Preliminary investigative study. The main points are to be found in the foreword and in the critique of the IMF article. (Translated with www.deepl.com and edited)
Introduction.
Foreword: Equilibrium in Simple and Extended Reproduction, equilibrium by simultaneous resolution, equilibrium in the “market of markets”.
Generic and specific multipliers.
General points.
Logical development.
The Marginalist Multiplier according to historical epochs, inter-sectoral links, targeting.
Some stages in the creation of the Keynesian multiplier:
a ) Prologue: a Keynesian critique of Richard Kahn. The blind leading the world.
b ) Richard Kahn’s formalization.
Critique of the IMF’s Sept. 2021 article on the fiscal multiplier during the Covid.
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Introduction
According to the IMF’s Sept. 2021 study, in their « war » against Covid-19, the Advanced countries lavished on average 16% of GDP to support their economies for a Fiscal Multiplier of … 0.06 – lockdowns, avoidable deaths with generics drugs and poverty, to boot.
One euro injected into the existing economy spins off x Euros, thus contributing to economic growth – that’s what the Economic Multiplier is all about. In reality, it’s a Marginalist tool that surreptitiously attempts to take into account the Marxist Simple Reproduction (SR) and Extended Reproduction (ER) Equations, which ensure stationary or dynamic equilibrium simultaneously in terms of quantities and prices. Otherwise in Marginalist terms, inter-sectorial relationships are ontologically excluded from the analysis, except in pure empirical terms based on GDP statistics.
The Multiplier originated in Keynes’s work, but was subsequently perverted by the neoclassicals, whom Joan Robinson called “the Keynesian bastards”, the various Hicks, Samuelsons, Solows etc., because they re-proposed a Marginalist “synthesis” that eviscerated Keynesian socio-economic State interventionism by reiterating the centrality of the free market, particularly in the labor market.
Keynes had devised a system of interdependent equations, with one determining variable: the labor market maintained in equilibrium by full-time full employment. Marginalist equations – the role of the free market – were tolerated for class ideological reasons, insofar as their “animal spirits” acting at the microeconomic level were regulated by State intervention in production and consumption, and by the Treasury’s and the Central bank’s intervention to regulate money and credit.
Such a system, based on full full-time employment, led to more virtuous growth, particularly in terms of social well-being. In this way, the Marxist logic of Extended Reproduction was emulated without actually saying so. Conversely, Marginalism, left to its own devices, is compatible with a general infra-social and always post hoc equilibrium, a situation that became dangerous when the proletariats began to organize, and especially when they were influenced by the lessons imparted by the Bolshevik Revolution. Monetarist neoliberalism, with its disastrous “fiscal multiplier” – see e.g., IMF Sept 2021, fiscal multiplier in 2020 of 0.06 … – brought to a climax the structural gap between accelerating speculative capital accumulation and a dramatic decline in social well-being, coupled with an enormous waste of available resources. This ontological flaw has been compounded by the extroversion of the multiplier since the dismantling of the GATT, hemispheric free trade under NAFTA, and the Uruguay Round culminating in the WTO and its deleterious definition of anti-dumping based on global competition towards the lowest bidder on the basis of individual net salary and minimum environmental criteria alone. One of the urgent tasks of the authentic Left will be to re-establish the coherence of the productive apparatus of its national Social Formation with a view to achieving optimal insertion into the Global Economy.
Foreword: Equilibrium in Simple and Extended Reproduction, equilibrium by simultaneous resolution, equilibrium on the “market of markets
Equilibrium in Simple and Extended Reproduction
Any economic system imposes its dynamic reproduction on the basis of the existing stationary reproduction.
Extract from the Synopsis of Marxist Political Economy: “The Equations of Simple Reproduction (SR) forming a stable system reproducing itself identically will serve as a basis on which to elaborate the conditions prevailing for Extended Reproduction (ER). Here they are, based on the aggregate production functions of SI and SII:
SI : c1(80) + v1(20) + pv1(20) = M1(120 Euros pour 120 Mp)
SII : c2(40) + v2(10) + pv2(10) = M2 (60 Euros pour 60 Cn)
The ER Equations are as follows :
c2 = (v1 + pv1)
M1 = (c1 + c2)
M2 = (v1+ pv1) + (v2 + pv2) »
Let’s move on to Extended Replication (ER.) Note that the scheme based on identical v/C and pv/v in SI and SII no longer needs to be considered a special case, since the problem of inverse ratios in the event of productivity change has been solved. (Added: Added: The Marxist law of productivity which I formulated based on Marx, keeps the whole system coherent in exchange value – or price – and in quantity.)
Let’s assume that half of pv1 is reinvested. (We note: E = savings and tE = savings rate = E/pv.) The distribution of reinvestment is noted in bold type.
t1 Reinvestissement t2
8 + 2 + (2)
SI : 80 + 20 + (10 + 10) = 120 SI : 80 + 20 + (10 +10 ) =120 SI : 88 +22+22=132
4 + 1
SII: 40 + 10 + 10 = 60 SII: 40 + 10 + 10 = 60 SII: 44 + 11 + 11= 60
SR underlies ER, but half of pv1 is re-invested. To respect the Reproduction Equations, SII will have to follow: and necessarily does so at the same rate. Indeed, the share of pv1 saved (here 10) giving the tE1 reinvested is divided into c’1(8) and v’1(2) according to the organic composition prevailing in SI.
Through exchanges, this always results in c’2(2) and v’2(0.5), depending on the organic composition prevailing in SII. However, this is not enough to ensure equilibrium, so exchanges will lead to standardization through anticipation: SII, having to respond to a real demand, will find itself inclined to exchange more of its own pv2 to obtain the missing Mp; this is done while respecting v/C, SII will also have to cover additional v’2 needs. Once we have “v” via the rate of exploitation by living labor, we automatically obtain “pv”. This gives us the result shown in the diagrams above.
Sectors, sub-sectors and value chains.
We have a diagram of the SR-ER in two sectors SI -Mp – and SII – Cn – whose equilibrium is given by the Equations of the SR-ER. In the production function, Mp refers to capital “c” and Cn to human capital “v”. This is why all sub-sectors, like all individual companies, can be subsumed into either Sector I or Sector II. This makes it possible to understand not only the interactions between sectors, but also the inter-sectoral interactions that define value chains. This is then finely manageable on the basis of Marxist-scientific economic statistics that bury the nonsense of Marginalist GDP by apprehending, within the general framework of the parameters provided by Ecomarxism, both changes in productivity and the role of public and private bureaucracies, which are not just costs but play a part in the social division of labor at microeconomic level – productivity of the immediate production process or company – and macroeconomic level – competitiveness, in other words, the macroeconomic framework necessary for the reproduction of social capital in a given Social Formation. Private and public bureaucracies therefore play an important role in the organic composition of capital at both levels, and make a powerful contribution to the creation of surplus value, the new exchange value.
The subsumption of sub-sectors into one or other of the two major Sectors implies that we cannot treat relations between sub-sectors – or within an industry – without taking into account their respective overall SR-ER equilibria in quantitative terms – exchange value – but by reintegrating the whole into the general SR-ER framework as far as prices are concerned, otherwise the whole structure of relative prices – the logic of the law of value – will be distorted.
For example, by breaking down SI and SII into two sub-sectors respectively:
SI = c1a + v1a + pv1a = Mp1a
= c1b + v1b + pv1b = Mp1b
…………………………….
= c1 + v1 + pv1 = Mp1
SII = c2a + v2a + pv2a = Cn1a
= c2b + v2b + pv2b = Cn2b
…………………………….
= c2 + v2 + pv2 = Cn1
RS-RE, rotations, money and credit
We know that the so-called “quantitative theory of money” formalized by Irving Fisher is a tautological fraud designed, from the outset, to obscure Book III of Marx’s Capital, continuing the manipulation of Books I and II by the « pitre » Böhm-Bawerk and his invention of the false “problem of the transformation of values into prices of production”. Fisher chooses to obscure the distinction between salary, profit and rent, a distinction that lies at the root of the class struggle in which Social Formations clash over the ways in which surplus value is extracted and distributed among actors according to a particular allocation of the resources available for Reproduction. To this end, Fisher amalgamates the three concrete sources of income into an abstract artificial category, the “income stream”. In this way, everyone, regardless of their class position – the housewife, the unemployed, the worker, the businessman, the rentier – has an “income” or “revenue” which they must put to work, according to the imperatives of their presumed capitalist “acquisitive mentality”, which is given by the economists of the Austrian School and later by tutti quanti as a universal and perennial psychological behavioral given. Slave-owning societies, potlatch societies and all the rest are said to have a capitalist mentality. To ensure their “income stream”, all must “invest” according to their risk and time preferences…
Fisher also confuses money and credit. In this way, he issues his falsely quantitative tautology according to which the value of “money” is equal to the value of all goods and services exchanged; but as the tautological string would be too thick, we sprinkle in a little monetary “velocity”, the sum of money being that of all monetary aggregates M, M1, M2, M3 taking into account a velocity childishly apprehended according to the average time it takes a monetary species issued by the Central bank to return to the Central bank! Add to this the fact that Marginalism has no coherent theory of productivity, while market prices fluctuate constantly by definition. In such a context, how can we make reliable comparisons over time? Since Fisher wants to conceal the exchange value around which market price oscillations are organized in bourgeois society, he resorts to a simplistic subterfuge: Fisher’s constant prices are thus empirically evaluated according to a Consumer Price Index corresponding to the average household consumption basket constructed in t1, the base year taken as a reference by official statistics, for which the CPI corresponds more or less to M1 and the small part of M2 which goes to households such as savings accounts and household financial products, in short, to the salary bill…
In reality, money is the convenient general equivalent that enables us to circulate all the goods and services we need to ensure SR-ER. Credit – in its public or private, classic or speculative forms – is nothing more than an anticipation of growth, an issue of capital needed to supplement the share of surplus value reinvested in production. The volume of money is therefore strictly determined by the quantity that is sufficient and necessary to ensure all the SR-ER exchanges.
In a situation of full employment, this quantity corresponds precisely to the real salary mass. If support for the inactivity of the workforce – unemployment, sickness, old age, etc. – is not provided organically by the deferred salary, but by an ex nihilo issue by the Central bank – when even general taxation is no longer sufficient – the ratio of this social salary mass to the real salary mass gives us the rate of structural inflation, which then makes workers pay for the weight of bourgeois economic incompetence incapable of providing full-time employment and/or an adequate deferred salary. If we take the macro-economic production function of Social capital, we see that the product « p » – the sum of Mp and Cn – is greater than « v », the salary bill; but all exchange is by nature reciprocal, which leads to a circulation of money that, through its rotations, ensures all the exchanges necessary for SR-ER, which is very different from the zany Marginalist “velocity” of “money” that confuses money itself with credit.
Here’s the general formula for rotations:
Extract from the Synopsis: « The detail including rotations is as follows:
S = money supply = salary mass.
R = number of rotations; R = C/v + pv/v
M€ = value in Euros of total product = S x R ».
Credit anticipates growth by issuing money, with the aim of increasing the opportunities for reinvestment provided by the surplus value available. When credit is public, its issuance costs the public Central bank virtually nothing, except to cover administrative costs and the provisioning for debt, as the case may be, although the latter may be the subject of a new issue. When the amounts issued are defined by the Plan and controlled at maturity by the Economic and Social Council and Parliament, there is little room for slippage. The extraordinary growth of our societies after the Second World War, J Fourastié’s Trente Glorieuses, went hand in hand with public debt in France oscillating between 17% and 27% of GDP. French public debt exploded immediately after the privatization of the Banque de France by the Pompidou-Giscard-Rothschild law of 1973 (in Italy, privatization took place between 1981 and 1983, with even more catastrophic results).
Let’s take a quick look at the differences between monetary management by private and public central banks. The former confuses money and credit; it assumes that the quantity of money needed is given by the “money” market, which leads to the tautological nonsense of Fisher’s quantitative theory. The role of the central bank is then to organize formally egalitarian access – Marx called it “capital’s communism” – to money for all economic players, large and small. Hence the uniform key interest rates and all their contradictions, notably in the genesis of speculative sectoral expansions accompanied by contractions elsewhere, the source of Trade Cycles.
On the contrary, the public central bank differentiates between money and credit. The former corresponds to the real and social salary masses, which must therefore be managed to induce the lowest possible structural inflation, given by the ratio of the social salary bill to the real salary bill! The closer we get to full employment, the lower the social salary mass. From this point of view, given household savings, key interest rates are only concerned with savings and consumer credit. Credit for investment, on the other hand, is managed according to planning needs, by modulating the ratio of Central bank Offices closely linked to their respective economic sectors. As credit is an anticipation that must correspond to the balance of the SR-ER, the modulation of the prudential ratio will serve to respect the right proportions for harmonious dynamic growth. Raising the prudential ratio will increase access to credit for specific sectors and branches, while lowering it will have the opposite effect.
Private credit first took the form of bank capital, available thanks to the “primitive accumulation” of prior capital by merchant capital: this anticipation of corporate growth was based on loans whose conventional interest was deducted from corporate profits. From the outset, the banking system made use of the possibilities offered by the fractional system – loans in excess of equity capital, depending on the prudential ratio adopted. Note that anticipating growth through credit in this way implies the concrete possibility of supplying the additional quantities for the inputs of the production functions involved, which presupposes stocks, installed overproduction capacity and/or, to speed things up still further, access to external supplies and outlets. Banking capital thus transformed trading posts into colonial territories.
This strike force of banking capital, supported by the fractional system and by the colonies, led to an increasingly consubstantial merger between merchant banks and big business, leading to finance capital as defined, following Marx and Lafargue, by Hilferding, Hobson and especially Lenin. This gave us an opposition between the fractions of capital emblematically summed up by industrialist H Ford’s animosity for the House of Morgan (see here). Indeed, the logic of deducting interest from profit remained intact and palpable.
Speculative credit is specific to speculative finance, which has become legally hegemonic since the repeal of the Glass Steagall Act in 1999. This New Deal law, which was passed in 1933 in response to the stock market crash that triggered the Great Depression, compartmentalized the 4 branches of finance – deposit banks, commercial banks, insurance companies and credit unions. It embodies a completely different kind of capitalist creature. For it legally usurps the form of profit, leading to a profound imbalance whereby, via the mobility of capital between sectors, further accelerated by the stock market, speculative finance, which benefits from a more advantageous v/C organic composition, distorts the structure of relative prices to its own advantage, thus cannibalizing the real economy while further distorting the Marginalist data of GDP. The weight of speculative finance in GDP is estimated at around 9%, whereas some believe that its overall direct impact through the financialization and stock-marketing of economic activities is close to a third of GDP.
This logic of credit’s anticipation of real growth can be seen in public credit, framed by Planning; a mix of real growth and growth that is still partly speculative – leading to the Trade Cycles – can be seen in the emergence of classic private credit. Hegemonic speculative credit leads to speculative growth, which goes hand in hand with a sharp decline in social welfare and of the Regalian role of the national State. In all cases, recourse to credit leads to an increase in the inputs of the production functions concerned, which can always be identified by the SR-ER Equations. These macro-economic equations systematically summarize Marx’s studies on the circuits of capital, taking into account production, exchange and the realization of capital – but all this remains essentially opaque to bourgeois theories, and to their empirical statistical restitutions, ever more powerful thanks to computerized information gathering, but always as approximate and ex-post.
None of this is visible in the maintream theoretical and empirical framework as reformulated by the “multiplier”, especially the fiscal multiplier spawned by neoliberal monetarist public policy….
Equilibrium by simultaneous resolution.
The origins of this attempt to find systemic equilibrium lie in Tougan-Baranovsky’s use of Bortkiewics to offer a solution to the (false) “transformation problem” invented by Böhm-Bawerk (for the solution, see Tous ensemble). It consists in reformulating the problem with three sectors, of which sector three, Gold, is presented both as production and as a unit of account, thus enabling simultaneous resolution thanks to a system with three unknowns and three equations. All other such attempts, such as Sraffa’s matrices or Hicks’ abortive attempt to generalize Alfred Marshall’s two-commodity system of “capital” and “wheat”, follow this logic. Clearly, this has nothing to do with Marx and, above all, with the problem of equilibrium through stationary or dynamic reproduction solved by Marx’s SR-ER Equations. This is one of the most blatant cases of the “model” replacing reality, which mainstream economists can no longer resist doing. Here’s the illusory Reproduction according to Tougan-Baranovsky:
c1 + v1 + s1 = c1 + c2 + c3
c2 + v2 + s2 = v1 + v2 + v3
c3 + v3 + s3 = s1 + s2 + s3
The third line represents the production of gold, which is supposed to correspond to money and profits. Of course, the bourgeois are guilty of this ideological concealment, but the academics, who are paid out of the public purse, are doubly guilty!
Equilibrium on the “market of markets »
It was Léon Walras who used this trickery to conceive of general equilibrium. It is this basis, represented by a classic microeconomic Marshall graph generalized into a aggregate supply-demand graph, that Kahn uses as the implicit underlying model in his attempt to “formalize” Keynes’s approach to the multiplier effect of counter-cyclical public spending. In fact, it’s a summary of a double absurdity. One curve is given in price, to determine the other and vice-versa, then the two curves are crossed to obtain … the right market price! For general equilibrium, put X for Supply and Y for Demand and then cross.
Now, this is done in the form of money, i.e. fluidly, which transforms all inputs into “factors of production”, including human labor, which is not a factor of production like any other. He must reproduce his labor power in order to return to work, but as a member of a sexually reproducing Species, he must also reproduce as a Species within a household. (This deception goes back to the very beginnings of bourgeois economics: we know that Jean-Baptiste Say proposed relying on Ricardo’s paper currency in order to mask class exploitation by transforming human labor power into a mere factor of production like any other, empirically given in the form of money. Conversely, Marx’s critical study of Quesnay’s Tableau made a breakthrough when he noted that equilibrium must necessarily take place both in terms of use value – quantity – and in terms of exchange value or price, and thus, to sum up, in terms of Mp and Cn. This is not possible with bourgeois economics in all its forms.
Generalities
With Marginalism, economic equilibrium is achieved within the contradictory framework of a price system given ex post by the market, i.e. by the growth of Supply and Demand. I’ve shown the logical absurdity of this: to establish the Supply curve, we must first empirically give the Demand curve in … prices! Then the same applies to the Demand curve. Then you cross the two curves and, miraculously, you get the right market price… Taking his inspiration from Marxism, but concealing it, Keynes sought to circumvent this problem by giving macroeconomics a greater role, in particular through the management of aggregate demand and supply, i.e. both consumption and production, and by theorizing the need for State intervention in these two areas to maintain an equilibrium compatible with the full-time employment necessary for social well-being and democracy.
Within the framework of the Law of Value, the micro-economic production function of the enterprises or that corresponding to the macro-economic function of Social capital, which is broken down in the Equations of SR-ER, all variables are controlled by the necessary, proportionally inverse relationships maintained by the organic composition of capital – v/C where C= (c+v) – and by the rate of exploitation, pv /v. So, if we know the inputs of the production function (c + v), we can deduce pv ex ante from the ratio pv/v; if we know the rate of surplus-value or exploitation, we also know the rate of profit, written as pv/(c+v). Knowing the inputs, we can therefore deduce “aggregate demand”.
Another way of putting this is to note that the SR-ER Equations define “aggregate demand” in its entirety, but above all in its decomposition into two main Sectors, Sector I for Means of Production – Mp – and Sector II for Means of Consumption – Cn. These two Sectors are not a simplified model, but correspond in reality to the two inputs of any production function, namely “c” capital and “v” labor. This means that all sub-sectors, branches of industry and companies can be subsumed into one or other of the Sectors; similarly, a scientific statistical system based on the SR-ER Equations, allows us to conceive of cross-sectoral value chains or filières. Knowing that higher productivity dominates, all the relations of the reproduction system, including its structure of exchange values or relative prices, are known.
Note that the system of SR-ER Equations represents the Social Formation – in other words, the space where exchange value is formed during the complete cycle of Reproduction, or the “equilibrium” in Marginalist terms. Let’s imagine a government intervention in favor of one branch; the increase in its production will imply more inputs for capital “c” and labor “v”, and consequently a parallel increase in one or more other branches. Nevertheless, the formation of relative prices calls into question the SR-ER Equations as a whole, since the branches involved are subsumed into sub-sectors and, ultimately, into the two major Sectors, I and II.
None of this is conceivable with marginalism, since it subjects the market mechanism to a reallocation of resources in reproduction effected by the “invisible hand”, i.e., to a blind mechanism driven by the pursuit of private capital accumulation characteristic of the capitalist acquisitive mentality. It is therefore impossible to define final “aggregate demand” and its two components, Mp and Cn. It can only be approximated, in the short term, by the empirical statistics available. Without knowing aggregate demand – what Léon Walras called “the market of markets” – exchange value cannot be established. We’ll have to make do with fluctuating market prices. As Marx noted in his Paris Manuscripts of 1844, these prices oscillate in the medium and long term around an axis, precisely that of the exchange value over-determined by aggregate demand, thus reached by trial and error.
Starting from the epiphenomenal nature of the market price, Marx understood that the real phenomenon to be explained was the exchange value of commodities, which could not be explained without resting on the exchange value of a specific commodity, comparable to any other commodity on the market but nonetheless different, “human labour power”, and without exposing the genesis of profit arising from exploitation. From there, he schematized all the economic exchanges of a given Social Formation, masterfully reducing Quesnay’s entire Tableau to his Equations of the SR-ER, an intellectual prodigy only possible by knowing how to take into account the ontological duality of every exchanged commodity, i.e. the use value and exchange value of every commodity, the former always being the support of the latter. Since economic reproduction – in Marginalist terms, “equilibrium” – implies a complete cycle of exchanges in both exchange value or price and quantity, the cycle of reproduction was thus scientifically conceivable.
This is masterfully synthesized in the Equations of SR-ER in Book II of Capital. The temporal range of Reproduction, i.e. of the entire cycle of Reproduction, thus made it possible to give a fully elucidated conceptual and theoretical content to Sismondi’s key concept of “annual income”, which formed the basis of the Physiocrats’ thinking on national accounting … in prices, captured ex post… Now, with production functions given in exchange value, the entire cycle can be predicted ex ante, which is indeed the object of Planning.
However, this requires a coherent resolution of the problem posed by productivity when it differs from one sector to another, and that of money and credit, resolutions for which I modestly refer to my Synopsis of Marxist Political Economy. I published the solution to the false problem of the transformation of exchange values into production prices, obtained several years earlier, in my Tous ensemble (1996). This false problem had been invented by Böhm-Bawerk to claim that Book III of Capital lethally contradicted Book I, and therefore the core of Marx’s theory, the Law of Value, which reveals the exploitation of labor – surplus-labor – as the source of surplus-value – profit – unilaterally pocketed by capitalists. This surplus value will be transformed into “social surplus value” during the transition out of the MPC and into the socialist, communist Mode of Production. « Social surplus value » collectively and democratically controlled by citizen-workers corresponds to the reformulation of the “social fund” that Marx theorized in his Critique of the Gotha Program.
Historical materialism claims to base the various disciplines on fully elucidated concepts, the “concrete in thought “. I refer here to my Methodological Introduction. The first of these “concrete in thought”, human labor, enables us to think of the necessary reproduction of Man within Nature and History, i.e. in their mutual becoming. Through manual and intellectual labor, the human being apprehends his environment – material, institutional and ideal – and transforms it while at the same time transforming himself. He becomes the Subject of his own History. With the social division of labor, the fruits of labor are “alienated” from others in exchange for other goods. But all these goods must be commensurable with each other if they are to be exchanged. This is why the value of labor power is the necessary common standard of measurement for all economic goods and services, which are therefore exchangeable. If any good can serve as a specific equivalent, if money can serve as a general equivalent, only labor power can serve as a universal equivalent. Without it, no rigorous economic calculation is possible.
Bourgeois economic theories, particularly all shades of Marginalism, are content with a primitive empiricism – “Baconian empiricism” in Koyré’s words – which allows them to develop a few accounting “recipes” to maintain empirical control over capitalist dynamics. Trade cycles and structural crises clearly demonstrate the limits of this method. Never mind, capitalists have made the economic snapshot, given by the fair market price, the Revealed Truth, while legally imposed competition plays the role of the Law and all the Prophets, to paraphrase Marx.
However, even the most hollow narratives must retain a certain plausibility if they are not to accomplish their work of caste and class control. The bourgeoisie hastily posits the law of competition as the supreme law of capitalism, based on the equality of all economic actors. But this is only a formal equality. Indeed, competition – in all its forms – is driven by the constant quest for the highest possible productivity, so that it leads paradoxically but implacably to the laws of motion of capitalism, namely the centralization and concentration of capital. Economically speaking, as we said above, Marginalism seeks to base this plausibility on empirical data capture, which informs all its control techniques, including corporate accounting and national accounting or GDP. We’ve always known that if appearance were enough to grasp reality, we wouldn’t need to resort to science.
This brings us back to Marginalist statistics. Thus, the inputs of the sectoral or sub-sectoral reproduction functions – (c+v) – can be captured empirically in terms of prices at a given point t, as can realized profits, but without knowing anything about their organic composition or their rate of surplus-value, i.e. the logic of productivity which, according to Marx himself, constitutes the revolutionary aspect of the CMP. The law of productivity according to Marginalism boils down to the “marginal productivity” of a given Marginalist function, of the kind y = f (K,L) where K is capital and L is labor; we seek to define optimal production according to the scale of demand; at its best, this takes the form of Pareto’s technical composition, and the increasing and decreasing incomes already criticized by Sraffa in the 1920s, and economies of scale.
In reality, all this verbiage amounts to saying that any production function – or company – will maximize its internal division of labor so as not to lose money unnecessarily. But, of course, this has nothing to do with the law of productivity, according to which a deeper organic composition of capital leads to a proportionally greater extraction of surplus value and a proportionally greater increase in production of the same or an elastic product, so that the unit price will fall proportionally. The more productive capitalist is enriched by volumes of profit, the rate of profit remaining the same, since the lower unit price enables him to conquer new markets in the face of competitors. We know that Pareto, who at least tried to be serious, never succeeded in reconciling his technical optimum with a composition in value – or price. Sraffa understood the nature of the problem, but was unable to reach a conclusion in his attempt to rehabilitate Ricardo’s value of labor power, i.e., a theory of profit without exploitation! He tried to co-opt the Marxist concept of “labor socially necessary for the reproduction” of labor power by its basic basket, “commodities thus producing commodities”. Except that he was obliged to supply the rate of profit exogenously to simultaneously solve his matrices, in a pathetic neo-Ricardian Tougan-Baranovsky redite.
Marginalist price statistics are, by their very nature, fluctuating, and only over the long term can they approximate exchange value – by “trial and error” or « tâtonnement », as Walras and tutti quanti put it. But this empirical approach to exchange value is ruled out by the chosen method. Marginalists resort to yet another narrative construction, namely Irving Fisher’s constant prices, which consist solely of saving appearances by empirically setting prices for a base year (t = 100) of reference, so as to evaluate subsequent years (t1, t2, tn) according to this index! Quite a trick. In particular, this method is, by definition, worthless for capturing “inflation”. It opens the way to all sorts of manipulations, depending on the base year chosen. But workers can nevertheless point out that 100% salary indexation simply keeps things as they are, in constant prices, otherwise the induced fall in real salary becomes theft pure and simple. In any case, indexation would have the advantage of prompting regime economists to think more carefully about the real causes of inflation, so as to solve the problems at source and not on the backs of the proletariat, including the so-called “middle classes”.
We have shown above how it is possible to determine the mutual links between certain sub-sectors and branches, and even trans-sector links in the case of commodity chains, when scientific statistics are available, namely those of the SR-ER Equations. For example – as Soviet statistician Stanislav Strumulin pointed out – we may want to introduce CNC machines and automation, but to do so we’ll also need to have trained the workers who’ll have to operate them; for Keynes and Kahn, State intervention in public infrastructure had repercussions on the cement and construction industries, as well as on employment, leading to the absorption of some of the unemployed, which led them to conceive their Multiplier – a poor man’s version of Extended Reproduction which, in fact, underpinned their thinking.
So how do these inter-sectoral linkages present themselves for Marginalism? At best, this is approached by empirical trial and error, with data always supplied ex post, and therefore without any predictive value, especially in the medium and long term. At best, the “statistical” photo claims to provide a “reality” that remains identical to itself over time. As the law of productivity is ignored, “growth” will be measured in terms of volume or price, but never simultaneously. This supposedly empirical method will aggravate the illusions of the Marginalist production function – which knows nothing of the genesis of profit, nor of inflations, etc. – and those induced by profit accounting. – and those induced by company or macro-economic accounting, notably GDP. These techniques confuse money with credit, public credit with private credit, the traditional interest rate deduced from profit with speculative interest, which, with the hegemony of speculative capital, legally plays the role of the profit rate, thus leading, given competition, to the cannibalization of the real economy by the speculative economy. We know that the structurally speculative economy now accounts for around 9% of GDP, with a direct deleterious influence of over 30%, according to some.
But that’s not all: the empirical Marginalist method, when attempting to identify inter-sectoral links – the specific multiplier – knows that it must take into account the relative price system of the Social Formation (SF). But this is beyond its ontological and methodological grasp. Unless we give ourselves a matrix in which the equations, namely the Marginalist and therefore false production functions, are solved simultaneously. This then requires a number of extrapolations based on the empirically supplied statistical snapshot, without which no resolution would be possible. For example, the average rate of profit will remain the same. In the IMF article (Sept 2021), this is indeed what is at issue, notwithstanding the “sectoral linkages and constraints” used empirically to identify the specific multiplier. In fact, no system of relative prices is definable by Marginalism – and bourgeois theories in all their forms – without reference to the general equilibrium price, which is poorly approximated both by Walras’ “market of markets” curves – a subterfuge used by R. Kahn – and by the simultaneous resolution system.
The SR-ER Equations allow us to specify what Marx called “the circuits of capital”. Thus, any production function c + v + pv = p implies at least two major Sectors, that of Mp for “c” and that of Cn for “v”, and thus the SR-ER Equations of stationary or dynamic equilibria. This involves circuits that ensure production – the inputs of the production function and its output – in terms of both quantities and exchange value or price. However, production – in this case “p” – only takes on economic value once it has been realized, i.e., once it has been exchanged for consumption, by households or capital, thus re-entering the great circuit of Reproduction. Marx thus came to define the fundamental distinction between money and credit – banking and financial. He could thus conceive of capitalist metamorphoses or circuits, to put it simply: P-A-P’ or P, the Mp entering production, is converted – realized – in the form of money A to be realized again in the form of Mp including an increment from profit – and/or credit to be repaid by drawing on profit. Likewise, commodities and money undergo their own specific and ever-increasing metamorphoses. The complete circuit is coherently synthesized in the Equations SR-ER when we simultaneously give them in quantity – use value Mp or Cn etc. – in price or exchange value and in money form – namely the salary masses necessary and sufficient to ensure all exchanges enabling Reproduction – and in credit – bank capital, then financial and today speculative.
The central role played by the size and composition of the salary bill in Stationary or Simple Reproduction (SR) is immediately apparent. If the salary bill is reduced to the individual net salary, as was the case during the classical era of liberal capitalism, which included child labor, then the growth in productivity that drives the system, driven as it is by the pursuit of capital accumulation, will result in a series of cyclical crises – simultaneous sectoral expansion and contraction – or of more structural crises of over-production and under-consumption. This is the price to be paid for unemployment not productively reabsorbed by recurrent cycles of working time reduction, the limit of which remains the SF’s rate of macro-economic competitiveness, since no SF can sustainably live beyond its means, given a rational citizen’s tax system.
And it was to counter these inner tendencies of the MPC that the systemic reduction of working time – day, week, year, paid vacations, sick leave, retirement, etc. – was historically put in place. – and the deepening of what I called, in the second chapter of my Book III, the “structure of v”, which takes place in the light of the Great Depression, with the establishment of the new CMP Epoch corresponding to the European welfare State – planning à la franҫaise and theories of regulation – or the Anglo-Saxon Welfare State – Keynesianism. This new “structure of v” takes the form of the “net global income” of households conceived in a context of full-time full employment. This “net global income” of households recognized that the human being must not only reproduce his labor power to return to work the next day, he must also, as a member of a sexually-reproducing Species, assume his reproduction as a Species, i.e. in a household. (We avoid the term “family”, since it takes on different historical forms, and also etymologically refers to “domesticity”: a household encompasses a number of people linked by stable, long-term relationships and living under the same roof). The three components of “global net household income” implement distinct economic circuits that pave the way to “social surplus value”, i.e. that which will characterize the Epochs that will initiate the transition out of MPC, in which all surplus value produced by society will be collectively and democratically controlled by all citizens via planning and public credit, in order to respond to a Reproduction that gives priority to social needs. This means the individual net salary, which covers day-to-day expenses, the deferred salary which finances the 5 branches of Social Security and individual household savings where applicable, and what goes back to households from taxes and duties to ensure infrastructure, public services and security. The Marginalist « disposable income » ignores everything that counts and everything that protects, and simply sticks to the individual net salary and financial income, which goes mainly to the wealthiest households. This private savings is socially ruinous when it replaces institutionalized savings mutualized in public Social Security, but, conversely, it is counted in GDP since it creates “added value” while leaving millions of people without social insurance or with inadequate coverage!
The most virtuous and efficient circuits for ensuring harmonious Extended Reproduction – dynamic equilibrium – are, of course, deferred salaries, especially when they correspond to full-time employment, and public credit.
With the emergence of the Welfare State, the deferred salary finally took into account the reproduction of the worker as a species. In this sense, it was a major step towards greater social justice. At the same time, it took account of the fact that workers inevitably experience periods of inactivity beyond their control – old age, illness, accidents, etc. In this sense, the introduction of Social Security represented a great civilizational advance, since mankind could conceive of being rationally protected against the vagaries of life, the proverbial « rainy days », « the fear of tomorrow ». However, if capitalist rulers were willing to play the game of deferred salary and of more or less progressive taxes to ensure infrastructure and public services, it was not through a return to the Physiocratic morality of an Adam Smith. The attempt to implement an exclusivist fascist society treating workers as subspecies or “chandalas” – Nietzsche – had once again failed miserably, receiving its final blow at Stalingrad. Once again, as was the case after the Bolshevik Revolution – with the establishment of the tripartite system of labor relations neutered by the ILO – the Western bourgeoisie rediscovered the virtues of the Charter of Social Rights that Beveridge had drawn up for the same reasons. However, this march towards a more socially advanced capitalism was only possible thanks to the realization of the stabilizing virtues of socialized savings in deferred salary and the appeasement of workplace conflicts acquired through collective bargaining controlled by the tripartite system, which embodied the nascent industrial democracy – Ralf Dahrendorf, Dunlop, Kerr and so on.
The socialization of the portion of savings corresponding to deferred salary was quickly understood as a counter-cyclical stabilization measure, since it financed unemployment insurance, among other things. At the same time, its role in supporting and stabilizing aggregate household demand was obvious: health insurance prevented families from sinking into destitution when they could no longer postpone medical care, and guaranteed a healthy and therefore more productive workforce; family allowances took account of differences in household size. In addition to its role in stabilizing the economy, whether the system was contributory or pay-as-you-go, it also involved considerable amounts of money – some 872 billion Euros a year in France today – withdrawn from capitalist speculation and its harmful effects. In the aftermath of the Second World War, they were the focus of bitter class struggles throughout the West, which are now being renewed with renewed vigour.
In the more rational and fairer form, the one set up in France after the war – Ambroise Croizat – Social Security was largely managed by the workers themselves and by a few employers’ representatives. All this was framed by the preamble to the Constitution – which enshrines the Social Republic – by the right to work – full-time and with all the associated social and trade union rights – and by an embryonic form of social democracy, enshrined in the Conseil Economique et Social (Economic and Social Council), which worked within the framework of publicly-funded planning. The latter was conceived as an anticipation of necessary investments in addition to the reinvestment of “social added value” compatible with the “net global income” of households.
It’s worth noting that the logic of Workers’ Funds – and of the Productivity Fund needed to ensure restructuring without harming employees in the long term – within the framework of public enterprises and cooperatives under the umbrella of planning and public credit, represents an optimal expression of the deferred salary working in support of social surplus value. For example, the public pay-as-you-go pension scheme can be supported by strictly public salary savings managed by the workers themselves, with a view to socializing the production tool by using these socialized savings as a tool for development and social justice, notably through Reduction of the Working Week and the social priorities selected. It was this thesis of socialization through institutionalized savings and public credit that I proposed in my Tous ensemble, paying tribute to Emile Pacault and Rudolf Meidner.
It’s easy to illustrate the power of this French-style planning system, which, with all its internal contradictions, is compatible with private capital regulated within a mixed economy framework. Just think of all the achievements of the Trente Glorieuses – Jean Fourastié’s word – bearing in mind that, thanks to public credit, all these technological, social and cultural modernization projects – think also of the Tourism Plan and the Côte d’Azur – were accomplished with a public debt oscillating between 17 and 27% of GDP, i.e. in anticipation of real growth, until the Pompidou-Giscard-Rothschild law of 1973 privatized the Banque de France, thereby subjecting public debt to the dictates of international financial markets, which were already moving – since the abolition of Regulation Q in the USA in the late 60s – towards systemic speculation under the suzerainty of the US Dollar. Here’s the graph on the debt/GDP ratio:
We can summarize this discussion by underlining the fact that macro-economic competitiveness, which derives from public infrastructure and social services, is the best systemic driver of micro-economic productivity. Greater productivity, combined with qualitative production, makes it possible to achieve a secular reduction in the working hours demanded of every able-bodied citizen in the Domain of Necessity, in order to constantly expand the Domain of Freedom, within which human beings can develop their work in a disalienated State, enabling them to harmoniously express their emancipated personality within Nature and Society.
The dismantling of the Social State, born of the French Resistance, through a class-exclusive refusal to deepen it, is a recipe for disaster. This refusal concerns, in particular, the Reduction of Working Time, the introduction of a wall-to-wall day-care system guaranteeing full employment, gender parity and, through the introduction of modern geriatrics, the preservation of the autonomy and fulfillment of senior citizens. Today, it is worsened by a return to exclusivism, once again projecting a “return” to a society of new domesticity and new slavery, with New Laws of Manu directly attacking the general epidemiological framework of the exploited classes, without ruling out Big Pharma’s genetic engineering design splitting the Human Species into subjugated subspecies, since the current Human Species ratifies the fact that all its members are, by definition, equal as members of the same Whole. (For Manu’s New Laws, see the Note of April 25, 2023 in the Breve/Flash News/Brèves.)
The quest for the best macro-economic competitiveness and micro-economic productivity within the framework of Extended Reproduction represents the best growth option, the highest generic Multiplier. As we have seen, this goes hand in hand with an ever-increasing priority given to social needs rather than the accumulation of private monetary wealth.
What of Marginalism, that of Keynes’s “bastards” – as Joan Robinson called the Hicks, Samuelsons and Solows who distorted the Cambridge economist’s social-theoretical advances by minimizing State intervention in the economy to regulate the “animal spirits” of capitalism – and that of the monetarist neo-liberals – the Chicago Boys – to whom the former de facto paved the way? We will then return to Keynes’s system, poorly simplified by Kahn’s multiplier, which drew heavily on Marxist lessons to conceive of direct interventionism in production with public enterprises, another in support of full employment and households, and another, through the Central Bank subject to the Treasury, to regulate public and private credit.
Monetarist neoliberalism conceives of no State intervention in the economic, social or cultural spheres, which is not to say that the State is absent. On the contrary, it is more interventionist than ever before, as it aims to ensure a minimum Social State, focusing instead on the creation and legal support of artificially created “markets” that invest even in natural monopolies, as well as public goods – the commons, in the ambiguous contemporary post-Reagan vocabulary – health, culture and, of course, labor management according to the principle already established by R. Solow in 1956, according to which full employment is automatically ensured on the labour market, provided that all barriers preventing the establishment of equilibrium at the physiological threshold are legally lifted. We know that the physiological level is elastic, since it depends on ambient civilizational conditions. The average longevity of the half-billion Dalit citizens is around 40-42 years…
Of course, this goes hand in hand with the explosion of precariousness to make up unemployment figures according to the ILO definition – one hour’s work during the last assessment period is enough to take workers out of the official statistics. This Reaganite workfare is further supported by free-trade treaties, including the definition of anti-dumping ratified by the WTO after the Uruguay Round. This definition put an end to all GATT tariff protection by imposing global competition on the basis of individual net salary alone, and eliminated minimum environmental criteria linked to the precautionary principle of health. This ushered in an era of global competition for the lowest salary, destroying the deferred salary, and hence the branches of social security which gave substance to fundamental social rights. Together with individual fundamental rights, they define modern citizenship. This global offensive makes general taxation ever more regressive, by substituting onerous tax expenditures for direct subsidies.
Neo-liberal monetarist public policy puts the pseudo-logic of “Ricardian equivalence” in place of the Keynesian Multiplier and Extended Reproduction. It replaces direct subsidies and State socio-economic investment with regressive taxation. It accumulates all the shortcomings of marginalism denounced above, and even goes so far as to call into question the Smithian role of the State in ensuring national security – which can now be transferred to imperial and mercenary forces – as well as the general interest, e.g. infrastructure and public services, since not only health care but also freeways or municipal sports halls etc. can be privatized.
Moreover, by dismantling the Welfare State, substituting full-time employment – and hence the “net global income” of households – with precariousness and a return to the single net individual salary, flanked by assistance that is once again largely privatized, if not directly denominational, fiscal regressivity is the result. State intervention in the form of direct subsidies is ruled out – except for military spending – and the gigantic tax credits and tax expenditures granted to capital with no counterpart for the world of work, are supposed to act according to the meta-magic of the free and undistorted market inducing the trickle down of wealth – John Galbraith, the counterweight theorist who spent his childhood on a farm in southern Ontario defined it as follows: “It is horsehist: you feed the horses to feed the birds”. The part of the economy stimulated by this is the accumulation of private capital, which is increasingly speculative. This has resulted in a net transfer of 10% or more of GDP from labor to capital since the 80s and 90s in Europe. Even the IMF – Sept 2021 – acknowledged that the huge fiscal stimuli granted in Advanced countries in 2020 during the health crisis produced a fiscal multiplier of just 0.06%, while 88% of the aid granted to SMEs alone went to those who didn’t need it. At the same time, we all watched the profits of the CAC 40 soar. The enormous profits made by capital, particularly stock market capital, confirm and clarify the mechanisms and results, particularly as regards the accumulation of wealth and the dramatic growth in social inequality and insecurity. (See Oxfam)
It doesn’t take a rocket scientist to see that this exclusivist neo-corporatism is no longer motivated by the secular growth in living standards. The project of social regression was set out by the Trilateral Commission in the 70s, in a shameless rehabilitation of the old Report from the Iron Mountain produced by the US Establishment a decade earlier. The idea was quite simply to “put an end to the rising expectations ” of citizens, and to re-impose “deference to Authority” – self-conferred authority, of course – while working to overcome the national State, the cradle of peoples’ sovereignty, in favor of a new world order subjugated to transnational corporations, and thus to a new Censitarian democracy of major shareholders, “private global governance”, i.e. ultimately to a new self-sectioned exclusivist plutocracy.
Generic multiplier and specific multiplier.
We saw above that the macroeconomic framework is still necessary to understand the relative structure of prices and therefore the two types of multiplier. The specific multiplier is a subset of and over-determined by the generic multiplier given by the SR-ER Equations – or empirically approximated by Keynes’ Aggregate Supply and Demand.
When it comes to the multiplier, whether generic or specific, we’re always dealing with ex-post empirical reconstructions based on this pseudo-scientific narrative method. Note that all Marginalist projections, GDP or otherwise, are consistently wrong, and are only plausible over the very short term, i.e. almost a quarter. In fact, no change in any parameter can be gauged except by a ladle, and always by the yardstick of past experience. Customary mistakes. Thus, LTCM’s stock market ruin was caused by a model – Morton, Black and Scholes – set up in 1968 and little or poorly adapted thereafter, when financial laws and rules – the main initial parameters – had changed completely. Note also that speculation, and its self-destructive role, cannot be identified by Marginalism, as the market is supposed to always establish the right price; financial crises are therefore ontologically excluded from Marginalist theory, which the smoky theory of “efficient capital” takes to its point of absurd development, and refers to purely empirical historical appendices, e.g. John Galbraith’s classic on the subject.
The generic economic multiplier is given by the SR-ER Equations during a reproduction cycle (see below). It can then be given ex ante with great precision by Public Planning based on public credit, full-time employment and, if necessary, anti-dumping calibrated to support, by the necessary margin, the deferred wage needed to finance the 5 branches of Social Security. As demonstrated in the Synopsis of Marxist Political Economy, the legal regime of capitalist competition leads to an ex-post market equilibrium which eventually balances the Mp sector and the Cn sector, but according to the logic of private capital accumulation which is largely antithetical to the primacy of social needs and respect for minimum environmental criteria (for a summary click here.) Capitalist equilibrium always goes hand in hand with an immense waste of available resources.
The Marginalist economic multiplier is a blind, imputed approximation of the economic growth effects of a monetary stimulus – investment or tax exemption. It always amplifies underlying capitalist contradictions such as overproduction/under-consumption and hence simultaneous sectoral expansions and contractions, especially when any corrective State intervention of capitalist “animal spirits” is banished by ambient monetarist neoliberalism, which reaches its climax in the Redistribution Epoch of the hegemony of speculative capital that cannibalises the real economy. Kahn’s Multiplier, in all its variants, formalizes all this without even taking into account the Keynesian constraints of a mixed economy regulated with the support of consumption – Social Security – and public investment – State enterprises and public credit. The geometric series generated by Kahn’s formalization is therefore nothing more than a formalization without any real economic object, a mere game.
We’ll see Kahn’s original text below. Here’s a classic formulation as provided by Wikipedia (https://fr.wikipedia.org/wiki/Multiplicateur_keyn%C3%A9sien . Translated )
“The State has, within the framework of its budgetary policy, the possibility of spending public money. 100 Euros spent by the State gives rise to an order for the same amount, which will increase the recipient’s income. This income will in turn be used to spend or save. If the beneficiary’s savings rate is 20%, these 100 Euros will generate a new expenditure of (100 – 20) = 80 Euros. This sum is also used by its beneficiary, who can also – after having saved 20% – spend (80 – 16) = 64 Euros. At this point, the first beneficiary has saved 20 Euros, the second has saved 16 Euros and spent 64 Euros, for a total of 100 Euros. And so on until the effect is exhausted: the sums redistributed at each stage diminish towards zero.
On the fourth iteration, the sum is distributed as follows: 20 Euros of investments for the first beneficiary, 16 for the second, 12.8 for the third and 10.24 for the fourth, plus a fourth beneficiary’s expenditure of 40.96 Euros. The total sum is always 100.
The total amount received is 100 (1st beneficiary) + 80 (2nd) + 64 (3rd) + 51.2 (4th) + 40.96 (corresponding to the 4th beneficiary’s expenditure, but not yet used), i.e. 336.16 Euros.
The total amount spent is 80 (1st) + 64 (2nd) + 51.2 (3rd) + 40.96 (4th), i.e. 236.16 Euros. The difference comes from the 100 Euros initially paid by the government.
At the end of the day, we can see that 100 Euros of public spending generates a greater increase in national income (hence the idea of multiplication) than the initial expenditure. The amount of this increase, over an infinite period, is given by the formula: 100 . (1/1- 0.8) = 500
The multiplier is simply a second-round effect on the economic circuit generated by the expenditure. With a savings rate tending towards 0%, the denominator tends towards 0 and national income tends towards infinity. At the same time, national expenditure increases according to the formula: 100 . (1/1 – 0.8 -1) = 400
By generalizing, we can say that, in an economy, the variation in one of the components of demand (initiated by a variation in public spending, investment, credit granting, wages, etc.) causes a higher variation in national income. »
According to the same Marginalist formula, we can look at things from the point of view of household consumption, or from the point of view of productive consumption, i.e. by considering investments. To add insult to injury, all Marginalists disregard public or private credit; moreover, by blithely confusing money and credit, they falsely assume that savings = investment, which is a hyper-simplification that even poor Hicks had to recognize as such. In this narrative context, we’ll determine the propensity to save, i.e. potential investment, and the related multiplier of productive consumption.
The economic multiplier for employment given in Kahn’s first Marginalist formalization is even more pathetic, since Marginalism cannot conceive of the law of productivity that represents the heart of the CMP, its revolutionary aspect as a Mode of Production according to Marx. Kahn formalizes it by using as a reference the intersection of the supply/demand curves on the “market of markets”. Now, productivity is the capacity to produce more of the same product or of an elastic product during the same working time, i.e. for a proportionally lower unit price but with a deeper organic composition (v/C ), producing a proportionally higher rate of surplus value ( pv/v ) for an identical rate of profit (pv/(c+v ) but higher volumes of profit, since the lower unit price makes it possible to conquer markets against the competition. Marginal productivity nonsense captures none of this, and even less the quantity/price relationship. So, starting from the classical Marginalist production function : y = f (K, L ) where K is capital and L, labour – at whatever level we wish, without any constraint of full employment according to Solow, 1956 – by taking the production function of global capital, we will have a ratio of total product (y) in price to the wage bill in t and then in t1 after investments and, by keeping wages equal in t and t1 while assuming equilibrium – thus independently of full employment or precariousness – we will measure the effect of the employment multiplier!
This kind of sleight-of-hand allows us to claim that fiscal stimuli aimed at either consumption or productive consumption can be targeted to specific objectives. (This is what the IMF study of Sept 2021 claims.) The exercise will remain limited by the parameters of Marginalist equilibrium and class narratives solidified in Marginalist national accounting – GDP – but, moreover, it will be unable to differentiate effects according to whether public or private investment is involved, and according to the degree of planning.
Investment in public services and infrastructure has, by definition, a greater impact on socio-economic growth and thus on macro-economic competitiveness and micro-economic productivity. Public companies – or natural monopolies such as EDF, SNCF etc. before privatization – enjoy greater economies of scale, rationality and efficiency, since they do not have to pay dividends to private investors, and can simply finance their administration and reinvestment costs. For their part, public services, including Social Security, are largely financed organically – without inflation – by social security contributions – the deferred wage – while benefiting from national economies of scale and the solidarity-based mutualization of contributions, resulting in fairer payments to beneficiaries.
That’s why these public social services were conceived – by Beveridge, Keynes and the socialists before them – as fundamental social rights and counter-cyclical economic levers. Yet, in Marginalist GDP, these public services are counted as costs simply because they have no market price. For example, when the healthcare system is private, it is unaffordable and leaves millions of people without coverage, yet these highly negative social costs are passed over in silence to retain only their added value on the healthcare market!
So much for generalities. Let’s take a closer look.
Logical development.
Any economic system imposes its dynamic reproduction on the basis of stationary reproduction. This is what Marx demonstrated in Book II of Capital, when he differentiated between Simple Reproduction – SR or stationary – and Enlarged Reproduction – ER or dynamic. Within this macroeconomic framework, microeconomic rules operate, in particular the extraction of surplus value, which refers to the organic composition of capital – v/C – and the corresponding rate of surplus value – pv/v -, the rate of profit being written as pv/(c +v), i.e. surplus value in relation to capital, which includes fixed capital, the organization of labor and the exchange value materialized in human labor power “v”. The economic rules at macro level are summarized in the Equations of RS-RE, in particular reinvestment, the level of “net global income” of households, the social priorities or lack thereof set for Reproduction with a view to social Redistribution, the use of credit understood as the anticipation of investment in addition to the reinvestment of profits.
This is the Scheme of Simple Reproduction, which must prevail simultaneously in terms of quantities and exchange values or prices. No economic model except Marx’s, elucidated in my work – see the Synopsis of Marxist Political Economy – is capable of doing this. All bourgeois theories treat capital and labor in the same way, as mere “factors of production”, valued either in quantities or in prices, most often in prices. This leads to an even greater fluidity of human labor power, which must nevertheless reproduce itself twice, once as labor power and then as the human species within a household. Since labor power only appears in the form of a monetary wage, the wage is theoretically subject to the laws of competition without limit.
Extract from the Synopsis: “The equations of Simple Reproduction (SR) forming a stable system reproducing itself identically will serve as a basis on which to elaborate the conditions prevailing for Extended Reproduction (ER). Here they are, based on the aggregate production functions of SI and SII:
SI : c1(80) + v1(20) + pv1(20) = M1(120 Euros pour 120 Mp)
SII : c2(40) + v2(10) + pv2(10) = M2 (60 Euros pour 60 Cn)
The SR Equations are the following :
c2 = (v1 + pv1)
M1 = (c1 + c2)
M2 = (v1+ pv1) + (v2 + pv2) »
In the same Synopsis, we demonstrate that the laws of capitalist competition, which are legally imposed in the Capitalist Mode of Production, lead blindly to a structure of Reproduction which necessarily implies an ex-post “equilibrium” in exchanges, both in terms of quantities and qualities or exchange value, since use value is the obligatory support for exchange value. The “invisible hand” thus leads to a “graveyard equilibrium” in which private accumulation is privileged to the detriment of social or simply human and environmental priorities. This is achieved at the cost of an extreme waste of necessary resources.
Another way of putting this is to note that, once “economics” will be established as a science, blind competition – and hence the allocation of socially available resources for reproduction – will be replaced by Planning at both micro and macro levels. At the microeconomic level, we will have the determination of the organic composition of capital – v/C where C = (v +c ) – and the related exploitation rate – pv/v – ex ante in the production function. Pareto, for example, may rightly insist on the technical composition of capital, thus paving the way for analyses of economies of scale and rising and falling incomes, but unfortunately he is incapable of reconciling technical composition with its value composition, which is something only I can do, including in the case of changes in organic composition in the various sectors. The Marxist law of productivity that I have established retains all its coherence in the reproductive system, particularly with regard to the structure of relative prices. (The false problem of the transformation of value into price has been shown to be a deception by Böhm-Bawerk). At the macro-economic level, given the homogeneous control of relative prices, we can then ensure Reproduction, but taking into account socio-economic, cultural, human and environmental priorities in the allocation of available resources – Ecomarxism.
In the elucidated Marxist framework, the problem of the economic Multiplier is that of Enlarged Reproduction according to the priorities chosen for Redistribution – which refers to the different historical Epochs of Redistribution experienced in the CMP, in short classical liberalism based on the individual net salary alone, the Welfare State based on the more virtuous circuits of “global net income ” of the household, i.e. net wages, deferred wages and direct and indirect taxes, and the socialist sharing of “social surplus value” both in terms of investment – supported by public credit – and in terms of “global net income” of the household. This brings us back to Planning, which, within the framework of “socialist democracy“, will become its core, since it will be based on the direct involvement of workers in the control not only of production, but also of Reproduction and Redistribution. Industrial democracy, glimpsed through industrial relations – the Economic and Social Council, Ralph Dahrendorf, Dunlop, Kerr etc., J Galbraith’s counterweight to the Big Corporations etc. – will then take on its full importance in the form of the “industrial democracy”. – (On the counterweights theory see Note 15 on John Galbraith in Keynesianism, Marxism, Economic Stability and Growth ).
The heart of the logic of Enlarged Reproduction – in place of the blind Marginalist Multiplier – will rest on the Equations of Simple and Enlarged Reproduction – see above – and on the Rotations that emanate from them. Here is the general formula for Rotations within this framework. It can then be adapted to take account of money – wage masses – as well as credit and its various forms, classic credit, public or private, or speculative credit.
Extract from the Synopsis
“The detail including rotations is as follows:
S = money supply = payroll.
R = number of rotations; R = C/v + pv/v
M€ = value in Euros of total product = S x R”.
The SR-ER Equations can be reduced to two sectors: Sector I producing the Means of Production – Mp – or capital goods in mainstream terms, and Sector II the Means of Consumption – Cn – or consumer goods. This refers to the two inputs of any production function – capital “c” and human labor power “v” – the production function being written: c + v + pv = p where “pv” is the surplus value or profit and “p” the product resulting from production. All sub-sectors and branches can be subsumed under these two sectors. If we had scientific statistics corresponding to this scientific production function and thus, at the macro-economic level, to the SR-ER Equations, we could easily compose the sectors that refer to specialized cross-sector groupings. In Extended Reproduction – ER – we can therefore scientifically conceive the effects of additional investment affecting both sectors together with their components, leading to coherent and harmonious growth. This would be the generic economic multiplier. We may also wish to act on a specific sector, such as certain machine tools. In this case, taking into account the parametric constraints of RS-RE, we will nevertheless have to ensure the necessary investments in the branches and sub-sectors involved, particularly if we are dealing with intermediate sectors. This will give us the sectoral economic multiplier.
Note that in both cases, the parametric conditions given by Equations SR-ER must be taken into account. Otherwise, according to capitalist competition abandoned to the “invisible hand”, we’ll always have a “market equilibrium” ex post, but it will often be a “graveyard equilibrium”, in any case an equilibrium achieved on a monetary basis without regard for quantities, and above all for the quantities of goods needed to satisfy even the most basic social needs. We have repeatedly stressed that the logic of the acquisitive mentality, combined with capitalist accumulation orchestrated by the “invisible hand” of the market, inevitably creates speculation, which translates into expansion in certain sectors accompanied by contraction in others, which is the logic behind the CMP’s cyclical crises, or Trade Cycles. Structural crises, on the other hand, are due to the exhaustion of the growth effects of a given technological wave.
The Marginalist Multiplier according to historical epochs, inter-sectoral links and targeting.
In its general formulation, the Multiplier aims to answer the following question: for a dollar invested according to economic agents’ propensity to “consume” or “save”, what will be its impact on economic growth, measured according to the national GDP accounting system (see the cove here: http://rivincitasociale.altervista.org/le-pib-outil-de-narration-Marginaliste-contre-le-bien-etre-des-peuples-et-la-prosperite-des-etats-nations-24-mai-2020/ )? We thus arrive at the famous geometric series that Kahn would formalize, drawing inspiration from Keynes, in particular his 1929 article “Can Lloyd George do it?”. Since all exchange is necessarily reciprocal, given the propensity to consume or save, an economic circuit is set up, which, at least we presume, will lead to economic growth, or, at the very least, support the economy, if not revive it in times of crisis.
We can see the problem straight away. In the structure of implicit reproduction that blindly reproduces itself in the bourgeois regime, “normal” exchanges are over-determined by the underlying structure. This, in turn, is over-determined by private capitalist accumulation, with investments going in preference to the most profitable companies, branches and sectors. This inevitably leads to sectoral expansions accompanied by contractions in other sectors, with these imbalances, or Business Cycles, being purged during crises by a series of bankruptcies leading to a rebalancing. But this happens at the cost of mergers, according to the logic of capital centralization and concentration, with its impact on the structure of the workforce, as unemployment does not always find opportunities to “spill over” – « déversement » according the A. Sauvy’s- into other intermediate or new sectors. Today, as a result of the hegemony of speculative capital, banks’ prudential ratios have been replaced by access to private central banks, and bankruptcies by bailouts (see “Credit without collateral“). The self-regulating function of capitalist cyclical crises no longer plays a role, leading to a purely narrative logic in a system of exacerbated financial Monopoly.
In this context, the Multiplier is primarily concerned with assessing the impact of support for the economy in times of crisis. As a private economy, this support in times of crisis can only come from the State.
Here’s the general problem: if there is no change in the underlying structure of trade, and therefore in the underlying system of Reproduction, the stimuli, and therefore the effects of the Multiplier, will follow this logic. If this logic is strongly biased, as is the case today, by the hegemony of speculative financial and stock market capital, then the Multiplier will not only be weak – speculation is phagocytising the real economy – but disastrous in terms of its social consequences, even though it will be highly beneficial to hegemonic speculation. This is true all the time, and we now know why, namely the underlying structure of exchanges in the capitalist system of Reproduction. For example, the “whatever it takes” approach has resulted in lower wages, more bankruptcies and more poverty, while the Cac 40 has set new records.
In such a context, can we claim better results, as the IMF and Mr. Gourinchas do, by emphasizing the role of better targeting of public aid and stimulus? On the face of it, this is wise, but without a change in the underlying economic and legal structure – notably the gigantic tax expenditures – it’s quite illusory.
The Covid-19 crisis in the USA, for example, led to an explosion in unemployment, officially to over 18 million. The UI paid out had curious effects: median American “disposable income” – which includes only net wages and the share of household financial income, thus excluding everything else that matters, in particular deferred wages and public social services – rose like never before (! ), poverty seemed to be eliminated from the statistics and – as a result of NAFTA and Reagan’s workfare on full-time jobs – structural inflation, directly linked to real and social wage bills, affected certain consumer products, including used cars. These transitory effects immediately disappeared as soon as the subsidies were reduced or abolished. In fact, Donald Trump, who reduced them shortly before the elections, suffered an electoral defeat, particularly in some of the key Rust Belt States that the Republicans had previously conquered. At the same time, these aids to wealthier middle-class households led to an initial explosion in Repos and Reverse Repos, as JP Morgan had anticipated that some $300 billion destined for these households would flow into financial products in a QT context. (see here and here)
The case of the IRA brings nuances. The High-Tech part is financed by a levy on buybacks – recently destined to be increased from 1% to 4%. This is unattractive. Indeed, when public spending is covered by levies, by definition it does not directly create inflation. The fact remains that the speculative structure in place will over-determine the expected results of this attempt to influence productive investment. The irrationality of the speculative green transition will add to the disaster without preserving the environment, human health or biodiversity.
As we can see, it’s difficult to target in the context of a neoliberal monetarist capitalist economy under the hegemony of speculative capital.
At this point, it’s useful to return to the central ideas of Keynesianism, in which the logic of the Multiplier was imagined – Keynes, Harrod, Kahn etc.
In this original mixed-economy context, Keynes adopted Marginalist micro-economic logic for strictly ideological reasons. But he knew that this capitalist logic, necessary to the legitimization of a system based on the apology of the individual entrepreneur and private accumulation, led to the imbalances of cyclical and structural crises – the Great Depression – due to what he called the “animal spirits” of private capital. Within the framework of a mixed economy, capitalists could therefore be given a certain amount of latitude, within the framework of a regulated macro-economy. In the last two volumes of his Collected Works, the pages referring to the hidden borrowings from Marx and his circuits of capital were published, which many of us already knew, given the impact of Sraffa – and therefore of Gramsci – if not of Eugène Dobb, which is a little more dubious…
Taking up, without saying so, the Marxist concept of “social demand” – first glimpsed in the Paris Manuscripts of 1844 and developed in Book II of Capital with the Equations of Reproduction – he set out, in particular, to imagine ways of rebalancing aggregate Supply and Demand, in other words, of achieving equilibrium. But he did so while stressing that any equilibrium worthy of the name must be based on full employment – full-time, of course. The result was a system of interdependent variables, with full employment as the determining variable. The rest adjusts itself. This was later illustrated by the Keynesian Hydraulic System in several machines (https://www.youtube.com/watch?v=rVOhYROKeu4 ) in Cambridge UK. The rest – money and credit – is grafted on according to these constraints. As ever, the main pitfalls of this kind of system lie in the failure to understand productivity – which frees up labour power not necessarily reabsorbed elsewhere without Reduction of Working Time – and the illusory management by interest rates of the shapeless “money” supply, which amalgamates money – the wage bill – and credit.
Such a system therefore leads to State interventionism to rebalance aggregate Demand and Supply, a trial and error – post-hoc statistical empiricism – blind to Marx’s Equations of Reproduction. On the Demand side, before full employment and unemployment insurance with vocational training in the context of frictional and seasonal unemployment, all with the development of the deferred wage – Social Security covering inactive life – retirement, unemployment – and sick leave etc. – and the development of the social security system. On the supply side, the level and direction of productive investment was called into question through public enterprises – natural monopolies that could not be privatized – or through the use of credit, with public money helping to rebalance the structural basis of Reproduction, and thus trade, and hence the development of the Multiplier. The tax structure was thus adapted to the new era of redistribution of the capitalist mode of production embodied by the Keynesian Welfare State, or by the European Social State: in addition to contributions, direct taxes took on great importance – income tax, inheritance tax, etc. – as a means of financing the social services. In addition to financing State-owned companies, this also enabled the financing of public infrastructure. The latter, the construction of which requires capital mobilized over the long term, is universally accessible, magnifying the crucial impact of the macro-economy on the micro-economy, and thus powerfully reinforcing the microeconomic productivity of companies.
Let’s return to the Multiplier and the propensity to consume or save. Here, understanding is completely obscured by the hegemony of what Joan Robinson called the “Keynesian bastards”. I have summarized this history in my Book III – Keynesianism, Marxism, Economic Stability and Growth – 2005 – as well as in my Methodological Introduction, both freely available in the Books section of my old experimental website www.la-commune-paraclet.com . It all starts with Hicks, who proposes the IS-ML model, which, in his own words, is a heuristic oversimplification; basically, savings = investment, which is an absurdity because it eliminates the counter-cyclical role of credit and socialized savings based on deferred wages. It should be noted that credit, which calls into question the fractional banking system, cannot be reduced to deposits, nor to the role of socialized savings, which are central to the general, counter-cyclical soundness of the system. For the deferred wage and its virtuous circuits, see: http://rivincitasociale.altervista.org/another-ineptitude-marxs-circuits-of-capital-and-realization-authored-by-g-dumenil-and-d-levy-dec-22-2019-january-27-2020/ )
Today, in the context of monetarist neo-liberalism under the hegemony of speculative capital, we have a primary distinction between the propensity to consume – household spending – and the propensity to save, but this is conceived according to the IS-ML model, what’s more with an extreme reduction in deferred wages, all aggravated by privatizations and all-out deregulation of the economy. In this way, we are regressing towards a system completely abandoned to its “animal spirits”, now prey to purely speculative short-term investments – financial products, the stock market, etc. – and, to top it all off, a system that is not only based on the “animal spirits”, but also on the “animal spirits”. -To add insult to injury, these investments are parasitized by gigantic buybacks and dividend payments, which immediately return to these purely speculative circuits. Let’s mention once again the exemplary and infinitesimal Multiplier of “whatever it takes” fiscal stimuli with the simultaneous explosion in profits and dividend payments, which even the IMF has had to take note of.
The Multiplier should at least differentiate between savings and socialized savings. The former is divided between household savings and capital savings – supplemented by access to private credit depending on the magnitude of the desired investments …. For households, we need to distinguish between net wages and deferred wages. The net wage is spent daily, weekly and monthly, and in the longer term, for example via the savings accounts needed to provide the larger sums required to purchase durable goods, the circulation of which is also crucial to Reproduction. Deferred wages finance the branches of Social Security as socialized, mutualized and solidarity-based savings. We know that these socialized savings stabilize the system – a counter-cyclical and anti-inflationary role for wages, since contributions are organically derived from the exchange value produced.
Capital’s savings – its propensity to save – supplemented by public credit and public enterprises – natural monopolies or strategic enterprises – stabilized the reproductive system on the investment side.
Note that this worked very well until the dismantling of the GATT – initiated with the Dillon Round – and the privatization of the central banks. This privatization took place under the Pompidou-Giscard-Rothschild law of 1973 in France, and led to the immediate explosion of public debt, now subject to the international capital markets (see the table quoted in: http://rivincitasociale.altervista.org/rapport-arthuis-2021-vous-avez-aime-thatcher-reagan-vous-aimerez-arthuis-version-italo-ludwig-mises-5-mars-2021/ . I reproduce it here:
None of these essential distinctions appear any more in discussions on the Multiplier, as they refer to the virtuous circuits of capital now denied by monetarist neoliberalism under the hegemony of speculative capital. This makes discussion of the impact of better targeting rather ingenuous.
It makes a big difference whether a citizen receives a neoliberal Marginalist “disposable income” that boils down to the net individual wage, supplemented by small amounts of income from household financial savings, all with social services, including health, education and transport, privatized and with paid access to public infrastructure, or, or, on the contrary, a “net global income” for the household with its three components, the net individual wage, the deferred wage ensuring guaranteed and “free” universal access, because collectively financed, to the 5 branches of the Social Security system, as well as “free” access to public infrastructures, including freeways… What’s at stake here is citizens’ standard of living, guaranteed by their social achievements.
The central question is that of the public policy linked to monetarist neoliberalism under speculative hegemony. This can be summed up by the critique of the brutal and senseless ineptitude embodied in the “Ricardian Equivalence” formally proposed by R. Barro; it constitutes the heart of the speculative system and its deregulations/privatizations, i.e. those of the public credit formerly issued by the public Central Bank at virtually no cost apart from administration costs. Which brings us back to the enormous tax exemptions and gigantic tax expenditures that politely disappear from the budgetary and media radars once granted, unless they are more recent and legitimized by a social impact or, more perniciously, by the speculative “ecological transition”. To this enormous waste, we must add tax evasion in addition to the legal transfers permitted by tax rulings – see http://rivincitasociale.altervista.org/paris-agreement-climate-decarbonization-and-the-problems-with-ets-the-climate-crime-against-emerging-countries-and-against-the-vast-majority-of-humanity-to-be-frozen-at-the-unequal-development-lev/
As everyone knows – and everyone understood thanks to the surge in popular awareness triggered by the pension counter-reform – there are now over 90 billion in employer contribution exemptions with no counterpart for the world of work except precariousness – RSA and workfare, free or almost free apprenticeships, gig jobs, parcoursup including now for master’s degrees etc. In the same vein, other exemptions for companies follow, under the pretext of lowering labor costs in line with the WTO’s definition of anti-dumping, which leads to global competition for labor power based on net wages alone, thus disregarding deferred wages and access to public infrastructures, and minimum environmental preservation criteria – not to be confused with the climate nonsense of the IPCC, which has been measuring temperatures by satellite since 1979, when there are no clouds, and which inevitably leads to a serious warming of totally bogus models that undoubtedly merit the International Criminal Court for crimes against humanity and against countries in transition. Note that the promise made to these countries of a Fund of 100 billion dollars a year is even more flouted than the former promise to increase international development aid, tied or otherwise, to 0.7% of the GDP of rich countries.
In short, Ricardian equivalence maintains that the Multiplier emanating from tax exemptions and tax expenditures is greater than that induced by stimuli in the form of direct subsidies and access to public credit. Reality, if only as illustrated by the ratio of public debt surrendered to the international market or by the unemployment rate, even in the ILO sense, says otherwise. We have already seen why, especially within the framework of a monetarist neo-liberal socio-economic reproduction/redistribution structure: the effects of aid will preferentially go to speculative capital, further cannibalising the real economy and full-time employment. (Concerning the difference between the generic multiplier and sectoral multipliers, already discussed above, I refer you to this: THE BODY ECONOMIC: why austerity kills, by David Stuckler and Sanjay Basu, HarperCollins Publishers LTD, 2013. A critical review ». in https://www.la-commune-paraclet.com/Book%20ReviewsFrame1Source1.htm
What remains to be clarified is the question of the Multiplier’s differential impact in the speculative context depending on targeting, which is of concern to Mr. Gourinchas. In fact, as we have stressed at length, it’s not so much the targeting that counts as the Epoch of redistribution: it’s important to know whether we’re dealing with a planned and regulated Welfare State or a monetarist neo-liberal State with its disastrous public policy. We have given the amount of State aid – according to the IMF – and the evolution of real GDP for France, Italy and the USA. The inefficiency of these policies is matched only by that of Western central banks in their fight against “inflation” – in the singular. (see e.g. http://rivincitasociale.altervista.org/the-inflation-narrative-and-the-irreversible-ruin-of-our-country-july-4-2022-includes-french-spanish-and-italian-versions/ )
The Multiplier of public aid was greater during periods of redistribution characterized by the welfare State, and remains greater when infrastructures and public services are not privatized. Similarly, in France, we can verify that a less degraded Social Security system induces less CPI “inflation”. It would be even lower if the nuclear fleet had not been ideologically diminished by subsidies to inefficient and intermittent “alternatives”, and if France were not part of the single European market, which imposes a price corresponding to the last power plant called on to produce for a specific contract, generally a gas-fired power plant whose cost is now subject to speculation – the Amsterdam TTF – and sanctions against Russia, to the benefit of polluting American shale gas, which is 4 to 6 times more expensive…
Analysis of Obama’s “stimulus plan” had already shown that spending on the public sector produced a Multiplier nearly 3% higher in the USA – see The Body economic quoted above). So when aid went to bridges and sewers, public infrastructure or public services – Medicare, Medicaid, public education – the impact was strong, but fell back around the average logically prevalent in speculative economics – so dear to that ideologue R. Barro and so many others like Blanchard, Summers, Akerlof, Stiglitz, etc., etc. – namely 1% and less. – i.e. 1% or less. (We also know that the Multiplier of military expenditure is the lowest of all; this prompted Chancellor Willy Brandt to outline the benefits of “peace dividends” in his famous Report (https://fr.wikipedia.org/wiki/Rapport_Nord-Sud ), money wasted on armaments should instead be devoted to socio-economic development. This is all the more important given the a-social drifts at home and abroad embodied in Star Wars and the Doctrine of Preventive Warfare espoused by today’s transverse Western neocons. This is now culminating in the Otanesque destruction of the Ukraine in the vain hope of weakening the Russian Federation, after the destruction of the former Yugoslavia.
It’s easy to see why, if we refer to what we said above about Reproduction, Redistribution and the Structure of Exchanges. In the public context, there are no profits to be made and no dividends to be paid, or else, as in the case of the old public enterprises and freeways, they go to the Treasury. The socio-economic multiplier is then fully expressed, especially if it is not extroverted by the end of tariff barriers and free-trade treaties. Yet this extroversion, endorsed by the current WTO definition of anti-dumping, has become the global neo-liberal monetarist norm.
When aid goes to the private sector, and moreover to the private sector under the thumb of hegemonic financial speculation, the impact is felt above all in dividends and private profits, in other words, through the even greater excesses of speculative capital. Today, they are undermining human reproduction as well as socio-economic reproduction, as demonstrated by growing poverty, queues for soup kitchens and the demographic winter into which our societies are sinking… and by the attack on the genome of the human species and its general epidemiological framework, subjected to criminal mass experiments outside any methodological or deontological framework. The mRNA pseudo-vaccines were hastily rigged and imposed without any real informed consent, backed up by job blackmail, even before the end of Phase 3 …( See Breve/FlashNews/Brèves )
Questions for Mr. Gourcinchas and others: targeting, yes, of course, but how? And in what reproductive-redistributive and legal context?
Let’s start by noting that Marginalist national accounting and the equations that depend on it, including the calculation of the Multiplier, are ontologically flawed. I refer here to my definitive critique of Marginalist GDP: it counts as a cost public administrations and public services – Social Security – because they have no market price. In this way, public health is criticized and dismantled in favor of Anglo-Saxon-style private health schemes, whereas the public system worked very well in the 1970s. The public system, financed by mutualized employee contributions, was worth 9% of GDP in France, while being universally accessible. At the same time, the US private system was worth almost 16% of GDP, but left almost 50 million citizens without medical cover, and millions more with insufficient cover – for working people, a simple appendicitis often meant poverty, or even ruin. The situation has worsened today with Obamacare, which was designed to benefit private insurers. The same applies to pension schemes.
Since these affect production costs, it follows, as always, that good macro-economic competitiveness, along with public R&D, is the best way to keep companies’ micro-economic productivity up. The same applies to universally accessible public bureaucracies, which mutualize costs at the lowest possible cost, since the quest for maximum profits or dividends is not part of the equation. Despite this, neo-liberal monetarist logic pushes privatization: it ruins people, their health, etc., as well as the national productive base, but, through market-pricing, the disastrous result counts towards GDP. To obtain scientific economic statistics, and therefore scientific national and corporate accounting, we need to start from the SR-RE equations, taking into account public and private bureaucracies, which are simply the result of the division of labor within the company, or of the social division of labor at macro level; in the latter case, public mutualization makes the cost much lower in the production function summarizing the immediate production process, despite the “reverse Schumpeterian” practice – the artificial creation of “entrepreneurs” through the dismantling of public enterprises and services – implemented by private neoliberal outsourcing. Scientific national accounting would treat all the production functions subsumed in the RS-RE equations in the same way, for public and private, for empowered and less empowered services. The systemic rate of profit would remain the same everywhere, but investment in the public sector would be limited by the percentage of taxes that a given SF could devote to it, taking into account
As we can see, the Marginalist Multiplier isn’t worth much, except perhaps in a system of State interventionism à la Keynes, or according to the schools of regulation within the constitutional framework of the right to work guaranteed by the mixed economy, planning and corrective regalian intervention.
A few stages in the creation of the Keynesian multiplier.
Prologue: a Keynesian critique of Richard Kahn. The blind leading the world.
See: file:///C:/Users/Paul/BACKUP%20TEXTES/ECONOMY/SSRN-id3691905%20The%201931%20Kahn%20Multiplier%20Creation%20Myth.pdf
Micheal Emmett Brady valiantly breaks a spear in defense of Keynes. But he reminds me a little of the famous painting by Brueghel the Elder. He makes him a very mainstream theorist for both the Multiplier and the IS-ML curve!!!! He argues against the interpretation that Keynes is indebted to Kahn for the geometric formalization of the Multiplier. To this end, he points to a footnote in Treatise on Probabilities, 1921, in which he highlights a footnote containing suspension points, from which he argues that the Cambridge UK theorist distinguished between arithmetical and geometrical methods, long before R. Kahn’s contribution. He also refutes Frank Ramsay’s influence on Keynes, without understanding that the latter’s emphasis on the definition of the Universe under consideration is essential. In fact, Keynes would never have presented a geometric abstraction that theoretically develops ad infinitum in economics! (I’ve shown the puerile falsity of Zeno’s Paradox: it’s based on the confusion of the concept of the point, and of the point as a surface or solid. In short, Plato has Socrates say in the Republic that the concept of the dog doesn’t bark…)
As we saw above, Keynes was inspired by Marx’s circuits of capital, which are resolved in the Equations of the SR-ER. In his 1929 essay Can Lloyd George do it? Keynes applied his famous “rules of thumb”. In the absence of reliable and more or less complete statistics, he devotes himself to a sociological-historical analysis from a perspective strongly influenced by Labour and the theorists and commentators gravitating around it, all more or less influenced by the Marxists. Moreover, Keynes had always been familiar with the main reports of the UK Establishment. Based on available knowledge, he makes a projection of the growth that could be induced by government intervention. He does so taking into account the obvious inter-sectoral connections, which would be inconceivable without the influence of Marx and his brilliant summary of Sismondi and Quesnay’s Tableau. We’ll see below that Kahn’s contribution is no more than an impoverishing formalization; like the IS-ML curve, it may have satisfied Paul Samuelson who, tellingly, wanted access to a summary of General Theory as much as James Joyce’s Finnegans Wake. Later, Popper would make these abusive formalizations his methodological anchor …
I’ve said elsewhere that the first major collection of modern socio-economic statistics emerged from the Tennessee Valley Authority’s New Deal public works program. It showed that a worker who had been out of work for 2 years or more became difficult to employ due to physiological and training deficiencies. Unfortunately, with Kuznets, then Jan Tinbergen and tutti quanti, statistics became formalized and fossilized in Marginalist, empirical, ex-post and false narratives focused solely on private capitalist value added. This Marginalist added value was substituted for surplus value and profit. Society, the basis of the economy, is thus evacuated from the field of research! The result is GDP and managerial accounting, with the added bonus of the “income stream” and Irving Fisher’s quantitative theory of “money”.
For Keynes’s pragmatic, non-dogmatic text “Con Lloyd George do it?“, please refer to this link : keyneshenderson1929lloydgeorge.pdf (hetwebsite.net)
Suffice it to add here that this Keynesian-Marxist assessment, let’s say “tongue in amiable cheeks”, of the inter-sectoral effects of public economic support programs, was capable of seeing the macro-economic effects on micro-economic productivity, since better infrastructures and the general modernization of the public space, induce greater competitiveness of the Social Formation, thus protecting its rank in the inter-national world. All the ingredients needed to build an advanced class alliance under Labour’s leadership. It’s not for nothing that Keynes was reputed to have saved capitalism from its “animal spirits”. In fact, as a great surreptitious reader of Marx, this was his innermost project. Apart from the last two volumes of his Complete Works, Micheal Roberts recently added this piece to the dossier:
« Keynes’ ‘socialism’ was openly designed as an alternative to the dangerous and erroneous ideas of what he thought was Marxism. State socialism, he said, “is, in fact, little better than a dusty survival of a plan to meet the problems of fifty years ago, based on a misunderstanding of what someone said a hundred years ago.” Keynes told George Bernard Shaw that the whole point of The General Theory was to knock away the ‘Ricardian’ foundations of Marxism and by that he meant the labour theory of value and its implication that capitalism was a system of the exploitation of labour for profit. He had little respect for Karl Marx, calling him “a poor thinker,” and Das Kapital “an obsolete economic textbook which I know to be not only scientifically erroneous but without interest or application for the modern world.” » in https://thenextrecession.wordpress.com/2019/06/05/keynes-socialist-liberal-or-conservative/
Ideological class warfare: discredit the adversary by plagiarizing him or her in an occult manner – see the last two volumes of Keynes’s Complete Works – and replace science with plausible narratives, and thus draw inspiration from Marx but with the project of denying the Law of Value, and therefore the central idea of class exploitation! It’s an old story (see Pour Marx, contre le nihilisme, Book 2 here and here). In addition to Marx, it led to an ideological cleansing against the classics, including the Physiocrats, Smith, Ricardo, Torrens … And ended up by basing “dismal science” on a psychological and subjective falsification that reached its climax with the Austrian School, namely the perenniality of the acquisitive capitalist mentality everywhere, diachronically and synchronically, to the great despair of the German historical school, including Schmoller. Here we have it: Potlatch and other societies all followed Menger et al’s individualistic calculation of joys and sorrows…
Richard Kahn’s formalization
See “The Relation of Home Investment to Unemployment”, Author(s): R. F. Kahn: https://sci-hub.ru/10.2307/2223697
Source: The Economic Journal, Vol. 41, No. 162 (Jun., 1931), pp. 173-198
Published by: Blackwell Publishing for the Royal Economic Society
Richard Kahn takes Keynes’s 1929 article “Can Lloyd George do it?” as his starting point, and proceeds to formalize it into a presentation of the geometric series that characterizes the Multiplier, but at the cost of an extreme Marginalist simplification, quite foreign to Keynes.
Kahn’s method is simplistic: he assumes the same productive conditions everywhere. This is no doubt due to his knowledge of the – false – transformation problem invented by Böhm-Bawerk against Marx, since no problem arises in Simple or Enlarged Reproduction when productivity is the same in all sectors.
From there, without even realizing the incongruity, he transforms global Demand and Supply, at the macro-economic level, into a simple crossing of Supply and Demand according to the Marshallian microeconomic model. This is a cookie-cutter formalization of Léon Walras’ “market of markets”. He also adopts Marshall’s hypothesis = two categories, capital and wheat, i.e., suitcase categories – capital = Mp and wheat = the consumption basket. And he further simplifies matters with his choice of two sectors to symbolize: public works = roads, plus raw materials and food. The effects of public works programs on unemployment are said to be primary in the first case, and secondary when they affect overall growth, in this case in the second sector, food.
The geometric series – theoretically infinite! – although it is bounded by the economic structure; for each unemployed person employed, there will be an effect on both primary and secondary employment.
All that remains is to assess the cost-benefit relationship – and the impact on the price level in the case of a closed or open economy – but open in the Ricardo-style here, since the “Repeal of the corn laws” and thus the importation into the UK of a large part of the basket, of which Marshall’s “wheat” forms the main constituent. Tariffs were out of the question – the Gatt would come later, leading to a major confrontation between H White and Keynes, with Keynes defeated at the Savannah Conference in 1946. Imperial Preferences were replaced by the US-controlled GATT.
You have before you the familiar crescent of microeconomics, but used for the aggregate supply and aggregate demand curve, determined according to marginal utility theory. So, following the nonsense of the method whereby to determine the market price of a good or service, we cross the two curves. Now, to determine the supply curve, we give the scales of the demand curve in price (!), and vice versa for the other curve always given in price and, by increasing the two, we end up … oh! miracle … with the market price!!!!
It should also be noted that everything here is given in fluid monetary form, which amounts to transforming all inputs into perfectly fluid factors of production. However, exchange value or price always has a material or at least objectified support – in the case of certain services. And this is even truer for the commodity “human labor power”, which refers to a human being who must renew his labor power, but who must also reproduce as a Species – something Keynes never forgets, unlike Pigou etc. and even Kahn. and even Kahn, and subsequently all the “Keynesian bastards” according to Joan Robinson’s expression, including Samuelson and Solow – for whom, in his 1956 Nobel Prize-winning article, equilibrium occurs when the labour market can freely tend towards the “physiological threshold”, a threshold which in reality does not exist, as it is elastic and depends on the civilizational parameters of societies, e.g. Dalits have a life expectancy of 42 years, more or less! – or Samuelson et al.
You can quickly see that the two curves must evolve in tandem if they are not to affect the price level. Increased employment will create greater demand, and hence inflation, if supply doesn’t keep pace. If the supply of food does follow, then we need to take into account whether it comes from domestic or imported sources.
In the case of imports, this would in principle lead to outward capital flows – with the crucial problem, at the time, of the convertibility of the Pound into gold and the City’s involvement in financing the Empire and then the Commonwealth.
Cost-benefit? Firstly, part of the investment needed for these public projects will come from savings on unemployment and other benefits – “the dole” as R. Kahn puts it. Secondly, part will come from the taxes paid by the new workers (in fact, we should also include the deferred wage, however underdeveloped it may be, which refers here to the low unemployment benefits. Finally, following Keynes, he points out that the capital flows driven by growing imports are offset by the portion of increased investment at domestic level. All that remains is to introduce financing, partly through debt – with private central banking, but without the current hegemonic speculation, and therefore with more moderate rates… – and the maneuver becomes conceivable. Neither Keynes nor Kahn conceived of the role of public credit.
Keynes – 1929 – also added an intuitive understanding of what I later developed analytically with the concepts of “macroeconomic competitiveness” and “microeconomic productivity“: he asserts that infrastructure modernization, induced by public works to reabsorb unemployment, leads to higher productivity and keeps the country ahead of competing countries. Keynes also takes better account of social effects, including health and employability, as well as savings, although he remains trapped in the idea that savings = investment, despite the fractional banking system… This will be better specified later – particularly in the light of New Deal initiatives and banking regulation – Glass Steagall Act, which compartmentalized the banking-financial sector – not forgetting the crucial counter-cyclical role played by institutionalized savings to finance Social Security, etc. It could be said that Keynes’s reading of Léon Walras took account of Auguste Walras’s criticisms, unlike Kahn’s own. Auguste, Léon Walras’ father, urged him to distinguish between abstract “economic science” and the social economy that should inform its priorities.
The real problem Keynes tried to tackle in the General Theory, in evolution but also in a break with his earlier work, was how to curb the capitalist “animal spirits” made even more damaging by Marginalist theory. The underlying influence of Marx on his thinking is well known. On the other hand, Marginalist theory – supply and demand – does not allow us to balance the socio-economic system, particularly with regard to full-time full employment, but only the capitalist economic system, with its ex-post equilibrium and recurring cyclical crises – trade cycles – resulting from overproduction coupled with under-consumption, and overinvestment in some sectors accompanied by underinvestment in others. The aristocratic Keynes maintained macro-economic competition, the fool’s game of capitalism’s “animal spirits”, for ideological class reasons, while demanding direct corrective intervention by the State to balance the economic structure, even if this meant creating public enterprises and a Social Security system to give substance to Beveridge’s fundamental social rights – and therefore, necessarily, reforming taxation to make it more general and progressive, especially direct taxes such as income tax.
But the same problem arises for the “money market” – according to the quantitative theory of Irving Fisher, the Böhm-Bawerk disciple forger of Book III of Marx’s Capital – see my Methodological Introduction, in the Books-Books section of my old website www.la-commune-paraclet.com . Now, in this respect, Marx had initiated the critique of capitalist credit but had not offered a complete theory of money – with, moreover, the complication of productivity change not coherently included in the RS-RE Equations. See my Synopsis of Marxist Political Economy – idem.
While Kahn had to move his aggregate curves in tandem to avoid “inflation” – in the singular as always – Keynes, for his part, proceeded by entrusting the Central Bank with the task of managing the money supply – blithely confused in Marginalist fashion with credit – according to the needs of the economy. Already in 1929, he showed that the price level corresponded to real economic activity; in other words, as aggregate supply and aggregate demand grew, they theoretically led to the right market price – without inflation, as in Kahn’s case – but since this was not spontaneously the case in practice, it was necessary to intervene to ensure that this happened, by balancing things structurally, through the intervention of the State acting through public enterprises and Social Security. All that remains is to ensure that the money supply meets the economic needs of the system. On the one hand, the prudential ratio should, in theory, link the supply of credit to the needs of the (real) economy, with banks’ balance sheets growing with the economy and, conversely, banks scaling back when the economy slows down. But this self-regulation is motivated by capitalist “animal spirits” – albeit already moderated by the productive intervention of the State, via public enterprises, natural monopolies and public works. So, in addition, the central bank must be charged with the task of balancing things out with key interest rates, especially in view of the economic lag.
The problem, of course, is that this does not allow us to get out of the confusion between money and credit: the central bank’s key interest rates ratify the “communism of capital” by ensuring equal formal access to credit for all capitalist actors, regardless of the difference in size or role in the real economic equilibrium – simultaneously quantitative and price-based – given by the SR-ER Equations. Cyclical crises inevitably follow, necessitating corrective intervention by the State. What’s more, Marginalist theory – including Keynes’s aggregate form – does not allow us to understand inter-sectoral relations – in quantity and price – nor changes due to productivity.
This will be approached by planning, including in the case of the mixed economy enshrined in our constitutions, born of class, political and scientific alliances forged in the Resistance to the corporatist narrative excesses of Nazi-fascist exclusivism. It’s worth noting that, within the framework of planning, if the central bank is public, then investments that go beyond savings – household savings, i.e. non-socialized savings deposited in banks, as well as corporate savings – will be increased by public credit. This will be done according to the needs of growth or, in Marxist terms, according to the needs of Enlarged Reproduction, but respecting the underlying SR so as not to end up with a regressive, always ex-post and always anti-social capitalist graveyard equilibrium.
Public credit anticipates growth: money is transformed into exchange value, and we know that roughly 40% goes into fixed capital and 60% into wages – and deferred wages. This gives us a clearer idea of Marx’s capital circuits in the Equations of SR-ER Credit presupposes either excess production capacity – or inventories – or access to foreign trade, or both.
Neither Kahn nor Keynes had complete economic statistics. Kahn was content with his supply-demand logic in the simplest case, with identical productive conditions everywhere. Keynes, on the other hand – he had worked for the India Office, whose great task was to balance the Empire’s burdens, notably through the opium produced in India and sold with cannons in China, which Rosa Luxembourg masterfully analyzed in her Accumulation of Capital – Keynes, therefore, never lost sight of real socio-economic flows, and he approached them as best he could through what he called the “rules of thumb” – synthesized by him on the basis of the various governmental, industrial and financial reports available.
Marginalist accounting – GDP – has been totally fallacious by construction since its inception: public infrastructures and public services, which are the key to macroeconomic competitiveness and hence microeconomic productivity, are seen as costs, leading to a socially catastrophic logic of all-out privatization. Add to this the weight of financial speculation, which is swallowing up the real economy – estimated at 9% of GDP, but 30% if you count the total …
As a result, today’s serious economists are obliged to take GDP and its equations – including those of the Multiplier – with a grain of salt.
In my Synopsis of Marxist Political Economy, I explained how imperative it has become to establish national – and corporate – accounting on the basis of Marx’s production functions – the RS-RE Equations – grouped into two major sectors – Mp and Cn – under which are subsumed all the sub-sectors, branches and enterprises one wants, including the production functions of public and private bureaucracies. Such scientific accounting also makes it possible to understand and apprehend cross-sectoral channels – operational statistical constructs – and thus constitutes the real science of what we want to apprehend through the Marginalist Multiplier. Namely, Extended Reproduction.
Critique of the IMF’s Sept. 2021 article on the fiscal multiplier during the Covid :
See: https://www.nber.org/system/files/working_papers/w29293/w29293.pdf
A good summary by the IMF itself is provided in this video: https://www.nber.org/affiliated-scholars/researchspotlight/pierre-olivier-gourinchas-summarizes-macroeconomic-effects-pandemic-induced-fiscal-stimulus
Roughly speaking, in 2020, in terms of real GDP, a tax expenditure of 11.3% of GDP for all the Advanced and emerging countries considered would produce growth of 0.67%, i.e. a Tax Multiplier of o.67/11.3 = 0.06 (rounded off)!!!! For Advanced countries, the IMF obtained real GDP growth of 0.97, with a Multiplier of (0.97/16 = 0.06). (Table p 42 )
The IMF welcomes the fact that aid has gone a long way – “they did get in all of the cracks” – even though it was poorly targeted. While a few bankruptcies were – temporarily – spared, 88% of the aid went to companies that didn’t need it. (We’ve all seen how the increase in poverty went hand in hand with the explosion in profits and dividends, particularly those paid out by the CAC 40 and the stock markets. )
Furthermore, the IMF study does not take into account the use of State guarantees that have yet to be repaid. It does not take the trouble to denounce the extraordinary profits of stock exchanges and shareholders, partly due to these State subsidies, while employees have been subjected to miserable support measures such as short-time working, in addition to the imposition of miserable lockdowns militarized on purpose. All this continues today with savage wage deflation due to the absence of 100% income indexation, at least calibrated to official inflation, which is much lower than real inflation.
A glance at the Johns Hopkins map – https://coronavirus.jhu.edu/map.html – is enough to understand: the countries least vassalized by the West and Big Pharma did not suffer the same crisis directly attributable to Covid-19. On the other hand, the more vassalized countries have more harmonized marginal statistics, which are easier to manipulate in model sets that bear no relation to reality…
However, for the year 2020 considered in the IMF study, total aid over the period analyzed is much higher than fiscal stimulus alone – over 16% of GDP for France versus nearly 10% for fiscal stimulus, and over 25% versus + or – 9% for Italy – see tables p. 70 for total and p. 2 for fiscal stimulus.
Given that the effects of non-tax aids are inevitably included in the data collected to isolate the tax effect, this makes no sense. Or should we say “the tax effect in the context of other aids”… ? This calls into question the simultaneous resolution method used by the IMF for its relative price structure, and the validity of inter-sector links.
However, if we look at things in a more prosaic way, we obtain the following real GDP trends for 2020. This gives us the strong impression that the IMF is sailing in a world of its own:
France : France gdp growth rate for 2020 was -7.78%, a 9.63% decline from 2019.
Italy : Italy gdp growth rate for 2020 was -9.04%, a 9.52% decline from 2019.
USA : U.S. gdp growth rate for 2020 was -2.77%, a 5.06% decline from 2019.
The IMF study overlooks the most important point, namely that direct subsidies, especially when planned by the State but now prohibited by free-trade treaties (with the exception of gigantic US military spending, now close to $900 billion… ) have a greater impact than the nonsense of monetarist neo-liberal public policies, further aggravated by R. Barro’s so-called “Ricardian equivalence”. See “THE BODY ECONOMIC: why austerity kills, by David Stuckler and Sanjay Basu, HarperCollins Publishers LTD, 2013. A critical review. ” in https://www.la-commune-paraclet.com/Book%20ReviewsFrame1Source1.htm
For a critique of the policy of permanent “support measures” in Italy, see: “Società dei ristori, lockdown permanenti, nuova domesticità, nuova schiavitù, pericolose terapie genetiche, pork barrel, ricovery fund”, 23 January 2021/ in http://rivincitasociale.altervista.org/societa-dei-ristori-lockdown-permanenti-nuova-domesticita-nuova-schiavitu-pericolose-terapie-genetiche-pork-barrel-ricovery-fund-23-gennaio-2021/
Not so long ago, the IMF was considering what measures to take to put the key under the door. Then, in extremis, the “rescue” of Hungary was invented; soon afterwards, other victims followed, including Argentina, which at the time was subservient to the students of Stiglitz! !!!!. Previously, Nestor Kirchner had reduced the debt to around 8% of GDP. What a shame!
For a new multilateral world see: « For an open multilateral world without monetary suzerainty, meddling in internal affairs and extraterritoriality, for bilateral credit lines and public credit, April 7, 2022 », in http://rivincitasociale.altervista.org/for-an-open-multilateral-world-without-monetary-suzerainty-meddling-in-internal-affairs-and-extraterritoriality-for-bilateral-credit-lines-and-public-credit-april-7-2022/
More in detail:
1 ) The first thing to note is that this team creates two groups of countries, advanced and emerging, to analyze the respective impact of fiscal stimuli before and after – year 2020 – the Covid. However, the emerging countries chosen, no doubt in order to have sufficiently harmonized data to enable them to handle the model, are very close to the statistics of the advanced countries, i.e. the very countries that have imposed, in a liberticidal manner, lockdowns, without rapid home care and without the use of effective generic drugs, as well as the criminal mRNA “vaccines” – the disastrous effects of which are more obvious and numerous every day. Just compare the emerging countries group with the Johns Hopkins Covid map: https://coronavirus.jhu.edu/map.html
2 ) The second thing to note is a lethal error which invalidates all this work and its conclusions – except in a tendentious metaphorical sense due to the volume of “empirical” – but Marginalist – data collected. We claim to isolate pre- and post-Covid tax stimuli in the two groups respectively. However, for the year 2020 considered, total aids during the period analyzed are much higher than fiscal stimuli alone – over 16% of GDP for France compared with almost 10% for fiscal stimuli, and over 25% compared with + or – 9% for Italy – see tables p 70 for total and p 2 for fiscal stimuli).
As the effect of non-tax aids is inevitably included in the data collected to isolate the tax effect, this makes no sense. Or we could say “the tax effect in the context of other aids”…
3 ) That said, metaphorically speaking, the positive effect on GDP is derisory – except for Keynesian unemployment – but it has prevented social exposure. The leaders have bought the peace, but by throwing money out the window, while promising to maintain the disastrous path of fiscal consolidation imposed so far, but with some allowance for the new debt … . The authors show that 88% of these ill-targeted tax stimuli went to SMEs that didn’t need them. (They are also found in the profits of the CAC40 … The others survived with a bankruptcy rate slower than normal in advanced countries, and without any pronounced zombification. Except that the question of guarantees to be repaid is not taken into account. In short, for the very small – I’m guessing restaurateurs, waiters, etc. – the opening up of the market has enabled them to survive. – until the self-inflicted “Ukrainian” crisis as part of the forcible construction of a new CoCom under Washington-Tel Aviv control – with its attendant sanctions and effects on energy prices, etc. ….
4 ) For the rest, the model has all the defects of the Marginalist models of simultaneous resolution pompously called I-O models – which I denounced by tracing their origin in the Tougan-Barasovski critique in my Tous ensemble. (All the others, from those of Sraffa to Hicks, etc., follow this method, which in no way corresponds to an economic reproduction leading to equilibrium, for that requires accounting both in quantities – use value as a support for exchange value or price – and in exchange value or price. )
But it doesn’t stop there: to isolate the impacts we’ve chosen to study in this game, the model is simplified at every turn, so as to neutralize all variables except those we want to analyze (for example, to analyze the effects on aggregate demand, we use an inelastic product, etc.). ) We could propose a short list of the most damaging.
5 ) The authors dare to predict the spread and interest rates – without knowing anything, like all Marginalists and bourgeois economists, about the difference between money and credit or about what inflations are – which is necessary to understand the real interest rate. The IMF shares the absurd view that inflation – in the singular – comes from an overabundance of money in the system, despite the current Quantitative Tightening, whereas Western central banks tried in vain to achieve a stable inflation rate of 2% during the Quantitative Easing period.
I’m referring here to the conclusion that – counterfactually – rising interest rates in rich countries – FED, etc. – would cause a rise in the spread between public and private bonds in emerging countries, but a downward trend in rich countries. – would lead to an increase in the spread between public and private bonds in emerging countries, but a downward trend in rich countries. Now, this normally makes no sense, except in a context – the one in which we live – of hegemonic speculation, i.e. FED rates rising, but a public-private spread closing as the market remains “bullish”. Good. How exactly do we achieve this otherwise insane result? Simply by integrating the JP Morgan index into the equation, and linking it to the VIX for good measure!
6 ) Note that the discussion focuses solely on the restricted aspect of the fiscal stimulus – the neo-liberal ideology of Reaganite public policy, which is now at the end of its cycle – whereas the real problem is as follows: the more economies are deregulated and privatized, the more immense sums of money are wasted on tax shippers – almost 316 billion Euros in 2015 in Italy, a little more in France, but once granted, they politely go off the budgetary radar unless they are useful for legitimization purposes – and other tax credits and exemptions – of contributions in particular and others – with pitiful results – we used to say around 1 for the multiplier, the authors tell us around 0.06! !!
What a waste of money! But instead of playing with the model by oversimplifying, they could have given us the details for advanced countries, comparing the multiplier in countries like France where public sectors and services are still strong with countries that are more privatized. And on the same note – they could have made a distinction between public subsidies and tax incentives, and their destination, public or private. Indeed, when aid goes to the public sector, the multiplier is much higher. But this is difficult to see today, given the rampant deregulation of privatization. Except that here, by distinguishing the two types of aid, we could have had an umpteenth verification. This would at least have made the model interesting, Marginalist though it is… But this was not even considered. We can see the weight of ideology and the blinkers it produces… See https://www.la-commune-paraclet.com/Book%20ReviewsFrame1Source1.htm#thebodyeconomic
7 ) Linkages. In fact, the I-O table is a matrix with the same number of functions and the same variables, with an exogenous rate of profit, etc. It is impossible to respect the necessary proportions. It is impossible to respect the necessary proportions – in quantities and prices – for stationary or dynamic reproduction – RS or RE. We have empirically captured relationships from one sector to another, but without meaning for SR-RE – unlike Marx’s Equations. And since the theory and the table cannot control productivity – quantity and unit price – no projection other than the very short term can be attempted!
With a minimal portion of this aid and a few re-nationalizations – notably of public monopolies, energy, etc. – the States could have taken advantage of the crisis to modernize their economies and move towards a RTT with a full employment rate based on full-time jobs paying the net wage, the deferred wage – Social Security – and the various taxes financing public sectors and infrastructures. It is this positive restructuring of the economy that Chinese planning has achieved during this crisis. And it’s precisely this that is dismissed and obscured by these pure model games, which serve no useful purpose other than to preach to the ruling classes. (See point 2 above in particular… ) They could also have avoided the liberticidal policies leading to this crisis by respecting scientific ethics and the Hippocratic oath; countries that did so, had fewer deaths and a lesser economic impact directly linked to Covid, but this is dismissed! See http://rivincitasociale.altervista.org/sars-cov-2-brevesflash-newsbreve/ )
Not so long ago, the IMF had prepared the documents to close the door. Then they invented Hungary etc. to survive. Too bad!!!
Fortunately, more sensible countries are building in parallel a multilateral world based on planning, public credit, Reduction of Working Time, bilateral credit lines – with a clearing house to be built, see http://rivincitasociale.altervista.org/for-an-open-multilateral-world-without-monetary-suzerainty-meddling-in-internal-affairs-and-extraterritoriality-for-bilateral-credit-lines-and-public-credit-april-7-2022/ – and the new anti-dumping necessary to protect Social Security. Social Security plays a crucial counter-cyclical role in times of crisis, including to contain structural inflation, since economic support to households comes organically from the deferred wage already included in selling prices. Thanks to this, France has less CPI inflation than neighboring countries: this is why the pitiful leaders all want to privatize – e.g., Mr. Claude Reichman literally drools with envy when he sees the 872 billion Euros of Sécu social savings escaping to Blackrock, Vanguard, State Farm etc. … By preaching everyone’s freedom to invest – by privatizing everything – he is actively pushing towards the society of new domesticity and new slavery. This is their program. Denis Kessler – repeating JP Morgan’s words – judged that the Constitution – born of the Resistance – is an obstacle to neo-liberal monetarist “reforms”; consequently, he called for the dismantling of all social and other programs instituted from 1944 to 1954. Clearly. These people think “it’s impossible to reform the country democratically and constitutionally”. Ergo… Except that it’s unconstitutional in our country.
(For example, a certain Claude Reichman (Claude Reichman : “Il faut supprimer complètement le régime des retraites” in https://www.youtube.com/watch?v=6nmHoOUDGmA ) – imitating Felix Rohatyn in Le Monde diplomatique a few years ago – recently attacked the 872 billion Euros of French social savings, which break down as follows: 226 M for sickness, 345 M for pensions, 50 M for family allowances, 170 M for unemployment insurance and employment aids, plus various other programs. Ignoring the danger of the stock market). Paul De Marco