Re: Minsky
On Aug 30, 2007, at 3:34 AM, Rakesh Bhandari wrote:
Hi Doug, couldn’t find your reply.
See below.
Just can’t see how Minsky is not only not Marxist but methodologically antithetical.
Minsky was no Marxist, but I don’t see him as antithetical to Marxism
either.
A general crisis may manifest itself first of all in the sphere of bank credits, as a financial crisis, only later involving commerce and sphere of direct production. This is indeed how things will appear, but Marx shows the apparent succession in time is misleading. Difficulties in bank clearances appear as the cause, the basis, the source of all general crisis. Yet a crisis of over-accumulation may have already taken place, it may manifest itself only in the course of time in disturbances and confusion in the sphere of bank clearances. All this is not to say that all banking crises are delayed manifestations of a crisis of over-accumulation. But Minsky at least according to Crotty argues that they can never be. Yet today even Stiglitz and DeLong suggest that an underlying shortage of investment outlets vis a vis global savings has led the sub-prime mess. Of course that shortage of investment outlets itself needs to be explained (petering out of technological innovations, continued overcapacity, underconsumption, insufficient deficit govt spending given the neo liberal ideological revolution led by rentiers, shortage of surplus value given earnings which would have to be retained for continued accumulation). I hope others take up this debate.
This sort of analysis always underestimate’s finance’s contribution
to the problem, which is partly a reflection of Marx’s own biases
(though much of his work on credit is incomplete and drafty). Two
points on this. First, credit helps enable the process of “over-
investment” - Marx says as much himself. E.g., vol. 3 of Capital
(around p. 570 of the Vintage edition), Marx points to the credit
system “as the principal lever of overproduction and excessive
speculation in commerce[. T]his is simply because the reproduction
process, which is elastic by nature, is now forced to its most
extreme limit; and this is because a great part of the social capital
is applied by those who are not its owners, and who therefore proceed
quite unlike owners who, when they function themselves, anxiously
weigh the limits of their private capital. This only goes to show how
the valorization of capital founded on the antithetical character of
capitalist production permits actual free development only up to a
certain point, which is constantly broken through by the credit
system. The credit system hence accelerates the material development
of the productive forces and the creation of the world market, which
it is the historical task of the cpitalist mode of production to
bring to a certain level of development, as material foundations for
new forms of production. At the same time, credit accelerates the
violent outbreaks of this contradiction, crises, and with these the
elements of dissolution of the old mode of production.” Well, not yet.
And second, the “shortage of investment outlets” means outlets that
can generate a sufficient profit. Stockholders have imposed a very
high hurdle rate for investment since the shareholder revolution of
the early 1980s; it’s now their definition of sufficiency that
matters most.
By the way, looking over my old Marx notes for Wall Street, I see
that on p. 53 of Vol 3 of Theories of Surplus Value (in the old
Soviet edition) Marx said “I exclude Sismondi from my historical
survey here because a critique of his views belongs to a part of my
work dealing with the real movement of capital (competition and
credit) which I can only tackle after I have finished this book.”
This puts credit in the real sector, which would surprise a lot of
Volume 1 Marxists.
And later in that same volume (p. 473), Marx writes: “There are not
two different kinds of capital — interest-bearing and profit-yielding
— but the selfsame capital which operates in the process of
production as capital, produces a profit which is divided between two
different capitalists — one standing outside the process, and, as
owner, representing capital as such (but it is an essential condition
of this cpaital that it is represented by a private owner; without
this it does not become capital as opposed to wage-labour), and the
other representing operating capital, capital which takes part in the
production process.” The view of financial capital representing the
owner, or “capital as such,” suggests that the ownership aspects have
to be taken more seriously than many Marxists have.
Further to that POV, in Capital III (pp. 497-8 of the Vintage
edition), Marx writes: “[I]nterest accrues to the money capitalist,
the lender, who is simply the owner of the capital and thus does
represent mere property in capital before the production process and
outside it; while profit of enterprise accrues to the merely
functioning capitalist, who is not the owner of capital.” Again, the
owner’s prerogatives are introduced into a financial relation, which
many would take as secondary or epiphenomenal to the “real” story of
production.
On Aug 26, 2007, at 1:42 AM, bhandari@berkeley.edu wrote:
However good his dance steps, can’t possibly see how Minsky’s theory can be understood as Marxist. No real impediments in the real sector of the economy? No wonder Meyer and others can enthuse about his theory. Doug, you don’t agree with that yourself, given your insistence that the Fed responds to a real tightness in the labor market, though Fed action does not seem as mechanical as that either.
You, Crotty, and the rest are right that Minsky ignores the real sector, as do a lot of PKs. But a lot of Marxists ignore the financial sector. It would be hard to explain the U.S. economy of the last 25 years without paying a lot of attention to what went on in finance. For someone like Shaikh, causality only flows from the real to the financial and never vice versa.
Not sure what you mean by the Fed’s not being as mechanical as making policy on the unemployment rate. Of course that’s not the only thing, but it’s an important indicator of the balance of class relations. They rarely reverse a tightening cycle by loosening until the unemployment rate has risen by 0.3 point or more. That hasn’t happened yet, though it’s close. I heard Bernanke at the CFR before he became Fed chair. He said that sagging productivity is a late cycle phenom, and it would incline the Fed to be tighter than it otherwise would be. So I think they’re not enthusiastic about having to ease for financial reasons, so they’re being as coy & grudging as possible. If it looks like things are going haywire, they will ease of course.
Doug