fiscal policy is staggering, just wait until I next explain what knowledgeable insiders are saying about the cost of the Federal Reserve’s monetary policy.

Can government be reduced without limiting hours of Labor?

January 27, 2011 Leave a comment

Is it possible to get rid of government, either by abolishing it outright or gradually reducing it, without, at the same time, ridding society of Labor? This is a question posed by libertarians and marxists who declare their opposition to abolishing one or the other.

First, let’s define what I mean by Labor. As I am using the word, Labor is not work; I define work as any form of productive activity during which we create some useful object by mixing our human effort with natural objects. It is the metabolism of life: the exchange between nature and humans which is essential to life itself. Labor, on the other hand, does the above as well, but the aim of the activity is to create value — a commodity with a price.

Among Marxists, one would think this question had already been settled by the experience of the Soviet Union. There, despite Marxist expectations that the State would whither away once wage slavery was thought to be abolished, the State never even shrank. It continued to expand up until the point it collapsed entirely. Even if we accept the idea that the Soviet Union was confronted by an implacable enemy, it is hard to accept this as an explanation for the Soviet occupation in Eastern Europe, its massive accumulation of troop and military power, and the willingness of Moscow to sacrifice basic material standards of living of the country, when the United States is presently bogged down and slowly being defeated by isolated bands of mostly illiterate guerrillas in the mountains of Afghanistan — much as the USSR was previously. How, under any reasonable scenario, was the US supposed to occupy and pacify a population of freely associated, well-educated, highly skilled persons, spread over one sixth of the planet’s surface and eleven time zones?

But, marxists seem unable to absorb this lesson of history. Among libertarians, I am often in conversation with, and reading the posts of, those who are quite seriously opposed to the State, but fierce opponents of any limitation on hours of Labor.

In all honesty, folks, how is this supposed to work?

Total federal, state, and local government employment (not including the military) in 2008 stood at 22.46 million persons according to the Census Bureau (pdf). At the same time, total employment in the US stood at 145.36 million persons (pdf). Government provided approximately 15 percent of all direct employment — and this does not even begin to take into account those persons who owed their jobs directly or indirectly to government expenditures: those employed as a result of contracts with various agencies of federal, state, and local bodies — Blackwater, GE, Raytheon, and the entire Fortune 500 come to mind — and those whose jobs are at least in part the result of demand generated by various transfer programs, like Social Security, Medicare, Medicaid, school lunch programs, etc.

If we could remove all of these expenditures overnight by means of a magic wand, what would happen to the economy and the tens of millions of other jobs only indirectly affected by this? Where would all of the goods produced for this massive body of entirely superfluous laborers be sold? Even if we did not remove it entirely, but only limited it by refusing to raise the debt ceiling and preventing the expenditure of some 3 trillion additional dollars by Washington over the next two years, what now fills that void?

If libertarians and others who are seriously determined to get rid of the State have no answer to these questions, what answer will your congressperson have when Obama and Boehner grab them by the lapel and show them, in very graphic terms, exactly what their vote against raising the debt ceiling will do to employment?

The argument can be made that any limitation on hours of labor requires State coercion and limitations on the individual’s right to enjoy her property — every wage contract is a voluntary agreement between two property-owners, even if one of the parties has no choice but to make the agreement. However, thirty, forty, or fifty percent unemployment is also the coercive application of market competition. If some make the argument that capitalist coercion is somehow more “natural” than State coercion, I need only remind them that the State, having been around for thousands of years longer than Capital, is clearly far more “natural” than the latter.

I am not for coercion in any form — political or economic. I am not trying to abolish State coercion in order to allow the mechanisms of economic coercion room to expand, further intensifying the already Hobbesian environment of Civil Society. The vast majority of the population of the United States is dependent on selling their Labor Power — even those who are self-employed. The idea that they will come to see Washington as a greater threat to their well-being than the Koch brothers, WalMart, or BP is laughably naive. Start abolishing regulations, reducing the minimum wage, breaking pension plans, and slashing Social Security, and you will see how little love folks have for a stateless society that leaves them at the mercies of the owners of capital.

This really doesn’t require a doctorate in economics: those who are really serious about a stateless society, and not simply using it as a screen to advance their own agenda, will understand that State coercion cannot be abolished without also abolishing the coercion of the market in Labor Power.

Update: Courtesy of Zero Hedge, a list of Russell Index companies that generate 50 to 100 percent of their revenue from the federal government.

Update 2: Someone asked me a good question: Am I suggesting there should be no reduction in the size of government until hours of work can be reduced? Absolutely not. It would be a mistake not to do the two together, but the biggest mistake would be to do nothing until both can be done together. If the debt ceiling increase can be voted down today, it should be voted down; in time it will be obvious that hours of work must also be reduced.

Iran, Afghanistan: Keep your eye on the Messiah…

October 1, 2009 Leave a comment

According to Grossman’s reconstruction of Marx’s Theory of Capital’s Breakdown, capitalism undermines its own conditions of existence by destroying the need for work.

Logic dictates that any attempt to forestall this breakdown must, in some way or another, counteract this tendency toward collapse by successfully increasing the need for work, and thus improving profits.

This probably played out, for instance, as World War II brought about the collapse of various national economies – Japan, Germany, Britain, France, etc. – and made possible the expansion of American capital into the vacuum, and which further allowed the scale of economic activity to escape the narrow bounds of national economies and assume directly global character.

afghanistan-helicopter-474Also contributing to the demand for more work after World War II, however, was a decades long erection of an extensive network of military bases to encircle the Soviet Union and People’s Republic of China – and various somewhat unsuccessful military adventures to enforce that Cordon Militaire.

That being said, as outrageous as it is to consider that even the most Hitlerian personality might coldly calculate the economic consequences of expanded conflict on GDP, it is nevertheless true that a massive military push into Afghanistan, or, a military adventure in Iran are both means which could spur domestic demand for labor.

This possibility, therefore, bears watching.

In the present circumstances, when it appears all attempts to revive the labor market in the US has failed, and where little more effects of these policies can be detected beyond Washington’s own efforts to increase government employment, an adventure in the Persian Gulf and East Asia offers certain advantages.

Among those advantages is the speed with which Washington could get boots on the ground in Afghanistan, for instance, versus that amount of time it would take to bring various make-work projects – building and improving infrastructure, roads and so forth (the spending which delights our progressives) – to shovel-ready status.

We suspect – though we are far from certain – that the hesitancy in Washington on a requested troop buildup in Afghanistan is not good news. In fact, it may be merely buying time as the Messiah tries to prepare for an expected outcry when the troop expansion is announced.