Thursday, August 22, 2013

An elite without pity: Michal Kalecki, Paul Krugman and Tracy Mott, part 3



For parts one and two, see here and here.

Tracy Mott, a fine economist who rightly connects the insights of Michal Kalecki and Marx, set me the following notes:

“Alan:

Two of my colleagues and my ex-brother-in-law all sent me messages when Krugman wrote about Kalecki in last Friday's NY Times because my work is based on Kalecki. Below are my responses to them. Also, yes, your father's Keynesian ideas are important, as Kalecki and Paul Sweezy (who should have been at Harvard around the time your father was there?) would also tell us.

Tracy”

***

My father, Richard Gilbert, was a friend of Paul Sweezy and Maxine Yaple Sweezy who was an economist at Tufts, and together (among 7 Harvard and Tufts economists), they wrote An Economic Program for American Democracy, a short, popular Keynsian program for getting out of the depression which was the subject of widespread discussion in 1937-38 and made Keynsian insights into fighting depression a mass phenomenon. Sweezy’s hand can be seen in a reference to commodity fetishism – my father later thought amusingly.

***

Paul Sweezy and Leo Huberman among others worked closely with the Communist Party. They were among many Americans who thought the Spanish Civil War was a test of civilization against barbarism and supported the Abraham Lincoln brigade (Franklin Delano Roosevelt, sadly, did not). One night my father was hanging around with a group in which someone started talking about selling Daily Workers in the subway. Someone else urged him to be quiet since my father was there. The first person said “Oh, it’s only Dick,” meaning that he was, politically, a friend and someone who would not rat them out.

***

My father told me he would have joined the Communist Party – a peculiar organization though it had 100,000 members in the ‘30s - during the Spanish Civil War if anyone had asked him. Apparently, no one bothered (the Communist Party had many many foibles, an intensely undemonic and rather erratic organization that the American elite - with a fervid and self-serving fantasy life - demonized).

***

Though prominent in Washington as an advisor to Secretary of Commerce Harry Hopkins, and lead economist in the Office of Price Administration as well as speech writer for Roosevelt during World War II, my father was not hauled before the McCarthy committees. Milton Gilbert, his cousin, a conservative economist, was, however, because his wife and some friends had been Communists (Ruth Mayerson Gilbert, his wife, became an internationally recognized photographer in the last thirty years of her life - see here). He was asked whether he had attended a party on January 1, 1943, answered no, flashed on that he had been there, and fainted dead away. He quickly took a job in Paris for the OECD (Organzation for Economic Cooperation and Development) and ended his life as a Swiss banker.

***

I wrote a poem about Milton whom I stayed with in Paris which is below.

***

That the US chased Milton out, that it was hit and miss whether they harmed thousands of innocent others, whether they commonly persecuted people for having reasonable views (roughly, those Krugman expressed in the New York Times about Kalecki) says something striking about the intellectual misery of mainstream journalistic and academic commentary to this day (and will tell you what Obama’s spying is politically – not just morally – worth…). Krugman stands out for decency and forthrightness.

***

Paul Sweezy wrote a fine book on Marxian economics, The Theory of Capitalist Development, published early in World War II. Sadly, he made peace with the Molotov-Ribbentrop pact briefly and sent my parents who were Jews, a Christmas card with a swastika on it (he forgot himself completely…).

Sweezy later founded and edited the Monthly Review which contributed much intelligent economic and political analysis about what was going on in the world and America’s role during the wasteland – in the commercial media – of the Vietnam War.

***

Tracy wrote to Markus Schneider:

“I think most economists don't know that there was any macroeconomics in Marx [most economists read up on the latest mainstream views and have little grasp of relevant economic theories which challenge them]. Joan Robinson [the famous Cambridge economist] pointed out to Roy Harrod that his knife-edge Keynesian long-run growth model could be found in Capital, Vol. II, so he looked at it and agreed.

Most economists think of Marx as labor theory of value and exploitation of labor. What they would see in Kalecki (if they bothered to look) is positive profits due to imperfect competition and effective demand problems due to fluctuations in investment spending. Albert Einstein understood that such macroeconomic issues were in Marx, but then he wasn't an economist and his education was in Germany and Switzerland.

Tracy”

***

Markus had written amusingly about the Krugman article "The Phony Fear Factor" (it is linked to in the first post in this series but you can also find it here):

“Thanks, Tracy! Very enlightening. I found especially that passage about "not finding much Marx" in Kalecki curious, but don't know enough to have judged it's accuracy or content. I did wonder whether it reflects mostly a lack of understanding of what Marx actually wrote? After all, to understand that Kalecki started with the schemes of reproduction requires understanding the schemes of reproduction!

Markus”

***

Tracy had written earlier:

“Fred, Markus, & Robert:

“All three of you sent me messages about this. Thanks!

I have some vague memory of Krugman mentioning Kalecki's "Political Aspects of Full Employment" slightly a while back. [see here and below]. This version is better. I would say he read it well and got it right. Though I agree with Kalecki on almost everything, I used to think that this article of Kalecki's had some problems because I thought it would take some trigger, like rising inflation, to get the "captains of industry" mobilized against expansionary policy, but these days Kalecki's arguments seems to hit the nail on the head. Some of this I think is because, as Krugman says, the economics profession has gotten so bad in supporting the anti-Keynesian ideas. As you know, Kalecki developed these ideas independently, coming out of Marx's "schemes of reproduction," but he saw that "Keynesian economics" would run into these sorts of problems.

The most interesting thing to me is what Krugman says about Kalecki's "Marxism." Kalecki certainly focused on macroeconomic issues in a way that Marx only got started on in Capital, and the major aspect that is "Marxian" is that he relates the "Keynesian" effective demand schema to the distribution of income between wages and profits. In that sense, you don't find what most economists think of as "Marxist" in Kalecki. My friend Jan Toporowski got ahold of Kalecki's FBI file form when Kalecki was at the UN, which describes Kalecki as something like a committed socialist but not a dangerous subversive. I guess he was too much of a theoretician for them to worry about.

Tracy"

***

If one wants to understand today’s political-economic crisis in which capitalists shamelessly intervene to cut off food stamps (the sequester) and consign millions of people to permanent unemployment and suffering, Paul Krugman, leading economist on inequality, Keynsianism and international trade producing economies of scale among broadly similer economies and urbanization (see here), Nobel Prize winner and New York Times correspondant, reports accurately Kalecki’s insight. The economics profession, otherwise, sadly, goes, sleepily, its own way.

That is the point of Tracy’s response on Krugman and it gets sharply the profiteering and special opposition to creating effective demand, without a sign of an inflationary trigger (that all of this is unnecessary economically, given what is known about capitalism; that it is, as Krugman says, a particular, political stand – a choice without economic necessity – to harm ordinary people and throw them away, using a crisis or shock to steal pensions, social security, college tuitions (through the new debt-slavery), and the like, has been Krugman’s commendable theme recently.

But the point that Kalecki captures, which Tracy does not mention directly and is central to Marx, is class struggle. The elite uses its political power, without any inflationary trigger, to harm the poor mercilessly to get power unless people fight back (voting for Obama was one way…). It is the politics of capitalism which prevents Keynsianism (after World War II, my father wrote a piece in a collection edited by his Harvard colleague and friend, Seymour Harris, called Saving American Capitalism) from making capitalism consistent with full employment for ordinary people, that is, decent (recall Roosevelt’s Four Freedoms speech early in World War II).

***

Keynsianism was a way of saving capitalism, morally speaking, from itself.

***

Unreconstructed Ebeneezer Scrooge is thus the symbol of today's American elite, and the Republican Party a Scrooge avatar (Paul Ryan makes Scrooge spiritually handsome by comparison…).

***

But the politics of class stuggle, the relentless attack on unions (Scott Walker in Wisconsin is also a contemporary Scrooge stick-figure), and the need to seize even food stamps in the sequester, even to Native Americans who live in the poorest American communities, kills Keynsianism. That is the dark insight of Kalecki and in his latest column Krugman’s intuition (see here).

***

It will take a vision of a better capitalism, more redistributive than Keynsians imagine (perhaps what many including Kalecki think of as socialism) to free us of this nightmare. It will also take a large, militant, nonviolent movement from below...

***

Here is the poem I wrote about Milton Gilbert:

Laissez-faire

1

you quarreled with my father
economists and second cousins
and we never saw you much
but I remember Paris
after your latest ski trip
you puffed packs of Gaulois
touted your prowess

and looked up
each leg
plastered
high
over the

you had Parisian style
(I loved your daughter)
worked for the O.E.C.D.
and ended your life
a gnome of Basle

2

laissez-faire man
your wife and all your Philadelphia friends
were commies once

and you were called
before the McCarthy Committee
set in the box
flashbulbs popped
Bobby Kennedy took notes

“no, I did not attend a party
at Mortie Gilbert’s
Friday, January the First, 1943”

flashed on a toast
and fainted dead away
and took a job in Paris
the next day

***

Here is Krugman's first piece from his blog Conscience of a Liberal on Kalecki with the amusing point that these bankers/economists/politicians swear a reverse Hippocratic oath: "First do nothing to mitigate harm."
What Noah Smith says is the theme of Naomi Klein's The Shock Doctrine of which Western economic policy in this depression - with the exception of Obama's stimulus and the Fed's Friedmanesque polices (the latter primarily aimed at helping banks, not ordinary people) - has been another startling illustration. Krugman, to his great credit, underlines his previous failure to recognize this.

"May 16, 2013

The Smith/Klein/Kalecki Theory of Austerity

Noah Smith recently offered an interesting take on the real reasons austerity garners so much support from elites, no matter how badly it fails in practice. Elites, he argues, see economic distress as an opportunity to push through “reforms” — which basically means changes they want, which may or may not actually serve the interest of promoting economic growth — and oppose any policies that might mitigate crisis without the need for these changes:

I conjecture that “austerians” are concerned that anti-recessionary macro policy will allow a country to “muddle through” a crisis without improving its institutions. In other words, they fear that a successful stimulus would be wasting a good crisis.


If people really do think that the danger of stimulus is not that it might fail, but that it might succeed, they need to say so. Only then, I believe, can we have an optimal public discussion about costs and benefits.
As he notes, the day after he wrote that post, Steven Pearlstein of the Washington Post made exactly that argument for austerity.

What Smith didn’t note, somewhat surprisingly, is that his argument is very close to Naomi Klein’s Shock Doctrine, with its argument that elites systematically exploit disasters to push through neoliberal policies even if these policies are essentially irrelevant to the sources of disaster. I have to admit that I was predisposed to dislike Klein’s book when it came out, probably out of professional turf-defending and whatever — but her thesis really helps explain a lot about what’s going on in Europe in particular.

And the lineage goes back even further. Two and a half years ago Mike Konczal reminded us of a classic 1943 (!) essay by Michal Kalecki, who suggested that business interests hate Keynesian economics because they fear that it might work — and in so doing mean that politicians would no longer have to abase themselves before businessmen in the name of preserving confidence. This is pretty close to the argument that we must have austerity, because stimulus might remove the incentive for structural reform that, you guessed it, gives businesses the confidence they need before deigning to produce recovery.

And sure enough, in my inbox this morning I see a piece more or less deploring the early signs of success for Abenomics: Abenomics is working — but it had better not work too well. Because if it works, how will we get structural reform?

So one way to see the drive for austerity is as an application of a sort of reverse Hippocratic oath: “First, do nothing to mitigate harm”. For the people must suffer if neoliberal reforms are to prosper."

***

And Krugman added this fine comment (the more mercenary the crooks, the quicker they are to adduce mercenary claims about others...) after Tracy wrote to me:

"August 19, 2013

Keynes, Kalecki, Konczal, etc.

John Quiggin has an interesting take on some of what two modern Ks — me and Mike Konczal — have been saying about two illustrious former Ks — Keynes and Kalecki. Interesting comment thread too — if you’re not reading Crooked Timber, you’re missing out.

I just want to add one thing. Quiggin remarks,

Krugman is certainly going to upset plenty of people in the econ profession with this. But as with most partisan debates in recent decades, it’s a case of sauce for the gander. The public choice school has routinely represented economic arguments for government intervention as the product of rent-seeking by interest groups, and the economists who make such arguments as pawns or hirelings of these groups.

It’s not just the public choice school. Let’s not forget Robert Lucas’s smear of Christy Romer. First he denounced the stimulus with an argument that was, in fact, wrong even on its own terms. Then he flat out accused Romer of pure hackery:

'Christina Romer — here’s what I think happened. It’s her first day on the job and somebody says, you’ve got to come up with a solution to this — in defense of this fiscal stimulus, which no one told her what it was going to be, and have it by Monday morning.

So she scrambled and came up with these multipliers and now they’re kind of — I don’t know. So I don’t think anyone really believes. These models have never been discussed or debated in a way that that say — Ellen McGrattan was talking about the way economists use models this morning. These are kind of schlock economics.

Maybe there is some multiplier out there that we could measure well but that’s not what that paper does. I
think it’s a very naked rationalization for policies that were already, you know, decided on for other reasons.'

So I don’t feel much sympathy for anti-Keynesians who reach for the smelling salts when someone suggests that politics influences their ideology."

***

And here is Krugman's note on August 3 about Kalecki and the

"Roots of Wrongness

Today’s column [here] wasn’t written as a response to Noah Smith’s examination of conservative economic arguments since the crisis, but it has an obvious bearing.

Smith bends over backwards to try to find some truth in the various arguments bubbling up from the right — they’ve been 50 percent right on the budget? Really? — but still finds an extraordinary record of getting everything wrong. Why?

Well, Kalecki had the answer. We are in a Keynesian crisis that calls for Keynesian policies; but conservatives find both the diagnosis and the cure anathema, for political reasons. Conceding that the government can and should create jobs would devalue the importance of being nice to businessmen, and suggest that in general the government can do good things. So the obvious diagnosis and response are unacceptable.

And hence the seemingly endless series of bad new ideas. These ideas don’t add up to a coherent counter-theory of the crisis; they’re more a matter of throwing stuff at Keynes, hoping that something will stick.

Are liberals just the same? Actually, no — not now, anyway. Conservatives were quick to claim that liberals were just looking for an excuse to spend more — remember Robert Lucas accusing Christy Romer of “shlock economics”, of making up an analysis to justify Obama’s lust for spending? But liberals aren’t the mirror image of conservatives; they don’t seek big government as an end in itself. And in this crisis, liberals have just been sticking with the textbook, while conservatives are desperately seeking ways to ignore what we know.

Hence the remarkable record of wrongness."

***

Lastly, here is a note from Alan Maki adding to his fine analysis of the partial and anti-democratic misinterpretation of statistics in Charles Blow’s initial “A city without pity” here:

‪"I appreciate the further discussion of this article and my response.‬‬

‪You ask where I obtained the figure of 8% supporting all the reasons for poverty provided in the chart.‬‬

‪My figure of 8% comes from the link in Blows own op-ed piece as published in the NYT with links including this one:‬‬

http://inplainsight.nbcnews.com/_news/2013/06/06/18802216-many-americans-blame-government-welfare-for-persistent-poverty-poll-finds?lite

See paragraph #5 the very last sentence‪:‬‬

By Erin McClam, Staff Writer, NBC News

Two decades after President Bill Clinton promised to "end welfare as we know it," Americans blame government handouts for persistent poverty in the United States more than any other single factor, according to an NBC News/Wall Street Journal poll released Thursday.

Given a list of eight factors and asked to choose the one most responsible for the continuing problem of poverty, 24 percent of respondents in the poll chose "too much government welfare that prevents initiative."

Whether Americans are too dependent on government was a flashpoint of the presidential campaign last year, and shrinking government has been a focus of the Tea Party movement, which has risen since the election of President Barack Obama.

"Lack of job opportunities" was the second most popular answer, at 18 percent, followed by "lack of good educational opportunities" and "breakdown of families," with 13 percent apiece.

The other four options in the poll, in descending order, were "lack of work ethic," "lack of government funding," "drugs" and "racial discrimination." Eight percent of respondents said that all eight factors were equally responsible.

Alan L. Maki”

***

That all eight factors are responsible “equally” is not as clear as Alan made out, since several of the factors have some blame the victim quality, the attack on welfare as killing initiative – the first, horrific one – being included. The figure, nonetheless, does, on balance, support his basic point that Blow’s statistics misrepresent a large majority – the democracy – which lives not so distant from poverty and does not share the relentless and reprehensible cruelty of an elite which, nonetheless, has created some broader atmosphere of social and political stigma for its victims.

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