Commenti disabilitati su THE PSEUDO-ECONOMIC SCIENCE OF THE BOURGEOISIE: Here is why we should quickly change economic paradigm.

The objective of science consists in establishing general laws and, in the best of cases, universal laws. Ideology satisfy itself with mere plausibility often reached with the reversal of scientific arguments thanks to the implementation of the usual sophist method. For the non-initiated this creates a cognitive barrier reinforced by the deference towards so-called « authorities ». For instance, the plausibility of the Marginalist narrative originates with the manipulation of appearances by all the leading institutions. In the social sciences, the appearances and empirical data are deeply influenced by the mode of production and by its historical redistribution epochs. Thus the Sun rises and sets, it stops at the sound of trumpets etc., etc.

With Marginalism things get much worse given that the plausibility rests upon a big anti-logical and anti-egalitarian falsification devised with great care. For instance, capitalism is described as the best system when it comes to the allocation of resources only because one pretends that when there is a demand a supply will necessarily follow. However, this is true only when the demand is cash-worthy. Indeed, this explains why so many essential social needs remain unsatisfied despite the huge waste of resources in a society marked by increasing inequalities. Narratives are to science what perceptions are to reality. The pseudo-Nobel Prizes of economics granted by the Central Bank of Sweden have one main purpose, namely to re-establish in a recurrent fashion the plausibility of the dominant narrative which otherwise would be fatally confuted by the evolution of the concrete socio-economic reality.

We emphasize the fact that the bourgeois economic « science » in all its nuances is simply unable to explain the genesis of profit despite the fact that without profit the capitalist mode of production would cease to exist as such.

Let us look at the bourgeois function of production. It is written c + v = p, where « c » is the capital and « v » the labor force expanded in the production process while « p » is the product born from the production process. Today, this original Smithian formalization is rendered as y = f(K, L) where K is capital and L is labor, but it is exactly the same thing.

On the contrary, the scientific function of production is written : c + v + pv = p, where « pv » represents surplus value or profit. In more details, in terms of the quantities of « p » produced or use value terms it represents the over-work carried out by the labor force during the working day, over and above the time necessary to reproduce its salary. In exchange value – or price – terms it represents profit. The rate of surplus value is therefore written as pv/v, while the rate of profit is written pv/(c +v), that is to say, the surplus value produced by « v » during the working day and noted « pv », over the cost of production in terms of the capital « c » and of the labor « v » effectively employed in the immediate production process. The genesis of profit comes from the fact that the capitalist buys the labor force « v » at its exchange value, the salary, only to use its capacity to work during a time greater that the working time necessary to reproduce that salary. The surplus value rate is also rightly called the rate of exploitation. In societies characterized by the private ownership of the Means of production, profit is pocketed by the these owners; in our mode of production it is pocketed by the capitalist.

At page 47 of his Wealth of Nations, ed. Sutherland 1993, Adam Smith was honest enough to note that human labor ( « v ») is the unique factor of production that is able to create commodities using other commodities (« c »). This being the case, Smith recognised that it was impossible to explain the origin of the profit pocketed by the capitalist over and above the fair remuneration of his own labor. Smith concluded : « The (capitalist) likes to reap where he never sowed. » This logical problem linked to the genesis of profit was finally resolved by Karl Marx with his distinctions between over-work, surplus-vale and profit. (See the Annex below.) Capitalist profit has its origin in class exploitation because it rests on the over-work demanded from the worker. The inability to explain the genesis of profit remains the major fallacy of the so-called economic science of the bourgeoisie in all its nuances, despite all the attempts at falsification, especially at the hands of Marginalists, a process that was already underway with J-B. Say.

The entire chain of the main pseudo-concepts of this bourgeois science » is as follows:

1 ) Utility and scarcity. One objective of economic science is to define the commensurability in the disparate sets of commodities and services, that is to say to define their respective exchange value or relative price. To do so, a measuring method is needed. Only two are available. The first, the scientific method, relies upon the quantity of human labor necessary for their respective production. The other, the narrative method, features the respective desirability of goods and services, the co-called « utility » of the Marginalists.

For the conquering bourgeoisie the key was to do away with the duality exchange value/use value which is inherent to all commodities, and in particular to the labor force. This was essential to cancel the plain fact that the labor force is the unique factor of production capable to create other commodities and, as such, represents the sole universal and objective measuring stick with which to establish their respective commensurability. When applied to the labor force considered as a commodity, this duality use value/exchange value makes it possible to explain the temporal exploitation and thus the emergence of profit. This is exactly why the bourgeoisie prefers to use an entirely synthetic concept, utility. In effect, the bourgeoisie proposes an elastic and subjective measuring stick in a discipline that is considered quantitative only because its purpose should be to measure the quantity of goods and services produced and their respective and global exchange values! It is better known as the « dismal science ».

Scarcity plays an identical role even though everybody, including Léon Walras, knows perfectly well that scarcity is always a social product. Nonetheless, it is presented as a natural given. Without it the Marginalist « calculus of joy and pain », namely the desirability curve, finds itself on moving sands. On this shaky foundation are then erected the theories of absolute and relative rents as well as that of comparative advantages enunciated by Ricardo. Years ago, Dockès had demonstrated that this logic would fatally lead to the desertification of wine producing Portugal and to the enrichment of GB specialised in the production of manufactured goods. Capitalist history generalised this asymmetrical pattern making it easier to verify its inherent logic, for instance with the theory of « the development of under-development » applied to the socio-economic periphery. Thanks to the resolution of the productivity problem and to its insertion within the Equations of Simple and Enlarged Reproduction – SR-ER see the Annex below -, the Marxist critique of comparative advantages allowed me to enunciate my concept of Ecomarxism which is more pertinent than the belated and simplistic concept of circular economy. (See the Introduction and the Annex of my Keynesianism, Marxism, Economic Stability and Growth, 2005, in Downloads Now, Livres-Books Section of . This book was the first to scientifically announce the financial-economic crisis which unfolded in 2007-2008.)

2 ) The Supply and Demand Curves. The bourgeois objective here was to cancel the determining role played by the function of production and by the SR-ER Equations in the formation of prices, hence of profits. These curves are based on a lethal logical ex-ante/post hoc contradiction. As I have demonstrated, it paradoxically consists in the very problem Böhm-Bawerk had falsely and maliciously attributed to Marx with the so-called problem of transformation of exchange values into prices of production.  In effect, to draw the Demand curve one needs to provide beforehand the Supply table in prices, and similarly to draw the Supply curve one needs to provide beforehand the Demand table also in prices. Then one superposes both in order to arrive at the equilibrium price or market price. Et voilà, done! In one of his song Bob Dylan offered the image of a mattress dancing on a bottle of wine, a fitting image I would think.

3 ) Micro and macroeconomics and simultaneous resolution. Another way to illustrate this ex ante/post hoc contradiction is to emphasise that the bourgeois economic pseudo-science is totally unable to conjugate micro and macro economics. Alfred Marshall, the inventor of the graphic presentation of the Supply and Demand curves, was still thinking in terms of two commodities, « corn » metaphorically representing for him the consumer’s basket, the other commodity representing capital. In this mode, he remained dangerously tied to the incomplete Smithian function of production written as c + v = p. Similarly, the Walrasian attempt to come up with a macroeconomic « market of the markets » is as fallacious as his microeconomic initial Marginalist market. Hicks then used the falsified contribution of Irving Fisher, an avowed disciple of Böhm-Bawerk the first falsifier of Marx. He did so in his attempt to generalise the Marginalist analysis to 3 and potentially n commodities thanks to the simultaneous determination of prices. In truth, Hicks, which published his book after the publication of Keynes’s General Theory, had no illusions, in particular because he was unable to introduce coherently the structure of revenues as well as inflation in his analysis.

To reconcile micro and macro economics in order to rationally determine prices, Tugan-Baranovsky reformulated Marx’s SR-ER Equations with recourse to quadratic equations, thus typically substituting the model to reality. (See the Annex below). We emphasise that the quadratic system proved here unable to resolve anything and, in particular, it is unable to account for general stationary or dynamic equilibrium. When I write 1 + 1 = 2, I obtain an abstract arithmetic truth which does not tell us much until we are told to which reality the unity used applies. The proposed system retains an heuristic value, but one that is fallacious because it has no rational relationship with the socio-economic reality to be analysed. Thinking to offer a devastating critique of Marxism and of Bolshevik planning, Hayek did pretend that this simultaneous transformation method was impossible to operationalise because it supposed an innumerable series of simultaneous resolutions for each single exchange. The worse is still to come. The system induces the illusion of a general equilibrium in term of an « accounting unity » without insuring any real economic equilibrium, a statement that can be easily verified in terms of the input/output quantities. In other words, it does not allow to define how many Means of production – Mp – and how many Means of consumption – Cn – are necessary to obtain a stationary or a dynamic equilibrium. The grandeur of Marx manifests here anew with his Equations of Simple and Enlarged Reproduction ( Book II of Capital, in which I coherently introduced the role of money and the analysis of classical as well as of speculative credit.)

4 ) Saving = investment? Hicks was obliged to draw his saving/investment logic from the revenue, generically conceived, thus mixing salary and profit together. In this, he was following the falsified narrative conceived by Irving Fisher, the inventor of this amalgamated « income stream ». Fisher’s conscious objective was to erase any trace of the distinction between salary, rent, profit and interest, which forms the basis of class struggle according to Marx’s analysis proposed in the Book III of his Magnum Opus Capital. We are here dealing with another gigantic ineptitude imagined in the footsteps of Böhm-Bawerk. (As we all know, Fisher was wrong on all his economic analyses and prescriptions and he fittingly ended-up ruined.)

It is true that one needs to take into account the virtuous circuits of capital originating in the institutionalised saving of households such as it was conceived by the Social or Keynesian Welfare State. Using actuarial calculus for the financing of Social Security and other public social programs, for instance Unemployment Insurance, these remain based on the postponement of a part of consumers’ demand in the framework of a complete reproduction cycle. The acquisition of ordinary daily goods and services mobilises smaller sums of money than the acquisition of a car or of other such durable goods. All these acquisitions remain within the overall reproduction cycle. This socio-economic progress led to the emergence of a « differed salary » and of generalised income taxes levied on the « global net revenue » of the households. This « global net revenue » had been at last substituted to the individual capitalist salary which prevailed with classical liberalism. By itself, individual capitalist salary does not take into account the reproduction of the labor force within households with fatally different sizes.

The refutation becomes immediately transparent. On its own saving cannot explain the volume of investment necessary to ensure economic growth, and thus the accumulation of capital. To saving must be added credit. It is understandable that using this generic concept of income – i.e. income stream – Pigou was able to come up with his Wealth Effect which he tried to oppose to Keynes. This Wealth Effect showed exactly what it was worth through its reformulation as the House Effect of « maestro » Greenspan! In the epoch of the dominant 1 % or rather of the hegemonic 0,01%, it is clear that one cannot deal with the structure of incomes in such a cavalier and anti-social fashion. The equation saving = investment is too generic to be useful. It does not even account for the banking and financial organization, hence for credit, the true motor of capitalist and often of speculative growth.

Consequently, one must include the banking system with its prudential ratios and with its inevitable financial speculation. Today, this last has become autonomous and hegemonic. It is thus able to dominate the entire structure of relative prices given that its fictive sectoral productivity is now legally considered as a legitimate and real productivity. Think, for instance, of the unsustainable level of ROE or return over equity. Because of the effect of competition understood as the mobility of capital, speculative capital is thus able to cannibalize all the other sectors in the real economy. In so doing it cuts the very branch on which it is comfortably seated.

This was not entirely the case with classical capitalist credit because of the effective working of the prudential ratio. This ratio was further strengthened by the functional separation within the banking-financial sector between deposit and commercial sub-sectors – viz. the Glass Steagall Act of 1933 which was unfortunately abrogated in 1999. This system governed the allocation of available credit in accordance with the needs of the real economic system. From time to time, crises and their purges completed this vital retroactive capitalist mechanism. Today, the regulating function of the ratio is de facto replaced with the creation of « money » ex nihilo by the Central Bank ( QE etc) and with the recurring bailouts which are also, albeit less dramatically, implemented through tax-deducible provisioning often reaching 100 % – as in Italy. Bailouts have become the de facto prudential ratio in a speculative « credit without collateral » system. (See the pertinent article in the International Political Economy section of my old site )

5 ) Marxist productivity Law versus Marginal productivity. The latter is always prisoner of the appearances formalized by the increasing and decreasing returns graphs. Marginalists attempt to erase the traces of their falsification of the origin of profit resorting to an exogenous definition of profit. Its rate can thus subjectively establish itself at whatever level. Profit is thus reduced to the mechanics of the economy of scale, namely to the logic of increasing/decreasing returns. Obviously, this is infra-Taylor and infra-Pareto as far as the technical data is concerned, that is to say the optimum combination of capital and of labor force within the immediate production process. Here, the technical composition and the value composition of the production process are incoherently tied-up together. And this without even mentioning that the rate of under-utilization of the existing production capacities is on average around 80 %.

Additionally, technology is itself introduced in an exogenous fashion as if in realty it were not traded, hence valued, on the market! This general bourgeois fallacy is even more obvious with Robert Solow, another bourgeois pseudo-Nobel Prize. Finally, von Mises thought he could establish the structure of prices with a simple and ideologically driven return to Marginal productivity, pure and simple. We have already seen above that this goes head on against the logical ex ante/post hoc contradiction so that this presumed marginal productivity, unfettered by any regulation, is impossible to establish either at the micro economic level or, worse still, at the macroeconomic level. In scientific terms, that is to say in Marxist terms, productivity consists in producing more commodities of a specific kind during the same labor time and with the same labor force estimated in use value terms but obviously with a superior organic composition of capital. (See the Annex below ) Marxism is the only system capable to provide simultaneously and coherently quantities and qualities – or exchange values – something unreachable by any of the pseudo-scientific bourgeois economic theories.

6 ) Conclusion. The Marxist function of production implies specific and demonstrable relationships between all its variables ( c + v + pv = p) resting on the specific relationships given by its Law of productivity ( i.e., the relationship between the organic composition of capital – v/C – and the rate of exploitation or rate of surplus value – pv/v – ). It can thus be coherently incorporated within the SR-ER Equations.

This gives us a totally elucidated scientific system endowed with a universal value. In such a way, we are able to apprehend the laws of motion of all the modes of production, namely for our mode, the centralization and concentration tendencies of capital. We can also apprehend their appearances, their contradictions and their mediations and, above all, their dominant form of extraction of surplus value. Thus absolute surplus value based on the duration of work is dominant in all pre-capitalist modes of production; relative surplus value, hence a transient form, is potentially present in all modes of production because it corresponds to differences in the intensity of the labor expanded in the immediate production process; however it leads to the analysis of increases in the structural intensity, namely productivity, which is the dominant form of extraction of surplus value with the capitalist mode of production; finally, social surplus value is the dominant form of extraction within the socialist mode of production. We can then understand how perfect or unfair competition systems work, namely the logic of monopoly and oligopoly, because both rely on specific forms of mobility of capital enshrined in specific legal structures.

The global Supply and Demand are known thanks to the Equations of SR-ER. The Enlarged Reproduction Equations – i.e., dynamic equilibrium – imply the anticipations of dynamic growth and thus a necessary proportional intersectoral symmetry of investment, obviously taking the insertion of the Social Formation within the World Economy into account. Without this, the system is ineluctably confronted with crises due to the expansion of some sectors accompanied by contractions in other sectors etc. It is thus possible to demonstrate that the capitalist epiphenomena « prices » are over-determined by the function of production coherently integrated within the SR-ER Equations. (For the details see my Synopsis of Marxist Political Economy, freely accessible in the Livres-Books section of my old site )

It follows that Marginalism rests on a series of falsifications conceived to induce the voluntary servitude of the proletariat. (For further details, see my Methodological Introduction, same section, same site as the Synopsis mentioned above.) This evidence should raise crucial questions over the current anti-scientific teaching apparatuses. To these Marginalist narratives one could attribute the term « delirium » used by Baruch Spinoza. The most grievous consequence is that, aside from a minute group of self-chosen « high priests », too many academics and intellectuals are now victims of their own falsifications originally conceived as domineering ideological tools. They implement their recipes with cold-blooded and harsh cynicism, without any remorse, for instance the current so-called austerity program also known in the Eurozone as the Fiscal Compact. This despite the warnings by their Grand Master Nietzsche. In such cases, in his Thus spoke Zarathustra, the latter would exclaim : « Hihan! », as a loud braying call – or alarm bell?

Paul De Marco

San Giovanni in Fiore, Nov. 2017 – translated mid-August 2018.



Book I of Capital starts with the analysis of the duality in terms of use value and exchange value of all commodities, including the labor force traded on the market like any other commodity. This duality had already been analysed before Marx. However, Marx was the only one to understand the specific characteristic of the use value of the – physical or mental – labor force: While Nature can produce use values, it, and it alone, is capable to produce other exchange values, including the machines, the work organization and even the AI algorithms. If one erases this duality profit can no longer be explained in scientific terms. And this is the reason why Marginalists have invented the one-sided and fallacious concept of « utility ».    

The scientific, hence Marxist, function of production is written as : c + v + pv = p, where  « c » is that part of capital which enters into the product – the great American Marxist Paul Sweezy called it « used-up capital » – plus « v », the labor force, plus « pv » the surplus value or profit, the sum of these three variables being equal to « p », the product.

The product « p » can be either a Means of production (Mp) or a Means of consumption (Cn). The Marxist function of production is the only one that is able to provide simultaneously the quantities and the qualities or exchange values (or prices). It is the only one which leads to the comprehension of productivity.

Here is a summary which speaks for itself. The initial conditions in t1 are simultaneously given in the monetary form (EUR) and in physical quantitative form (p). One can easily translate in labor time assuming, for instance, a working day equal to 8 hours, so that, in our example, 4 hours of production suffice to reproduce the salary, that is to say the labour force « v », and the remaining 4 hours will produce the surplus value – « pv » – pocketed by the capitalist in the form of profit. Here : pv/v = 1.

t1: c (80 EUR/80p) + v (20 EUR/20p) + pv (20 EUR/20p) = p (120 EUR/120 p)

The essential relationships which characterise the function of production are : A ) the organic composition of capital, that is to say the relationship of labor over the total capital expanded in that production process, hence v/C, where C = (c + v); B ) the rate of exploitation or rate of surplus value written as pv/v; and C ) the rate of profit written as pv/(c + v).

Let us now examine what happens when we introduce a productivity growth of ¼ for the same labor time and the same real salary, that is to say the salary expressed in use values – hence in equivalent number of « p » – but with less physical workers. Remember that productivity is a structural increase in the intensity of labor. Here, the production of « p » rises from 120 p to 150 p. We obtain:

t2: c (84 EUR/105 p) + v (16 EUR/20 p) + pv (20 EUR/25 p) = p (120 EUR/150 p)

From t1 to t2, v/C goes from 0.2 to 0.16. The rate pv/v goes from 1 to1.25. The quantity of « p » produced goes from 120 p to 150 p while the unitary price displays an inverse evolution from 1 to 0.8 EUR.

This elucidation of the Marxist theory of productivity is mine. No other theory is able to account for productivity and even less to provide simultaneously and coherently the quantities and the qualities, especially when it is incorporated within a SR-ER context. No more than Pareto were the bourgeois economists ever able to reconcile the technical composition and the value composition of the function of production. Said otherwise bourgeois economists cannot reconcile micro and macro economics.

Let us now briefly look at Reproduction namely at the general equilibrium.

The function of production c + v + pv = p already contains in itself the expression of the entire system of reproduction given that it must necessarily reproduce the Means of production (in « c ») and the Means of consumption ( in « v » ). When this reproduction happens in identical terms, Marx calls it Simple Reproduction (SR), mainstream economists speak of stationary equilibrium. When it includes a growth in t2 with respect to the initial conditions in t1, Marx calls it Enlarged Reproduction (ER), that is dynamic equilibrium. Given that I have solved the productivity problem, which does not alter the coherence of the SR-ER Equations when the conditions of production change, we can illustrate with a simple example in which v/C and pv/v are identical in both sectors, in SI, the sector of Mp and in SII the sector of Cn. It becomes clear that within this reproduction framework we can add all the sub-sectors we wish subsuming then respectively in these two main sectors, which, as we have already noted, are already contained in the basic components  « c » and  « v » of the function of production itself. Here is an illustration:

SI: c1 (80 EUR/80 Mp) + v1 (20 EUR/20 Mp) + pv1 (20 EUR/20 Mp) = p (120 EUR/120 Mp) (M1)

SII: c2 (40 EUR/40 Cn) + v2 (10 EUR/10 Cn) + pv2 (10 EUR/10p) = p (60 EUR/60 Cn) (M2)

Here are the Equations of SR given in Book II of Capital as synthesised by Bukharin:

M1 = c1 + c2

c2 = v1 + pv1

M2 = (v1 + pv1) + (v2 + pv2)

In my Synopsis of Marxist Political Economy I clarified the Enlarged Reproduction also introducing credit, both classical and speculative credit.

Compare this with the quadratic system of Tugan-Baranovsky/Bortkiewicz. The variable c3, which is supposed to represent GOLD or a means of exchange, is introduced with the sole purpose to be able to formalise the problem in a quadratic system. This is one of the most obvious way to substitute a model for the reality it pretends to apprehend!!! Here it is:

c1 + v1 + s1 = c1 + c2 + c3

c2 + v2 + s2 = v1 + v2 + v3

c3 + v3 + s3 = s1 + s2 + s3

The third line is introduced only to allow a quadratic formulation, nothing else.

Theory of money.

Money is distinct from credit. The scientific theory of money is based on the salary masses, real and social, and on their rotations. The social salary mass is the real salary mass plus the monetary mass emitted to finance the maintenance of the unemployed or inactive force of labor. It corresponds more or less to the monetary aggregate M1 (and to a small part of M2). Let us consider the total function of production, namely (SI + SII) in both t1 and in t2 where the productivity growth happens. We have:

t1: c (80 EUR/80p) + v (20 EUR/20p) + pv (20 EUR/20p) = p (120 EUR/120 p)

Here, following Marx, we rewrite the total function of production with (c + v) = 100 because it provides an immediate comparative expression of its determining ratios. In t,1 we are in a full-employment situation so that the social salary mass is not needed given that all the workers receive a salary. In such a system, there is no emergence of any « structural inflation ». We have:

S = the monetary mass emitted by the Central Bank = the real monetary mass.

R = the number of rotations; R = C/v + pv/v

p EUR = value in Euros of the total product = S x R

In t2 : c (84 EUR/105 p) + v (16 EUR/20 p) + pv (20 EUR/25 p) = p (120 EUR/150 p)

In t2, the increase of productivity causes the emergence of the Reserve Army of the proletariat – RA. Suppose that from t1 to t2 we go from 20 to 16 workers, then RA = 4 workers. Suppose further that the maintenance cost of this inactive labor force is equal to 50 % of that of the active labor force. We then have a real salary mass equal to 16 euros and a social mass equal to 18 euros. The rate of the structural inflation induced  – there exist many other forms of inflation, for instance imported inflation – will be the social salary mass (Ss)/real salary (S), namely 18 EUR/16 EUR = 1.125. It would be the duty of the Central Bank to emit and manage the monetary masses as needed. Without confusing them with credit.

With bourgeois theories the case of money is treated as that of any other commodity, that is to say it equally displays the lethal logical contradiction contained in the market Supply/Demand curves. Additionally, through the circulation of money, the monetary mass in circulation equals the sum of all goods and services exchanged. No distinction is made between money and credit, the bourgeois main aggregates, all managed by the Bourgeois Central Bank, being M1, M2 and M3. This is a most absurd tautology. Although it was later elaborated upon to account for revenue and credit, thus leading to the various bourgeois monetary aggregates, it does not allow to distinguish between the quantity of money necessary and sufficient to permit all the economic exchanges, and the quantity that is linked to speculation. Understandably bourgeois top economists are now forced to admit that they have no clues what so ever about what inflation could be. ( See « The FED finally admits: it does not know what inflation is » in . Lately, the Bank of banks, the BIS admitted to the same ignorance. If they do not know what inflation is, they cannot know what a price is. But then as Hobbes might ask; what is the worth of these people’s « economic science »?)

In fact, bourgeois theories, Marginalist theory included, are ontologically unable to differentiate between the real economy and speculative economy. They cannot differentiate between profit and interest or between classical and speculative interest. Worse still, as is affirmed without much nuances by the epigones of « efficient markets », the lesser the regulation, hence the more speculation there is in the system, the most rapidly will equilibrium be attained! With the ending of the functional segregation of the banking-financial sector – deposit vs merchant – namely with the counter-reform launched by Volcker-Reagan in 1979-1981, and then with the abrogation of the Glass Steagall Act in 1999, we were ushered in the era of hegemonic speculation. Since 2007-2008, central banks have printed around 15 trillion of dollars in various QE and other liquidities. This deluge led to the bubbling expansion of the Stock Exchange and of the financial markets, but instead of the expected high inflation needed to cancel part of the debt at the expense of foreign creditors and of domestic workers, it created a structural « credit crunch ».

One word on money and credit management.

Within the capitalist mode of production the distinction is cancelled and the private banks, coordinated by the capitalist Central Bank, emit both money and credit. The emission is allegedly made with respect to market Supply and Demand. The capitalist Central Bank uses its main guiding rates for strict ideological purposes, namely keep a semblance of formal equality between all the economic agents, despite their actual size. However, to be harmonious dynamic equilibrium needs to respect a proportional symmetrical growth in SI and SII. A possible mediation is through the external balances but it is only a mediation which needs to be managed. Since the capitalist growth is driven by private accumulation motives, this proportional symmetry is never respected. Periodic crisis ensue opposing expansion in some sectors and contractions in others. This is the reality beneath the denunciation of the « animal spirits » of capitalism by Keynes.

Within a planned or partially planned economy, money and credit would be strictly distinguish. The role of money is to allow all the exchanges necessary to ensure the circulation of goods and services within the framework of SR-ER, hence the real and the social salary masses we discussed above and their rotations. The lesser the inactive force, the smaller the « structural inflation » rate. Credit is needed to ensure Enlarged Reproduction and thus needs to respect a strict intersectoral proportional symmetry. Of course, given that no Social Formation can prosper in autarky, in doing so, it must take into account the external balances. This means that, aside from the pools of capital available through institutional savings – public pension plans or even sovereign funds, etc -, credit should be managed by public banks in strict relation with the Ministry of the Economy and Industry or better still with the Central Planning Organ. In such case, periodic auditing must be carried out to avoid corruption and the debasement of « money » through it, knowing that credit is intended to transform investment into real goods and services. Regular auditing acts as a check on the harmonious evolution of planned growth and as a prevention against corruption.  Usually around 60 % of any investment in the real economy goes to the salary mass thus contributing to the Economic Multiplicator. It is also clear that the public, hence no-profit, Central Bank alone should be in charge with the financing of the public and para-public debt. Letting the private – primary – banks manage the public debt is the main cause of its present uncontrollable trend to skyrocket.

The most sensitive problem to be resolved with public credit is that of the rate of exchange, at least as long as only a few reserve currencies will keep the upper hand. In general, the rate of exchange should be dictated by the macro-economic competitiveness of the Social Formation (SF), knowing that macro-economic competitiveness is crucial for the development of micro-economic productivity. In an asymmetrical reserve currencies world, capital controls tied to export-imports needs are mandatory. Uncontrolled outflows of capital soon lead to financial dependency together with externally imposed conditionalities at the hand of such institutions as the IMF, the London and Paris Clubs etc. We all know the Chicago Boys’ recipes which have now become mainstream policies, including in the Eurozone: They consist of deregulation, wall-to-wall privatization and the focusing on the export industry to earn the foreign currencies needed to repay an ever increasing public debt owned by foreign banks. These capital controls can be alleviated by currencies swaps – or even barter trade for instance oil against other commodities – between willing central banks, especially in an effort to maintain the SF independence and to diminish its external vulnerability.

Our Giordano Bruno rightly spoke of « asinate e pedanterie » – silly and pedantic idiocies – in reference to the dominant narratives of his time. Today, things got much worse. It is high time to change tune – pardon me – paradigm.

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