Search

This paper addresses Marx’s theory of crisis in order to analyze the Great Recession in Spain, a peripheral economy within the Eurozone. It demonstrates that underlying the problem of the “housing bubble” is an incapacity to generate surplus value, which in turn explains certain particularities related to capital composition, productivity, wages, and finance. The article further carries out a critique of both orthodox and heterodox approaches that focus on (1) profit squeeze caused by labor market rigidities, (2) underconsumption due to stagnant wages, and (3) finances, interest rates, and indebtedness JEL classification: B14, E11, E20, E43, J30

By reconsidering the concept of normal degree of utilization in view of the fact that growth occurs through irregular fluctuations, the paper points out elements of weakness in the formalizations of the principles that underlie the notion of Harrodian instability. Since the latter was at the origin of the adoption of fully adjusted positions to represent long-term trends of the economy, such arguments call into question this way of addressing demand-led growth. JEL Classification: O40, E12

In this paper, Shaikh’s 1949–2011 classical Phillips curve (CPC) is replicated and extended to 2016. This updated CPC does not follow the pattern anticipated by Shaikh for the years 2012 to 2016. This paper hypothesizes that this divergence is a result of an increasingly “rentier” economy based on surplus extraction through unequal exchange (UE). Andrea Ricci’s methodology is then applied to the 2014 US advertising and market research (A&MR) sector as a sample test of this hypothesis. This analysis shows that UE accounts for $64 billion, or almost a half (45.3 percent), of total US A&MR value added ($141.3 billion) in 2014. A modification of Ricci’s methodology for a firm-level UE estimation finds that in 2014 Facebook alone was able to extract a within-industry, within-country, between-firm absolute rent of $3.8 billion. The paper concludes that Shaikh’s analysis needs to be extended with non-classical political economy UE, or “rentier economy,” analysis.

This paper analyzes key aspects of Marx’s theory of money in order to reassert its continued relevance for understanding monetary developments in contemporary capitalism. Unlike theorists who become preoccupied with particular functions and forms of money, Marx develops a comprehensive concept of money integrating its various functions and emphasizing the socio-economic basis of its existence. Money performs different functions including a measure of value, a means of purchase/exchange, a means of payment, and a means of hoarding, which are independent of money’s concrete forms. The functions of money as a means of purchase and means of payment relate to each other as money (income) and credit (money), which are fundamentally different. The quantity and availability of credit (money) may be influenced by the activities of the central bank and the private banking system. Credit (money), however, can only become money (income) if and when it enters the domain of social production as an embodiment of the value of social labor and social purchasing power. This inextricable link between money and social production sets natural limits to the ability of monetary policy to influence both monetary and non-monetary developments in contemporary capitalism. An analysis grounded in Marx’s theory of money can provide insights into a range of contemporary monetary phenomena including hoarding, the rush to liquidity during financial crises, the scramble for government debt as a source of ultimate liquidity, and the limits to conventional and unconventional monetary policy. JEL Classification: E4, E5, B51, E6

After the 2007 financial crisis, most macroeconomists advocated policies to restore economic growth, disregarding the constraints imposed by nature. Because standard macroeconomic models ignore environmental constraints, we propose reviving Harrod’s dynamic model as a useful abstraction of the dialectic of an evolving macroeconomy. Harrod’s model describes how environmental constraints can push the economy into recession, and it explains why traditional macroeconomic policies are unable to put a resource-constrained economy back on a full employment growth path. By clarifying the dialectic conflicts between desired economic growth and natural growth, Harrod’s model also reveals what types of policies can achieve full employment in a resource-constrained economy. JEL Classification: O44, E61, O41, P51

Wage squeeze/profit squeeze crisis theories provide a powerful framework for the historical analysis of US capitalist crises and the alternating demand-side and supply-side social structures of accumulation (SSA). However, the current neoliberal SSA would seem to defy the logic of this model in its persistence in the face of a deep financial crisis and a failure to realize its espoused objectives. This paper reviews this theoretical model of economic crises, its relationship to and viability alongside the rise and establishment of neoliberalism, and some of the political and economic obstacles that would seem to prevent the construction of a new SSA that would address and correct the glaring deficiencies of neoliberal political economy. JEL Classification: P16, G01

The paper analyzes briefly the changing ideas on the role of money and banks from William Petty to Thomas Tooke, including the works of Adam Smith, David Ricardo, and Karl Marx. It analyzes the role of ideas in shaping the evolution of central bank regulation. Particular importance is given to the Bank of England’s inconvertibility period, from 1797 to 1821, and the ensuing debate in shaping Robert Peel’s Bank Act of 1844, which is often seen as the birth of modern central banking. The importance of the Say’s Law, and the inexistence of an alternative theory of the determination of output, is shown to play an essential role in the policy prescriptions of the so-called Bullionist authors, who won the debates that shaped central banking practices in the nineteenth century. The paper concludes with a brief analysis of what is a central bank according to the dominant (marginalist) mainstream of the profession, and what an alternative conception based on what may be termed classical-Keynesian political economy would be. JEL Classification: B10, N20, E58

Since 2010, fiscal policy austerity has been a disaster for both Europe and the United States. But how much better could things be? How much good could be done by a restoration of a sensible fiscal policy? I take a sensible fiscal policy to be one that, in the words of Abba Lerner, recognizes the first principle of functional finance.

Pluralism is frequently supported by heterodox economists, but their rationale for it is not always transparent. It could be advocated for strategic reasons, as a response to the institutional power of orthodoxy, or for fundamental reasons, as a program for how economics should best be done. This paper evaluates strategic pluralism, compares it with the alternative of strategic monism, and relates both strategies to long-term objectives.

The paper presents an interpretation of austerity that sheds light on the crisis in the Eurozone. It argues that austerity is a long-term policy rather than an ill-conceived short-term remedy. To go beyond the by now familiar criticisms of austerity, we need to examine the crisis in its totality. Especially important are the impediments to a strong recovery driven by market incentives. This might ultimately undermine the very existence of the common currency and the future of the European Union. JEL Classification: E2, O4, B5.

In part 5 of the third volume of Capital, Marx analyzed the relationship between the monetary and credit systems in mid-nineteenth-century England. He argued this relationship shaped the complex form that crises took in 1847, 1857, and 1867, as well as the contradictory role and effectiveness of the Bank of England in managing those crises.

In combination the Okishio theorem (1961) and a theorem due to John Roemer (1981) imply that a capital-saving technical change could simultaneously (1) reduce production costs and therefore be adopted by profit-maximizing capitalists, (2) make the economy less productive because it is retrogressive, yet (3) raise the rate of profit even while the real wage remains constant. But how can a technical change which makes the economy less productive make capitalists better off if workers are no worse off? This article resolves this conundrum, and goes on to prove a third theorem which provides a way in the Sraffian framework to calculate precisely how much any individual technical change, introduced in any particular industry, increases labor productivity in the economy as a whole.

This paper presents a theoretical explanation for the enigmatic discontinuity of the relationship between inflation and unemployment that has registered the U.S. economy since the early 1950s onwards. I argue that by distinguishing between two different historical episodes after World War II, the Golden Age and the Age of Decline, some insights in the Phillips curve puzzle can be gained and the analysis helps us to substantiate the existence of both downward sloping and upward sloping species of the curve. The regime change is illustrated here by building on a commonly used Post-Keynesian model of distribution and growth, which is enhanced to allow for an inflation process based on a conflicting claims approach and a growth rate form of Okun’s law. The model shows that the long-run Phillips curve can be either downward-sloping or upward-sloping, conditioned to the distribution of market power between business and labor.

The paper develops a model of economic fluctuations in the medium run and their relation with the short-run macroeconomic equilibrium. The business cycle is the result of two separate forces. On the one hand, there is Harrodian instability. On the other hand, this instability is contained by the inherent contradictions of capitalism. I focus on two of these contradictions: the profit-squeeze that results from the tightening of the labor market as employment and utilization increase, and the financial instability hypothesis as formulated by Hyman Minsky. With the inclusion of overhead labor, the model can explain the U-shaped behavior of the wage share along the business cycle (wage share decreases for low levels of utilization and increases for higher levels) that prevailed in most of the post-WWII period, as well as the decrease in the wage share as utilization increases that has been observed in the most recent cycles.

The purpose of this article is twofold. On the one hand, to present a growth account of the evolution of the value composition of capital and in so doing to deal with some of the issues raised by Zarembka’s (2015) contribution. And on the other hand, to review some crucial relations between the variables that relate to the movement of the rate of profit and the current predicament.

Beginning in the mid-’80s, well after he brought his famous financial instability hypothesis to maturity, Hyman P. Minsky analyzed the evolution of capitalism. This paper proposes a critical reading of this analysis, focusing on the institutional dimension of Minsky’s research. From my point of view, if Minsky’s analysis constitutes more a history of capitalism than a theory of capitalism, this is because of the weak conceptualization of institutions and the absence of a genuine analysis of institutional change. From this perspective, I believe it necessary to clarify and complete Minsky’s institutional analysis. Only by doing so can we take full measure of Minsky’s research on the evolution of capitalism and identify all the repercussions for an analysis of the instability and resilience of the current stage of capitalism.

Thomas Piketty’s Capital in the Twenty-first Century has focused attention on the dramatic rise in economic inequality that has occurred in the United States and Europe over the past four decades. This paper argues that his account of the mechanisms that determine the distribution of income and wealth in a capitalist economy is unconvincing, for it rests on a tautology and on a spurious hypothesis about how the savings rate, the growth rate, and the capital/income ratio are connected.

A significant number of left political economists hold that the U.S. Great Recession and subsequent lethargic performance are a crisis of over-capacity that resulted from over-investment. Kotz (2011, 2013) has recently attempted to provide empirical support for this position. Despite sharing an understanding of the crisis very similar to his, the authors find in this paper that a careful examination of his evidence does not support considering this to be a crisis of over-investment.

To understand a severe economic crisis such as that of 2008, it is not sufficient to analyze capitalism-in-general along with various economic policy decisions and contingent events. An adequate analysis requires taking account of the particular form of capitalism. This approach to crisis theory is illustrated by an examination of the roots of the economic crisis that broke out in 2008 in the United States.

The assumption that capitalist globalization has been a period of overall stagnation is the dominant consensus opinion within Marxist political economy. This paper criticizes this opinion and shows that it rests on a mis-measure of the transition of the centrally planned economics of the ex-USSR, Central and Eastern Europe (CEE), and China developed by the official statistical agencies during the Cold War. This mis-measure has the effect of underestimating both the collapse of physical output in the ex-USSR and CEE during the transition and underestimating the growth of genuine national income after the creation of market economies where previously there had been none. This paper develops some alternative, much higher, estimates of the real growth of national income during the transition period.

Many commentators have remarked on the seemingly disproportionate job losses suffered by men in the initial days of the Great Recession; some conservative commentators have gone so far as to label it a “he-cession” or “man-cession.” In this paper, I assess the claim that the Great Recession has had a disproportionate impact on men. I begin by examining the position and status of women and men in the U.S. economy today in terms of labor force participation, occupational placement, relative wages, and financial responsibility for children. I discuss how women’s (especially women of color’s) economic status has rendered them particularly vulnerable to the impact of the Great Recession. I critique the notion of the “he-cession” and expose the faulty, ahistorical assumptions on which it is based. Finally, I examine the impact of state and local austerity on public sector employment and speculate as to the implications of austerity for the relative economic standing of women of various races/ethnicities.

Marxist views of the relationship between financial and real cycles suffer from three major weaknesses: (a) financial developments are almost always reactions to real sector developments; (b) financial crises can trigger but not cause real sector crises; and (c) the 2008 financial crash played only a triggering, not causal, role in the ensuing Great Recession. I would argue, by contrast, that (a) in the era of big finance, finance capital does not necessarily shadow or merely react to industrial capital, it also behaves independently; (b) financial sector crises can be transmitted (through debt deflation) to the real sector; and (c) the 2008 financial crash played not only a triggering but also a causal role in the ensuing Great Recession.

In an article published in 2011 in this journal, Fred Moseley tries to discuss how the value of inconvertible credit money is determined in a Marxian theoretical tradition. In this critical comment, while sharing some crucial views with Moseley, the author makes a critique to some views in Moseley. The first critique concerns the so-called circular reasoning in the MELT as defined by the New Interpretation. The second concerns the relationship between Moseley’s MELT and capital accumulation. In his definition of MELT with inconvertible credit money, Moseley seems to overlook a theoretical tradition embodied especially in the work of Okishio-Foley-Kotz, which to different extents points out that the incentive and the real magnitude of capital accumulation or new investment play a crucial role in determining the value of inconvertible credit money.

In tumultuous times of financial crisis, capitalism is increasingly challenged as a desirable economic system. But are there any realistic alternatives to capitalism? Using theory and empirical research, this article offers one model of alternative business organization, focusing on not-for-profit cooperatives. If capitalism’s distinctive features are private property, profit, and (intra-market) competition, cooperatives can, if designed intelligently, function without these features.

This paper develops a discrete-time formalization of the circuit of capital model presented by Marx in Volume II of Capital Marx (1993) as a tool for aggregate economic analysis of capitalist economies. The discrete-time formalization closely follows and extends the continuous-time formalization in Foley (1982, 1986a). The discrete-time model is used to address two important issues of interest to the heterodox economic tradition: profit-led versus wage-led growth, and the growth-reducing impact of non- production credit. First, it is demonstrated that both profit-led and wage-led growth regimes can be accommodated within the Marxian circuit of capital model. Second, it is demonstrated that the steady-state growth rate of a capitalist economy is negatively related to the share of consumption credit in total net credit, when the total credit is large to begin with. JEL Categories: B51, O1.