http://blogs.ft.

com/martin-wolf-exchange/2010/05/24/how-likely-is-financial-
repression/#respond
!"#$%&'&( and *&+,&
- &./i0ocation 1 'o do 2/stice to yo/r 34/strian chool5 leanings6 the reason why
34/strian5 theory is drawing so m/ch attention is that it is probably the only branch of
3economic theory5 that deals with the concept that is on e0erybody5s lips right now and is
the s/b2ect of this for/m 1 3!risis5.
4s yo/ know6 e0en 7ritain5s %$ recently belie0ed that 8the days of boom and b/st are
o0er9. 4cademic economists ha0e been b/sy with their pathetic mathematical e./ations
in general e./ilibri/m and game theory6 whilst on the 3left5 the last remnant of socialist
tho/ght was the ,eo-(icardian chool at !ambridge :raffa6 ;aregnani and %asinetti6
re0iewed in my !ambridge mentor5s6 ;eoff "arco/rt6 book6 3ome !ambridge
!ontro0ersies in the 'heory of !apital5<. 7/t e0en the ,eo-(icardians interpreted 30al/e5
as an 3inp/t5 in prod/ction with the rate of profit determined by the 3political5 bargaining
between workers and capital o0er distrib/tion of the 3o/tp/ts5.
4s yo/ can see6 e0en in the ,eo-(icardian theory the classical political economy 0iew of
30al/e5 as a 3./antity5 was so '='4> that it did not e0en %&(!&?@& that the real
3conflict5 in capitalist society is ,=' o0er 3distrib/tion56 b/t o0er the political
3antagonism5 arising o/t of the !=$$4,A of 3ob2ectified6 past6 A&4A >47=#(5 :the
wage< o0er the 3present6 act/al6 open-ended >?@?,; >47=#(5 of 3workers5.
'his form of blindness toward the real so/rce of 3conflict5 in capitalist society was
welcomed by the !ontinental !omm/nist %arties beca/se it 32/stified5 their 3political
role5 as parliamentary representati0es of the :distrib/ti0e< 3interests5 of workers in the
distrib/tion of social wealth6 whilst sparing them from the real task of abolishing the
3wage relation5. :? hasten to add6 howe0er6 that the historical and instit/tional form of
3s/persession5 of the wage relation is far from clear at this stage. &0en to this day the best
we can manage is probably $arx5s 3;r/ndrisse5.<
'he *eynesian chool does deal with 3crisis5 and b/siness cycles 1 these are implicit in
*eynes5s notions of 8/ncertainty9 and 8animal spirits9. 7/t the poor explanatory power
of these concepts has led *eynesians to concentrate on 8how to mop /p after the storm96
that is6 how to remedy 3crises5 once they occ/r6 b/t not how to pre0ent them by acting
3co/nter-cyclically56 as it were.
7y contrast6 the 4/strian chool was always concerned with 3crisis5 and b/siness cycles
precisely beca/se its relegation of 30al/e5 to the sphere of 3metaphysical essentialism5
:this was the basis of 7ohm-7awerk5s criti./e of $arx< allowed it to concentrate on the
3act/al f/nctioning5 of the market mechanism and partic/larly :as in "ayek< of 3prices5 as
3signals5 or 3information5 abo/t the allocation of reso/rces. 'his apparent 3empiricism5
allowed the 4/strian chool to champion con0eniently ?' =B, 3metaphysical5 notions
of 3marginal /tility5 :;ossen< and 8ro/ndabo/tness9 :7ohm-7awerk< or 8free market9 or
8entreprene/rial spirit9 :ch/mpeter<.
?n the 34/strian5 perspecti0e6 howe0er6 3crises5 co/ld only occ/r as a res/lt of 3political
interference5 with the market mechanism and not :as we insist< beca/se of problems
3internal5 to a capitalist economy. "ence the railing of "ayek :and especially the irascible
0on $ises< against monopolies6 go0ernment economic policy6 and central banking 1 all
instit/tions that interfered with the 3free5 operation of the 3market5 1 and the mocking
emphasis on the 3impossibility5 of socialism :"ayek5s 3(oad to erfdom5<.
ch/mpeter it was who introd/ced an 3internal5 element of 3crisis5 to capitalism in the
process of 3inno0ation5 led by capitalist 3entreprene/rs5 who periodically destroyed
:3creati0e destr/ction5< the tendency of market competition to res/lt in 3monopolies5 and
thereby6 thro/gh 3crises56 re-instated 3competition5 in the 3market5. ?t is c/rio/s and
essential to note that ch/mpeter5s 8entreprene/rial spirit9 :#nternehmergeist< is
necessarily 3exogeno/s5 to capitalist social relations :m/ch as 3animal spirits5 and
3/ncertainty5 are in *eynes<6 whereas the tendency to 3monopoly5 is 3endogeno/s5 to the
0ery definition of 3market competition5 :the ;=4> of 3competition5 isCto A&'(=+
3the other competitors5D<.
7/t this is where %=>?'?! comes into its own6 and go0ernments are s/pposed 3to re-set
the clock5 and re-establish 3the le0el-playing field5 e0ery time 3competition5 is
endangered by 3monopoly5. 'his is where ch/mpeter5s 8entreprene/rial spirit9 gi0es
way to the 8calling9 :7er/f< of $ax Beber5s 8charismatic politician9 or 8leader9 who
transforms society by 3mediating5 conflicting interests.
7='" Beber 4,A *eynes co/ld see what the 4/strian chool ne0er /nderstood: 1 that
the 0ery process of 3concentration of capital5 leads to a parallel 3concentration of political
power5 :Beber5s 3b/rea/cracy56 *eynes5s 3aggregate demand5< that is no longer
reconcilable and certainly !4,,=' be 3wo/nd back5 to the 8libertarian9 premises of
0on $ises and "ayek.
'he occ/rrence of !(?& and the need of antagonistic social forces 3to resol0e them5 is
what makes the theories of the 4/strian chool o/tdated with each passing day. !iao.
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE
=/r earlier examination of the 4/strian chool5s and ch/mpeter5s concept of 3crisis5 as
arising o/t of the 8creati0e destr/ction9 operated by the 8entreprene/rial spirit9
:#nternehmergeist< showed it to be an 3external5 explanation of capitalist 3crises5 beca/se
the 0ery process of 3?nno0ation5 that ch/mpeter placed at the origin of 3crisis5 thro/gh
its breaking of existing 3monopolies5 by means of a 8creati0e destr/ction9 that ser0ed to
re-ignite the 8market mechanism of competition9 1 we showed that this process of
3?nno0ation5 co/ld not explain capitalist 3crises5 beca/se6 far from being the prod/ct of
the 8entreprene/rial spirit96 8?nno0ation9 was ?, F4!' already s/bs/med within the
prod/cti0e process of capitalist enterprise.
Be *,=B that in modern capitalist ind/stry :and already in the time of ch/mpeter<
8research and de0elopment9 and indeed the entire process of 8scientific disco0ery9 had
become a 3(4'?=,4>?&A56 3'&!",=>=;?!4>5 process 1 ,=' one of 8disco0ery9
b/t rather one of 3'echni./e56 one of 3(ationalisation5 1 or in $ax Beber5s terms6
8(ationalisier/ng9.
"a0ing made this disco0ery in his 8%olitik als 7er/f9 :%olitics as @ocation<6 Beber
/nderstood that the capitalist economy was merely 8$4,4;&A9 by the capitalist
8entreprene/r9 and that therefore this co/ld no longer ser0e as an explanation for the
3existence5 of 8profit96 let alone for its 3distrib/tion5D
7/t the o0erall 8A?(&!'?=,9 of the capitalist 8ystem9 or 8$achine9 co/ld ,=' be
left to 8$anagement9 or 8'echni./e9 or 87/rea/cracy96 it co/ld ,=' be left in the
hands of a 8'echnocracy9C..%(&!?&>+ 7&!4#& Beber /nderstood %&(F&!'>+
B&>> that the capitalist economy was based on the f/ndamental 4,'4;=,?$ =F
'"& B4;& (&>4'?=, and that this most %=>?'?!4> antagonism needed a
%=>?'?!4> 8mediation9 and 8leadership9DDD Beber5s replacement of ch/mpeter5s
8entreprene/rial pirit9 with his 8%=>?'?!4> pirit9 or 8leadership9 :8leitender ;eist9<
was meant to gi0e a %=>?'?!4> 4,B&( to the phenomenon of capitalist 3!(??5.
'he so/rce of capitalist 3crisis56 therefore6 had to come F(=$ B?'"?, the capitalist
8system9 :its social relations of prod/ction< if it was to be more than 2/st a 8de/s ex
machina9 like ch/mpeter5s 3#nternehmergeist5 and if it re./ired a %=>?'?!4>
resol/tion6 a 8mediation of !=,F>?!'?,; interests9 as in Beber.
?n o/r presentations below6 we so/ght to identify 'B= interconnected so/rces of 3crisis5
in a capitalist economy. 'he first one was F(=$ 7&>=B and it is d/e to the antagonism
of the wage relation which at the le0el of the 3nation-state5 or 3the collecti0e capitalist5
with monopolistic control or sole a/thority o0er the /se of physical force 4,A of the
c/rrency :of 3money5< 1 at this le0el the antagonism of the wage relation is 3mediated5
predominantly thro/gh the interplay of 3?,F>4'?=,5 :thro/gh 3wage p/sh5 increases of
nominal wages< and 3#,&$%>=+$&,'5.
7/t this 8trade-off9 and the 8flexibility9 that it ga0e 3nation-states5 in connection with the
system of 3flexible exchange rates5 at the end of 7retton Boods in 1GH1 =,>+ &(@&A
to lead to 8competiti0e de0al/ations9 which in t/rn occasioned '"& &!=,A !4#&
of 3crisis56 the one F(=$ 47=@& that in0ol0es the attempt by capital in its most
3li./id56 3mobile5 and 3f/ngible5 form6 4 F?,4,!& !4%?'4>6 '= 4@=?A the conflict
and antagonism of the wage relation by @4>=#(??,; itself artificially thro/gh
3spec/lati0e5 or 3gambling5 acti0ities that go from 8financial inno0ation9 to 8c/rrency
spec/lation9 andC9capital flight9 :or 8capital flows9<. 4gain6 in the mar0elo/sly happy
phrase from ;eorge oros6 finance capital seeks 8to create imaginary 0al/e o/t of thin
air9DD
Be can see ,=B how the 8two so/rces9 of crisis arise both from the wage relation. Bith
its 3spec/lati0e5 acti0ities aimed at 4@=?A?,; the wage relation finance capital has
emerged as the most 0ir/lent threat to the 8so0ereignty9 and 8a/thority9 of 3,4'?=,-
'4'&5C.by /ndermining their 3c/rrencies5. ?n response6 3nation-states5 ha0e so/ght
3to co-ordinate5 economic policies and6 in the extreme case of the &/ropean #nion6 to
change their 8$=,&'4(+ 7=#,A4(?&9 thro/gh a 8!#((&,!+ #,?=,9. ?n the
third 3wolfexchange5 we tied this de0elopment /p with the breakdown of 7retton Boods6
the de0elopment of flexible exchange rates and $/ndell5s theory of 8optimal c/rrency
areas9. Be will see why the &/ropean c/rrency-/nion sol/tion was incomplete and
re./ired a %=>?'?!4> #,?=,.
'he 3exchange5 or 3trade-off5 between inflation and /nemployment we mentioned abo0e
was gi0en a 3dynamic5 definition by $ilton Friedman with his concept of 8non-
accelerating inflation rate of /nemployment9 :,4?(#<. ?n other words6 according to
Friedman6 there is a %=?,' at which the le0el of /nemployment is s/fficient 8to
discipline9 workers = '"4' the rate of inflation does not 8accelerate9 and 8market
prices9 are stabiliIed 4,A '"&(&F=(& inflation does not /ndermine the c/rrency. 'he
s/preme o0erriding task of the monetary a/thorities of a capitalist 3nation-state5 is to
ens/re that inflation is targeted at the ,4?(# le0el.
For Friedman therefore it was absol/tely ?$%&(4'?@& for control o0er prices6 inflation
and6 conse./ently6 control o0er the 8monetary mass9 to be placed in the hands of an
?,'?'#'?=,6 an 4#'"=(?'+ that was politically ?,A&%&,A&,' from other
8democratic9 instit/tions s/b2ect to the 8electoral cycle96 to political 8bargaining9 or to
8electoral press/res9. 'his 8independent instit/tion9 wo/ld take the shape of a
!&,'(4> 74,* 8go0erned9 by 8'&!",=!(4'9.
?n setting the c/rrent topic6 $artin Bolf has genially emphasiIed the 3!&,'(4>?'+5 of
the !&,'(4> 74,*. "ere6 once again6 we find the distinction between the 8pirit9
:;eist< represented by the capitalist 8&ntreprene/r9 :ch/mpeter5s 8#nternehmergeist9<
or the 8%olitical >eader9 :Beber5s 8leitender ;eist9<6 on one side6 and the 8$4!"?,&96
the 3'echni./e56 the 8$onopoly9 :ch/mpeter5s 8$onopol9<6 the 87/rea/cracy9
:Beber5s 37eamtet/m5< on the other side. 'he !entral 7ank that controls $=,&+6 that is
the $=' %=>?'?!4> ?,'(#$&,' in a capitalist society6 the one that determines
the all-important '(4A&-=FF between inflation and /nemployment 1 0ia the interest
rate and the 8monetary mass9 - is s/pposed to be 8managed independently9 or
84%=>?'?!4>>+9DD
'"?6 ladies and gentlemen6 is the political and instit/tional !(#J :in the do/ble sense
of 8cr/cial9 and 8cross96 weakness< of modern capitalism. '"? is the ;ordian *not that
we m/st examine in greater detail later.
'he abo0e analysis sho/ld help /s !=$-%(&"&,A this complex interplay of political
forces6 to /nra0el '"& 7?;;&' $+'&(+ =F 4>>6 the point in ./estion right now
:DD< 1 the relation between the tate as 8collecti0e capitalist9 on one side 4,A on the
other side its manip/lation of ?,F>4'?=, and F?,4,!?4> (&%(&?=, or the
control and reg/lation of finance capital as its #>'?$4'& 4''&$%' to gi0e ,&B
@?;=#( to the wage relation and to 8ind/strial capital96 to re-establish the ,&J#
between capital and 80al/e-creation9 away from 8the flights of fancy9 of finance capital6
to re-la/nch the process of capital 80alo/risation9 thro/gh greater 3prod/cti0ity5 in its
@?'4> ?'& where 4>> 3@4>#&5 is 8created9 1 ?, '"& B=(*%>4!&DD
?n o/r next inter0ention6 we will examine '"& >?$?' of this interplay6 thro/gh the
8monetary medi/m96 between %=>?'?!4> >&4A&("?% and the $4!"?,&(+ of
capitalist ind/stry in the context of the &/ropean #nion.
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE
@ Sepp good point about the eurozone, Geithner and Schauble.
Martin Wolfs frustration in the policy debates about how to reedy the crisis! is alost".#$%G&'()* &
ha+e now lost faith in the +iew that gi+ing the ar,ets what we thin, they ay want in future e+en though
they show little sign of insisting on it now should be the ruling idea in policy. So now should the -)./,!
0latest .olun in 1#2.
We certainly sypathise and share his passion! 0(atin 3passio, suffering2. What is becoing apparent is
that what we thin, the ar,ets ay want &% 14#45)! is a pro67ect of renewal of capitalist .-MM$%/ o+er
li+ing labour wor,ers. &n #8&S conte9t, any :eynesian! +elleity of return to the old e;uilibria! of
neoclassical econoics S8$##)5S against the solid roc, of the antagonis of the wage relation. #he
politico6econoic pro67ect 0(atin, to throw o+er2 of capital M4S# ') M-5) than siply to pic, up effecti+e
deand! and return to full eployent!. #he <5-6=).#! of capital is to ensure G5-W#8!, and that
eans a return to profitability! and the accuulation of >$(4)!.
$nd it is in #8&S 8&G8(? S<).&1&. .-%#)@# that & ha+e prepared a delightful little discussion of :eyness
theory of oney #- /&S<)( soe /)(4S&-%S that ha+e surfaced in recent discussions.
#he #&#() is S.84M<)#)5 $%/ :)?%)S* Money, .risis, Growth!. 8ere goes....
"if our central control authorities could anage to establish a total le+el of production consistent with full
eployent, classical 0econoic2 theory would continue to apply 0norally2 thereafter"! 0General #heory,
;uoting fro &talian translation2.
:eynes was aware of capitalist business! cycles. 8e ,new that they cae and went. #he ephasis of his
general theory! is .()$5(? on eployent! 0it coes first in the title, before &nterest and Money2. #he
entire ai of his wor, is how to deal with the .5&S&S! and the 3crisis is <-(&#&.$((? ainly one
dependent on eployent! because it is the lac, of eployent that will pose the greatest dangers to the
stability of the capitalist order. #he General #heory is written in the ABCDs when the entire capitalist syste is
on the +erge of collapse and 5oose+elts %ew /eal is only in its infancy.
'asing hiself on the <-(&#&.$( ()$/)5S8&< shown by <resident 5oose+elt, :eynes sees that an attac,
on the le+el of eployent will not be sufficient to dri+e down noinal wages ')1-5) the profitability of
in+estents can generate sufficient effecti+e deand to dri+e the le+el of eployent and consuption
bac, to e;uilibriu!.
#he )SS)%#&$( issing lin,! needed to a+oid a catastrophic deflationary spiral! of lower output and
eployent! is a %)W S-45.) of effecti+e deand! capable of supplanting the in+estent that is %-#
coing fro pri+ate! capitalists. &n other words, for :eynes the inability or unwillingness of indi+idual
capitalists #- &%>)S#, that is, #- .-MM&# 3M-%)? to the eployent of social resources in +iew of their
($.: -1 1$&#8 in 3M-%)? as a bridge between the present and the future! as a guarantee of
3profitability, of higher 3+alue that can be 5)$(&S)/ in the ar,et! this &%$'&(&#? or unwillingness to
in+est ust be M$#.8)/ by a collecti+e capitalist!, an institution that is able to supply the issing
effecti+e deand!, to supplant the capitalists $%&M$( S<&5&#S! so as to guarantee full eployent and,
with this, the <-(&#&.$( S#$'&(&#? of the capitalist syste. 1or :eynes, what is true and rational for the
&%/&>&/4$( capitalist is %-# true for the .($SS of capitalists $S $ W8-()!E
#he right dichotoy is, & suggest, between the #heory of the &ndi+idual &ndustry or 1ir and of the rewards
and the distribution between different uses of a gi+en ;uantity of resources on the one hand, and the #heory
of -utput and )ployent as a whole on the other hand. So long as we liit oursel+es to the study of the
indi+idual industry or fir on the assuption that the aggregate ;uantity of eployed resources is constant,
and, pro+isionally, that the conditions of other industries or firs are unchanged, it is true that we are not
concerned with the significant characteristics of oney. 'ut as soon as we pass to the proble of what
deterines output and eployent as a whole, we re;uire the coplete theory of a Monetary )conoy,!
0G#, .h.FA2.
&t is >&#$( to note that what is issing in :eynes is a theoretical fraewor,, or a political strategy, to re6start
capitalist G5-W#8!, a strategy to '5&%G '$.: the capitalist syste away fro the politicization! that
State in+ol+eent in production &%)>&#$'(? brings about and '$.: to the .-MM$%/ of pri+ate!
capitalists who will then 5)6S#$5# the syste toward profitability! and econoic growth!. )ssentially,
:eyness theory pro+ides a politico6econoic S#5$#)G? for the State, the collecti+e capitalist! to ,eep the
syste ali+e, to buy social peace! 4%#&( full eployent is achie+ed. $# #8$# <-&%#, the capitalist
econoy will be able to reach $ %)W )G4&(&'5&4M, siilar to that en+isaged by neoclassical theory, but
#8&S #&M) with a uch larger role for the State in guaranteeing! a politically acceptable le+el of
eployent and, with it, social peace and the stability and S45>&>$( of the capitalist econoy. What the
collecti+e capitalist!, the State, M4S# bring about is $ %)W 1$&#8 &% M-%)? the State ust 5)S#-5)
the ability of capitalists to belie+e that their present M-%)#$5? in+estents will bring about the
+alourisation! of capital in the wor,place $%/ #8$# ($#)5!, &% #8) 14#45)! the 3>$(4) of the goods
pro6duced by eans of the li+ing labour! of wor,ers in the wor,place will be able to be 5)$(&S)/ through
sales! in the ar,et!.
#8$# &S W8? :eynes is able to a,e right there one of the few italicized coents in the entire General
#heory 0E2, H1or the iportance of oney essentially flows fro its being a lin, between the present and the
future,H 0G#, .h.FA2.
1$5 fro being a M)5) <5-M&S)!, far fro being M)5) 1&$# M-%)?!, :eynes here .-55).#(? and
with G5)$# &%S&G8# identifies the .)%#5$(&#? of M-%)? in the political pro67ect of /-M&%$#&-% and
.-MM$%/ by capital o+er wor,ersEE M-%)? )M'-/&)S H>$(4)H 6 indeed it is the S4<5)M)
Hinstitutional e96pressionH of H+alueHE 1ar fro being ere hot air!, a tric,!, pure credit!, fiat oney!, Ha
proiseH, :eynes identifies oney6as6capital as #8) )M'-/&M)%# -1 W)$(#86$S6.$<&#$(, as the
-W%)5S8&< -1 #8) M)$%S -1 <5-/4.#&-% $%/ $S 3>$(4) #- S4'=4G$#) #8) (&>&%G
($'-45 -1 W-5:)5S in the process of pro6ductionEE
$gain, :eynes can percei+e the .8$SM that the wage relation with its $%#$G-%&SM pro+ides between the
<5)S)%# 3+alourisation of capital in the process of production and the 14#45) 3realisation of the pro6
duced goods in the ar,etplace!. :eynes can see ;uite easily #8) .5&S&S that this represents.
W8$# &S M&SS&%G in :eyness wor, is the outline of a strategy for the capitalist syste #- 5)6)S#$'(&S8
or 5)6.$S# its .-MM$%/ o+er li+ing labour by eans! of oney6as6capital %-# =4S# to sur+i+e
politically but also to generate profitability! and growth!, econoic )@<$%S&-% o+er new populations of
wor,ers, o+er new ar,ets! and territories". &% #8) 14#45)E
$nd this is <5).&S)(? the proble that Schupeter tac,les in 'usiness .ycles!. 0&ndeed, it is the Gordian
:not that Martin Wolf is trying to cutE2 &t is #8) 5)$S-% W8? Schupeter is a 1$5 G5)$#)5 political!
theoretician than :eynes in that 8) $(-%) poses the proble for capital of".8-W #- 3'5&/G) #8)
.8$SM 0reeber, pro67ect!2 between the <5)S)%# .5&S&S! and"!14#45) G5-W#8!EE $nd it is to
Schupeters pro67ect! that we will turn in the near".future.
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
F?,4,!?4> (&%(&?=, 4 4#'"=(?'4(?4, 3'&,A&,!+5
:or 8'he %olitico-&conomic !onse./ences of $r. *eynes9<
'he topic of 8financial repression9 calls for a brief reflection on the 3tendency5 of
8*eynesian theory9 with regard to the role of tate inter0ention in the capitalist economy
that we disc/ssed below. ? do this to alert pro-8*eynesian9 commentators to the
8tendency9 in their stance against 8spec/lators9 and 8casino capitalism9 toward tate
a/thoritarianism if this 3stance5 is not accompanied by a 3critical5 approach to the analysis
of capitalism.
'he 8*eynesian9 call for the tate :8the collecti0e capitalist9< to (&;#>4'&
3FinanIkapital5 against the deleterio/s excesses of its congenital search for 8paper gains9
- that is to say the search for ways 8to realiIe profits9 witho/t ha0ing to go thro/gh the
8antagonistic9 process of 80alo/risation9 in the workplace - shows /s /ne./i0ocally that
:as one contrib/tor to this for/m K3&./i0ocation5L pointed o/t recently< what lies at the
heart of this 3reformist5 call has gen/inely 3a/thoritarian tendencies5 against which we
m/st g/ard.
:?ndeed6 in the !omments to a $artin Bolf !ol/mn6 one partic/lar wit has 2/st called for
8the li./idation of the !ity of >ondon9 and6 behind a cascade of 8*eynesian9 0erbiage6
&@&, started to in0oke 8the o0ereign9KDDL6 by which he s/rely meant 3the tate56 taking
/p direct in0estments to maintain 8aggregate demand9. 'his is st/ff we had not heard
since "obbes5s 3>e0iathan5 or since the days of mediae0al 8statolatrists9 like %/fendorfDD<
Bhen *eynes called for the inter0ention of the tate to s/pply the 8effecti0e demand9
that 8indi0id/al capitalists9 were not willing to pro0ide beca/se of ins/fficient
3profitability5 :in *eynes5s terms6 lower 8marginal efficiency of capital9<6 he ./ite
explicitly arg/ed that the &&,'?4> (&4=, for this 8falling rate of profit9 was the
8A=B,B4(A (?;?A?'+ =F ,=$?,4> B4;&9 which *eynes6 with characteristic
sociological insight6 co/ld see had now become an inel/ctable instit/tional (&4>?'+ of
ad0anced ind/strial capitalist economies in the light of the growing political cohesion and
antagonism of working classes in those co/ntries.
'he higher le0els of 8/nemployment9 res/lting from the /nwillingness of 8indi0id/al9
capitalists '= ?,@&' 3$=,&+5 or '= "=4(A it regardless of how low interest rates
fell 1 which *eynes called 8the li./idity trap9 - led *eynes to call for the A?(&!'
?,'&(@&,'?=, of the tate in the process of prod/ction of 8o/tp/t9 so as to maintain a
3politically acceptable5 le0el of employment and to maintain 3social peace5 and6 with it6
the s/r0i0al of the capitalist system.
*eynes co/ld already predict that this 3tendency5 co/ld only worsenC.9in the long r/n9.
"is famo/s maxim that 8in the long r/n we are all dead96 together with his 8irrationalist9
references to 8animal spirits9 and the long-term decline of 8the marginal efficiency of
capital9 and his insistence on 8/ncertainty96 4>> '"&& were !>&4( ?;, that
*eynes saw e0er greater tate inter0ention in the capitalist economy as an ine0itable
8tendency9. imilarly6 *eynes5s famo/s conception of money as 84 >?,* 7&'B&&,
%(&&,' 4,A F#'#(&9 e0inces inconf/tably the F&4( that *eynes held forCthe
F#'#(& of capitalist society 1 or of 8society in general96 gi0en that a bo/rgeois thinker
like him co/ld not en0isage any ='"&( form of 8society9D
+es6 beca/se B"4' ? tate direct inter0ention in the capitalist economy if not the
4%%(=%(?4'?=, of the f/t/reDM B"4' ? ?' if not a political 3pro-2ect5 :a 8throwing
o0er9 the hiat/s or chasm that exists in capitalist in0estment between present and f/t/re<
to g/arantee by sheer political force :DD< the s/r0i0al of capitalism and the wage
relationDDM Bhat is it if not 8'"& @??7>& "4,A9 replacing 8'"& ?,@??7>&
"4,A9M
/ch were the fears *eynes held for the f/t/re of capitalism that he act/ally did en0isage
a time when the rate of interest :and therefore the rate of profit and 8the marginal
efficiency of capital9< wo/ld fall to Iero and6 conse./ently6 3money5 wo/ld become
entirely dispensable6 a mere cipher denoting no 30al/e5 whatsoe0er and in fact ser0ing 3no
p/rpose5 whatsoe0erDD ?n other words6 *eynes co/ld already predict the 47=>?'?=, =F
3$=,&+5 4 4 >?,* :pro-2ectio6 8throwing o0er9< 7&'B&&, %(&&,' 4,A
F#'#(&DDD
:Bith the ;erman ?dealist philosopher Fichte we co/ld call *eynes5s 3pro-2ect5 to abolish
money as his 8pro-2ectio per hiat/s irrationalem9 beca/se6 like religion where 3faith5
pro0ides the 3bridge5 between the world and ;od6 *eynes wished to 3bridge5 or 3link5 the
3irrational hiat/s5 KchasmL between the present of bo/rgeois society and its f/t/reC
witho/t the help of 3money5D<
'he ob0io/s diffic/lty with this 8tendency9 - which has been b o r n e o/t by the facts as
capitalist tates ha0e taken o0er a rising share of the capitalist economy 1 is that its
historical realiIation has bro/ght with it a growing 3b/rea/cratisation5 of e0eryday life in
capitalist societies. 7l/ntly p/t6 it is possible to say that the 8the control of ;(=B'"9
by the capitalist tate that *eynes correctly theoriIed has ine0itably res/lted in a
corresponding 8growth of !=,'(=>9 by e0er more 3a/thoritarian5 capitalist tatesDD :?
hope to co0er this in greater detail soon.<
'"? is the danger of 8the a/thoritarian tendency9 in o/r title that all those 8reformists9
:*eynesian or socialist< r/n when they call :as did ;eorge oros recently< for a greater
correspondence between the in0estments of 3FinanIkapital5 and 8the r e a l economy96
8real 0al/e9 or 8prod/cti0e in0estments9C.and so on. 'he tragedy in all this6 of co/rse6
is that 8*eynesians9 wish to preser0e 8/se 0al/e9 4,A 8exchange 0al/e96 they want
8capital9C.witho/t 8the capitalist9D
:?ndeed6 in the !omments to a $artin Bolf !ol/mn6 one partic/lar wit has 2/st called for
8the li./idation of the !ity of >ondon9 and6 behind a cascade of 8*eynesian9 0erbiage6
&@&, started to in0oke 8the o0ereign9KDDL6 by which he s/rely meant 3the tate56 taking
/p direct in0estments to maintain 8aggregate demand9. 'his is st/ff we had not heard
since "obbes5s 3>e0iathan5 or since the days of mediae0al 8statolaters9 like %/fendorfDD<
8*eynesians9:C. beware what yo/ wish forD
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE
'here is one final obser0ation that ? wished to make on this theme. 'here is a widespread
tendency6 common abo0e all among 3economists56 to (&A#!& the notion of 3crisis56
incl/ding those arising from spec/lati0e capital flows6 to a simple '&!",?!4>
problem. 'his tendency was partic/larly e0ident d/ring 3the great moderation5.
4s we saw below6 in mat/re capitalist societies like those that pre0ail now6 &@&, the
process of 3inno0ation5 described by ch/mpeter as the so/rce of 3crisis5 and 3b/siness
cycles5 has been entirely s/bs/med or 3taken o0er5 or 3internalised5 within the str/ct/re of
the capitalist corporation or organiIation. 4nd we saw that6 indeed6 the control o0er
3inno0ation5 has itself become a F=(!& p/shing toward 3monopoly5. ?t follows therefore
that the role of the 8entreprene/r9 is necessarily diminished to that of mere 3manager5.
?f we concede then that 3inno0ation56 the process of research and de0elopment has been
absorbed within the 3b/rea/cratic5 str/ct/res of ad0anced capitalism 1 p/t differently6 if
the 8entreprene/rial pirit9 has been 3integrated5 within the 3'echni./e5 of 3corporate
management5 1 ?' 7&!=$& 47=>#'&>+ !>&4( then that the =(?;?, of 3crises5
in a capitalist economy can be fo/nd =,>+ in the social antagonism B?'"?, the
str/ct/re and f/nction of '&!",?!4> or 3b/rea/cratic5 tate control of the 3wage
relation5.
?t is entirely clear from o/r analysis that the &@&(?'+ of 3crises5 in a capitalist society
can be 3ga/ged56 can be meas/red broadly by the extent to which the tate-form itself
needs to inter0ene %=>?'?!4>>+ in the broad economy 7='" in terms of direct control
of prod/ction 4,A in terms of reg/lation of economic acti0ity. ?t is at this precise point
that ch/mpeter5s 8entreprene/rial pirit9 has to gi0e way to $ax Beber5s 8leadership
pirit9 :leitender ;eist<.
'o express this acco/nt in the concept/al terms disc/ssed abo0e6 the se0erity of a
capitalist crisis can be ga/ged by the extent to which the %=>?'?!4> control of capitalist
enterprise act/ally &J%4,A6 on one side6 4,A6 on the other side6 the extent to which
the '&!",?!4> control recedes or contracts.
%/t in 0ery bl/nt terms6 a capitalist 3crisis5 is the more 3systemic5 or dangero/s the more it
becomes 3politicised5 in that it re./ires direct inter0ention by the tate in areas that 3in
normal times5 co/ld be $4,4;&A 3technically56 by '&!",=!(4'.
'his all-important concl/sion leads /s to a de0elopment that has %(&%='&,'>+ and
dramatically come to the fore of international attention where the essential tool of
political !=$$4,A of the 3wage relation5 takes place 1 and that is '"& %=>?'?!4>
!=,'(=> =F $=,&+6 incl/ding the control of capital flows.
'"? leads /s A?(&!'>+ to the present 3trans-formation5 of the role played by
!&,'(4> 74,* in the capitalist system. $=(& %&!?F?!4>>+6 it leads /s to an
examination of the central role that the &/ropean !entral 7ank has been F=(!&A to
play in the c/rrent e/roIone 3crisis5. 4nd this is what ? hope to do in a f/t/re for/m.
EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE
#>+& 4,A '"& ?(&,: 'echnocracy as (epression
=dysse/s was c/rio/s as to what the irens so/nded like6 so6 on !irceNs ad0ice6 to a0oid
being l/red onto their island by their irresistible singing and perish6 he had all his sailors
pl/g their ears with beeswax and tie him to the mast. "e ordered his men to lea0e him
tied to the mast6 no matter how m/ch he wo/ld beg. Bhen he heard their bea/tif/l song6
he ordered the sailors to /ntie him b/t they bo/nd him tighter /ntil they passed past the
island.
Be saw earlier how with *eynes it is the antagonism of workers expressed instit/tionally
as 8the downward rigidity of nominal wages9 that occasions a 8crisis9 of in0estment in
which the inability of wages to ad2/st to a le0el s/fficiently low to entice in0estors o/t of
the 8li./idity trap9 leads to stagnation or recession. 'wo things ens/e: the tate m/st
inter0ene to pro0ide the 8effecti0e demand9 that is missing in order to restore a politically
acceptable le0el of employmentO and also the li./idity pro0ided by the tate will res/lt in
a rise in inflation that will ser0e to red/ce the gap between asset-linked loans and the
ability of indebted b/sinesses and cons/mers to repay them :see ;eneral 'heory6 !h.21.
For the financial reperc/ssions of tate 3stabilisation5 after the ,ew Aeal6 see abo0e all
"yman $insky5s 8Finance and tability: 'he limits of capitalism96 $ay 1GGP. $insky is
partic/larly explicit abo/t the 8socialisation of debt9 s/ch as has occ/rred in the latest
8crisis9<.
'he conse./ent massi0e expansion of the role of the tate in the capitalist economy6 if on
one hand it leads to 8the control of growth96 at the same time it engenders 8the growth of
control9 by the tate-as-collecti0e-capitalist o0er most areas of social life. 'he old 8night-
watchman tate9 or 8liberal state9 is th/s t/rned into a tate-%lan6 a 0ast b/rea/cratic
network with e0er-greater control o0er the entire network of social life. 'he 8in0isible
hand9 of the 3self-reg/lating market5 is replaced by the 0ery 80isible hand9 of growing
tate inter0ention in the economy. '"? is what ? ha0e called 8the society of capital9.
'he conse./ent process of 8b/rea/cratisation9 is aided also by the sim/ltaneo/s process
of 8concentration9 of capitalist enterprise that rises as a direct res/lt of 8crisis9 as firms
seek to 8rationalise9 their operations and achie0e economies of scale. 'hese o/tcomes
8exist9 in *eynes. 'he !ambridge economist 8registers9 their necessity and theorises the
politico-economic strategy that the new tate-%lan needs to deploy to ens/re that 8the
crisis9 does not metastatise into a deadly deflationary cancer that will threaten the 0ery
s/r0i0al of capitalism. :4s we will see when we deal with ch/mpeter6 howe0er6 *eynes
A=& ,=' specify a strategy or de0elop a theory that can >&4A =#' of the 8crisis9
and F=(B4(A into a new cycle of 8growth9.<
7/t by their 0ery nat/re these twin processes of 8b/rea/cratisation9 and 8rationalisation9
cannot signify m o r e than 2/st an attempt 8to administer9 the economy and society6
they rarely achie0e 8more9 than 2/st 8manage9 the antagonism that led to 8crisis9. ?t
t/rns o/t that a l l the inter0ention of the tate-%lan manages to achie0e is to p/sh the
antagonism to a "?;"&( le0el6 one that re./ires direct %=>?'?!4> $&A?4'?=, by
the highest elected officials in parliamentary democracies. :? read in this sense (omano
%rodi5s latest =pinion on the F' concerning the &#5s failed decision-making process o0er
fiscal policy.<
'his analysis allows /s "&(& 4,A ,=B to assess directly and correctly the intention
and effecti0eness of the tate in dealing with the present 8crisis9. For it is ob0io/s now
that to the extent that the tate seeks '= (&%(& 8finance capital9 and to force it to
pay for 8the crisis9 thro/gh inflation6 to that extent the tate acknowledges its
%=>?'?!4> ?,47?>?'+ to s/ppress the antagonism of workers and to transfer
definiti0ely the costs of 8the crisis9 on to workers in terms of 8a/sterity9 and 8deflation9.
7y the same token6 we find that those 8instit/tions9 that ha0e been established by the
tate-%lan with the express p/rpose of being 8independent9 of politics6 to a0oid the
8political cycle9 and therefore to act 8technocratically9 4(& F4?>?,; $?&(47>+ to
come to terms with the new le0el of antagonism that 8the crisis9 has /nleashedD
>ike #lysses ordering his sailors to tie him to the mast so as to a0oid the irens5 fatally
all/ring 0oices6 the 8independent9 &/ropean !entral 7ank was established by the tate-
%lan as a 8technocratic9 instit/tion apt to remo0e monetary policy 1 an essential tool of
8political mediation9 of 8crisis9 in *eynesian theory 1 from the 8political press/res9 that
the economic cycle wo/ld ine0itably apply on the 8correct6 disciplined :scientific-
technocratic< cond/ct9 of this policy6 and also to ass/re the command of the tate and
capital o0er workers against the 8temptation9 of political leaders 8to accommodate9
monetary policy to assist with the creation of employment and the 8depreciation9 of debt
obligations. ?n short6 it was an attempt to present as >4B what was always p/re and
simple %=>?'?!.
?f6 as a res/lt of 8the crisis96 the so-called 8technical independence9 of central banks :Fed
and &!7< is weakened6 then this will be an important signal that worker antagonism is
gaining gro/nd. 7/t if the opposite occ/rs6 the ens/ing rigidity of central-bank policies
will only lead to a f/rther 8rigidity9 of the present tate regime. ?n both cases 8the room
to manoe/0re9 that $ax Beber spoke abo/t :in 3%arlament /nd (egier/ng5< will ha0e
been greatly red/ced for the capitalist class.
*&+,& 4,A !"#$%&'&(: !ycle6 !risis6 ;rowth :%art ??<
Q;rasshoppersQ and Qants. !ons/mers and workers. ?n0estors and a0ers. 'he dichotomy
between ?n0estments and a0ings is what Qthe rate of profitQ6 reflected /ltimately in the
rate of interest6 is what links the two. 4s !arol Bilcox reminded /s with her Qfallacy of
compositionQ6 *eynes co/ld see that what is reasonable for the indi0id/al capitalist firm
is not reasonable for the capitalist class Qas a wholeQ beca/se while the indi0id/al
capitalist wishes to depress the wages of NhisN workers6 NheN wants to raise the wages of all
other workers. 'his engenders a deflationary spiral of lower wages6 lower prices and
lower o/tp/t and employment that =,>+ the Qcollecti0e capitalistQ :the tate< can stop
and re0erse.
=nce the tate has re-established the identity between ?n0estments and a0ings6 *eynes
concl/des that ayNs >aw :or Qthe laws of classical economicsQ< f/nction normally.
&./ilibri/m is reached and the >aw of @al/e according to which Qo/tp/tQ is properly
distrib/ted to each factor of prod/ction - profit6 interest6 rent and wages - can finally
operate in accordance with economic theory.
'he &&,'?4> point here is that *eynes co/ld see Q&./ilibri/mQ and6 /nlike the
classical political economists :mith6 (icardo6 ay<6 "& !=#>A && QcrisisQ. !(??
was the Qine./alityQ of ?n0estments and a0ings bro/ght abo/t by the QA=B,B4(A
(?;?A?'+Q of nominal wages - that is to say6 by the antagonistic QresistanceQ or
QcompositionQ of workers 4 4 !>4 to the lowering of wages and conditions.
'= !=$& =#' of the QcrisisQ re./ired the inter0ention of the tate so as to bring the
economy 74!* to f/ll =#'%#' and F#>> &$%>=+$&,'. *eynes co/ld certainly
&& QcrisisQ in capitalism. 4nd he co/ld see ;(=B'" intended as Qexpansion of
=#'%#'Q. Bhat *eynes co/ld ,=' see was ;(=B'" 4 A&@&>=%$&,' - in other
words6 *eynes co/ld not see that Q!risisQ co/ld bring abo/t ,=' R#' QgrowthQ as Qf/ll
employmentQ.
(4'"&(6 as !"#$%&'&( disco0ered :D<6 capitalism co/ld o0ercome Q!risisQ
'"(=#;" ;(=B'"-4-A&@&>=%$&,'.....thro/gh ;(=B'"-4-
?,,=@4'?=,DD
B"&(&4 in *eynes capitalism was always prone to '4;,4'?=, :as we saw
earlier<6 and Qtechnological inno0ationQ was seen as an Qexogeno/s factorQ6 as a factor
&J'&(,4> to capitalist relations of prod/ction - ?, !"#$%&'&( Qgrowth-as-
inno0ationQ is an &,A=;&,=# F4!'=(6 a factor ?,'&(,4> to capitalism. For
ch/mpeter Q?nno0ationQ is '"& @&(+ &&,!& of capitalismD :For all this6 see
7/siness !ycles.<
For *eynes6 8technology9is p/rely a 8scientific96 8ne/tral9 process6 a process completely
independent of the social relations of prod/ction6 a process standing =#'?A& the wage
relation and ?,A&%&,A&,' =F and 4#'=,=$=# F(=$ the process of
prod/ction. 'he neo-classical economic theory to which *eynes s/bscribed for its notion
of 8general e./ilibri/m9 ,&@&( '(4+&A from the concept of an 8?,A&%&,A&,'
%(=A#!'?=, F#,!'?=,9 /nder which the 8economic system9 ;(&B9 from one
8e./ilibri/m9 to the next in the ./antitati0e terms of =#'%#'.
7#'6 as ch/mpeter disco0ered6 in this neo-classical concept of 8o/tp/t9 and 8growth9
'"&(& ? 8crisis9 b/t '"&(& ? ,= 8A&@&>=%$&,'96 there is 8&J%4,?=,9 b/t
there is ,= 8?,,=@4'?=,9. ?n *eynes there is 8control of ;rowth9 b/t no
8>&4A&("?%-as- de0elopment96 there is 8growth of !=,'(=>9 b/t no 34cti0e
domination of the prod/cti0e process96 8acti0e >&4A&("?%9 thro/gh ?nno0ation.
'here is a 8b/rea/cratic9 '4'&-%>4, to come o/t of the 8!risis9 b/t there is no
/nderstanding of how the process of prod/ction itself6 the (ationalisation of 'echnology
can ser0e as %=>?'?!4> >&4A&("?%6 as A=$?,4'?=,.
*eynes sees the ,&;4'?@& aspect of working-class antagonism in the 8rigidity9 of
wages. 7/t ch/mpeter sees the 8resistance9 to ?nno0ationD "e sees the workers5
antagonism to 8new technologies9 that are #,A&$=!(4'?!6 4#'"=(?'4(?4,
forms of !=$$4,A o0er 8li0ing labo/r9DD :!f. 7/siness !ycles.<
'"4' is B"+ for *eynes the 8collecti0e capitalist96 the tate can inter0ene to pro0ide
the 8aggregate demand9 that indi0id/al capitalists cannot s/pply. *eynes can see how the
8rigidity9 of the wage relation can be $4'&(&A by the tate to bring abo/t 8f/ll
employment9 and 8higher o/tp/t9 or 8;(=B'"9. 7/t *eynes 1 the 8b/rea/cratic9
'reas/ry official6 !ambridge don6 close to 8aristocratic9 circles - ,&@&( poses himself
the problem of whether a 8crisis9 can be answered not 2/st with 8aggregate demand9 or
8growth of o/tp/t9 7#' (4'"&( with a 8technological trans-formation9 of the
antagonism of the wage relation thro/gh the &,'(&%(&,&#(?4> 8re0ol/tionary9 or6
in the words of ch/mpeter6 8creati0e destr/cti0e9 transformational %=B&( =F
?,,=@4'?=,D
'"? is the %=B&( of ch/mpeter5s 8&,'(&%(&,&#(?4> %?(?'9 or
8#nternehmergeist9D ch/mpeter accepts the theoretical /sef/lness of neo-classical
8e./ilibri/m9 analysis beca/se of its 8metaphysical9 ./alities of 2/stification or apology
for capitalist 8market9 relations of prod/ction arising o/t of the 8F(&& market96 o/t of
8F(&& exchange9 in a 8&>F-(&;#>4'?,; $4(*&'9 in which the participants
8F(&&>+ &J!"4,;&9 their original 8&,A=B$&,'9 1 as in Balras5s system :not
for nothing ch/mpeter considered Balras the greatest economist<.
7/t neo-classical e./ilibri/m6 ay5s >aw and the >4B of @al/e can =,>+ res/lt in a
8circ/lar flow9 :'heory of &con. Ae0lpmnt.< 1 a '&(?>& 8circ/larity9 that /ltimately
will tend to the '4;,4'?=, of 8p/re competition9. ?ndeed6 for ch/mpeter the 8&!-
!&,'(?!?'+9 of capitalism6 its 8!&,'(?-F#;4>9 ./ality ? ,=' 8exogeno/s9 - ?'
? '"& @&(+ ,4'#(& =F !4%?'4>?$DD For ch/mpeter6 8!risis9 is not 2/st a
temporary 8dis-e./ilibri/m96 an 8anomalo/s9 ?$-74>4,!& in the system 1 ,=D For
ch/mpeter 8!risis9 is the ,4'#(& of the capitalist economy6 its 0ery "&4(' 4,A
=#>6 its empirical6 0isible 8act/-ality9 - and6 as we will see6 the antagonism of workers
is its $='=(.
'= $=@& =#' :DD< of C.this 8!?(!>&9 :DD<6 the capitalist $#' '(4,-F=($ the
means of prod/ctionD !apitalism m/st #& '"& 3!(??5 bro/ght abo/t by the
antagonism of workers 1 $#' A=$?,4'& the 3crisis5 1 by introd/cing ,&B
%(=A#!'?@& '&!",?S#&6 thro/gh the process of 8(esearch 4,A
A&@&>=%$&,'9 to bring abo/t $=(& than 8./antitati0e ;rowth of =#'%#'9.
ch/mpeter seeks to 8hide9 the political force of this concept behind its p/rely
8cons/merist9 effects :cons/mers are 8passi0e96 in 7/s.!ycl.<. "e hides the political
antagonism of the wage relation behind the %=?'?@& responses of the
3#nternehmegeist5 1 the 8pirit9 of the entreprene/r -6 the 8inno0ati0e9 aspect of
8!(&4'?@& destr/ction9 :shopferische Terstor/ng<. 7#' his &,'?(& 8e0ol/tionary9
acco/nt of capitalism and its intrinsic endogeno/s 8!(?&9 :taken straight o/t of
$arx5s notion of 8acc/m/lation9 thro/gh the red/ction of prod/ction time thro/gh
technological inno0ation< and 8theoretical9 relation to 7ohm-7awerk5s 8ro/ndabo/tness9
:itself the en/cleation of chopenha/er5s &ntsag/ng or 8(en/nciation9 or 8elf-denial9
as the 4skesis at the origin of %(=F?' - cf. again Beber5s %rotestant &thic< 7&'(4+
the clear /nstated p/rpose of the 8Bill to !on./er9 ,=' R#' in the sphere of
distrib/tion b/t %(&-A=$?,4,'>+ in the sphere of %(=A#!'?=,DD
'his is s/bstantiated also by his 4B4(&,& that 8crises9 are bro/ght abo/t by wage
antagonism :as in *eynes6 the tendency to monopoly and stagnation< &%&!?4>>+ in
his later re-statement of the theory of 8?nno0ation9 where it is no longer the 8indi0id/al9
entreprene/r that originates the process b/t rather the monopolistic firm itself :D< that now
s/bs/mes the entire process of 8inno0ation9. 4t this 2/nct/re the distinction between
8?ndi0id/alitat9 and 8$onopol9 or 8b/rea/cratic (ationalisier/ng9 :cf. reference to
Beber at start of !h.2 of 3'heorie5< is A?=>@&A: capitalist inno0ation is seen in its
f/ll and bare g/ise as naked 8Bill to %ower9 as 8domination9 o0er li0ing labo/r.
'he &ntreprene/r $#' ?,,=@4'& or 8create9 ,&B 8technologies9 in order to
A=$?,4'& the antagonism of workers by 8A&'(=+?,;9 the c/rrent methods or
=>A 8technologies9 of prod/ction = 4 '= 8&J'&,A9 or 8A&@&>=%9 its %=B&(
o0er workers ?, '"& B=(*%>4!& and in the =!?&'+ =F !4%?'4>DD
ch/mpeter m/st ha0e been aware of this %=>?'?!4> dimension of his 3'heorie5 of
8Ae0elopment9 beca/se as soon as he states it he proceeds immediately :!h. =n
3!apital5< to reassert at great length the 8inno0ati0e9 and 8creati0e9 moti0e of the
8entreprene/rial pirit9 :in both the indi0id/al 4,A in the monopolistic firm< by seeking
to interpret and explain away the 8acc/m/lation9 moti0e in his acco/nt of 8!4%?'4>9 as
simply an 8instr/ment96 a means-to-an-end :3?nno0ation5< for the capitalist
8entreprene/r9 :indi0id/al or monopolistic firm< and not as 4, &,A ?, ?'&>FD
ch/mpeter specifically and explicitly A?'?,;#?"& between 8in0ention9 which is
part of 8scientific research9 and ?,,=@4'?=, which is a ;#?A&A6 ?,'(#$&,'4>6
%=>?'?!4> B?>>-'=-%=B&( :he called it 8Bill to !on./er96 see ?ntro to 'h. =f
&con. Ae0lpt.< apt to 8dominate9 '"& $4(*&'9 so as to establish a ,&B
$=,=%=>+ that can control the market. 7#' this 8control9 is ,&@&( '4'?!6
,&@&( 47=>#'& 1 beca/se the 8pirit9 of capitalism6 the 8&ntreprene/rial pirit9 is
3to dominate thro/gh technology9. :!f. 4/di5s motto6 8@orspr/ng d/rch 'echnik9<.
:=ne co/ld s/mmarise the difference biographically by saying that *eynes lo0ed to sip
tea with aristocracy6 whilst ch/mpeter5s ambition was to become the greatest horse-rider
of his timeD ee kidelsky abo0e.<
ch/mpeter5s conception of capitalism is 8e0ol/tionary9 b/t in a 8re0ol/tionary9 way 1
he sees 8technological trans-formation9 or 8?nno0ation9 as an e0ol/tionary
8$#'4'?=,9 of the process of prod/ction and distrib/tion6 of capitalist social relations
of prod/ction6 of 8domination9 o0er 8li0ing labo/r9 or workers.
Bhile 8technological (ationalisation9 makes this political process &,A=;&,=#6 it is
always the !"4(?$46 the 8leitender ;eist9 of the &ntreprene/r that is needed to p/sh
the process F=(B4(A. 'herefore the &ntreprene/r $4'&( or A=$?,4'& the
workers by #7-=(A?,4'?,; the 8technological (ationalisation9 to the '4* or
;=4> of A=$?,4'?=, 1 '"? ? ?-,-,-=-@-4-'-?-=-,DDD :ch/mpeter promoted
the st/dy of 8economic sociology9 in this regard.<
7/t the rise of 8tr/stified capitalism9 leads to the 8deadening9 of this f/nction and
e0ent/al 8tendency9 :as with *eynes< to '4;,4'?=,. 'he link between 8oligopoly9
and 8technological inno0ation9 and tencency to 8stagnation9 has been st/died in a
8*eynesian-political9 key by ylos->abini. ->5s concl/sions are extremely interesting
beca/se whilst on one side they place m/ch emphasis on *eynesian
8psychological/irrational9 elements in in0estment decisions leading o/t of 3stagnation5
:cf. *5s 8animal spirits9 and of co/rse 5s 8#nt5geist9< on the other side it deepens the
analysis of the role of 8technological inno0ation9 or less in the concentration of firms
:oligopoly< and its conse./ences for both in0estments and employment. -> concentrates
especially on oligopolistic control of 3market share5 and profits as well as on the related
skewed distrib/tion of income gi0ing rise to the contraction of o0erall cons/mption
:aggregate demand<. 'his is 0ery close to $insky once -> t/rns to the effect of loose
monetary and fiscal policies :to alle0iate /nemployment< on the inflating of asset
3b/bbles5 and 3financial pyramids9 by 8financial oligopolies9 1 see 7,% paper in
3Fa0orites5<.
%aolo ylos->abini co0ers many of the themes contained here regarding 8oligopoly and
technical progress9 and partic/larly the different stances of *eynes and ch/mpeter. >ike
/s6 he stresses *eynes5s concern with 8f/ll employment9 and the tendency of his
8e./ilibri/m9 analysis to lead to 8stagnation9 :same as the *reisla/f in ch/mp<. 4
whole section of the book is dedicated to 8tagnation9.
-> is also like $insky concerned abo/t the 8debt str/ct/re9 and the role of 8oligopolies9
in ens/ring that 8f/ll employment9 does not occ/r by introd/cing 8inno0ations9 :and by
3resisting5 competiti0e ones< and also by a0oiding 8hairc/ts9 :in the case of 8financial
oligopolies9<.
:!oncl/de with hint to ;r/ndrisse and 8the limit to capital9.<
:%lease A= ,=' mis/nderstand o/r analysis as some 8late-(omantic9 opposition to
8'echnology9 similar to $ary helley5s depiction in 8Frankenstein9 or "erbert
$arc/se5s 8=ne-Aimensional $an9. F4( F(=$ ?'D Bhat we are doing is exploring the
ways in which 8/ndemocratic9 science and technology become 8?,'(#$&,' or
tools of A=$?,4'?=,9.<
8?M$% M&%S:?s 1inance and Stability* #he (iits of .apitalis!.
Mins,y correctly sees that the %ew /eal Settleent was brought to an end by the rise of financial
interediaries that e9ploited the dual pricing syste! disco+ered by :eynes. #his is the separation!
0financially induced2 of financial assets! 0finance capital2 as against producti+e assets! 0industrial capital2, 6
a dichotoy that was the basis of :eynesJs theory.
& disagree with this. What was central to :eyness theory was the downward rigidity 0or stic,iness2 of
noinal wages. #he dual pricing syste! of financial and producti+e assets is only a .-%S)G4)%.) of
the inability of capital to e9tract ore >$(4) in the sphere of production. $nd here is where Mins,ys
financial instability hypothesis! needs #- ') '5-4G8# '$.: #- )$5#8.
Mins,y argues that in the %ew6/eal State inter+ened to restore eployent and, through inflation, wipe out
debts and re6start the in+estent cycle. 'ut after 'retton Woods fro the early 3KDs, the rise of financial
interediaries! again occasioned a separation between industrial and financial capital that only the
inter+ention of the 1ed and #reasury in e9panding li;uidity and +alidating asset prices 0by socialising!
pri+ate debt into public debt2 has been able to rescue fro a <onzi collapse.
#his is consistent with what & ha+e been arguing throughout about the need! of finance capital! 0capital in
its li;uid! for2 to a+oid wage antagonis and in the e+ent speculate! and siphon off profits fro industrial
capital! until, if left unregulated!, it threatens the entire inter6connected financial structure with collapse.
0&ndeed, one could say that once engendered, this <onzi pyraid is unstoppable without e a r l y State
inter+ention.2
#he difference between Mins,y and our analysis is that he sees these probles as 1&%$%.&$(
<5-'()MS, flaws! or (&M&#S! of capitalis that can be fi9ed through State inter+ention. What is lac,ing is
an analysis of W8? the financial pyraid! of financial assets M4S# .-(($<S) e+entually. &n other words,
Mins,y fails to tell us W8$# &S &# that gi+es rise to financial instability! and W8? such instability! ust
crash bac, down into the hard roc, of reality!.
Whalen 0Mins,ys co6writer2 stresses that for Mins,y production cae before e9change, but finance cae
before production! which helps e9plain the bac,6to6front! approach he ta,es in 1&8.
#he ;uestion is* W8$# is this 35)$(&#?L $s & ha+e sought to show repeatedly, the 3reality is the reality of
3+alue it is the antagonis of the wage relation. $s & argued earlier, it is wage antagonis and the
politico6institutional teptation! of capital to a6+oid it, to $'S#5$.# 15-M it, that engenders the financial
pyraid and inflates the asset bubbles. &n actual fact, Mins,ys financial instability hypothesis! is liited to a
call for financial repression!, hence his positi+e attitude to the >olc,er 1ed policies of the late 3KDs and 3MDs
which helps e9plain its recent popularity! with reforist econoists 0the sae econoists! who ridiculed
hi as a a+eric,! while he was ali+e2.
'ut what brings the JpyraidJ or <onzi schee down is the realisation that the inflated asset J+aluesJ ha+e no
<-(&#&.$( +alidityN they cannot be J5)$(&S)/J in new Hproducti+eH in+estents that can generate further
profits. #his criticis of Mins,y is +alid also for :eynes. 4ltiately, what ,eeps up :eynesJs theoretical
structure is Hli;uidityH, that is, the interest rate. 'ut when as,ed what ,ept up the interest rate, :eynes
faously replied that....Hit holds itself up by its own bootstrapsHE 0-r by Hanial spiritsH2.
1. 5eport joseph belbruno O =une P Q*CKa O <eralin,
@ $: 6 Many than,s for what & sincerely belie+e are intelligent rear,s fro your good self. & cannot
disguise y e9citeent for the study on Schupeter 0& ha+e 7ust trac,ed down online #8) -5&G&%$(
edition of his J#heorie der wirtschaftlichen )ntwic,lungJ which & a reading furiously and coparing with a
1rench translation2 6 so & do proise to ha+e it posted as soon as it is HpresentableH.
Mins,yJs essay & cited below on HMoney and .risis in :eynes and SchupeterH is >)5? disappointing.
'ecause of his $erican origins, Mins,y 1$&(S .-M<()#)(? #- 4%/)5S#$%/ Schupeter. 8e chides
Schupeter for highlighting He+olutionH without suggesting ways to aeliorate capitalist Hfinancial instabilityH
and....return to full6eployent....J)G4&(&'5&4MJEE 'ut this is )@$.#(? the neo6classical M)#$<8?S&.S of
the (aw of >alue, of the identity of sa+ings and in+estents, of the :eynesian H5)M)/?! to crisis, of the
return to what he calls the circular flow! 0:reislauf2 that Schupeter /)M-(&S8)S with his theory of
3&%%->$#&-% and of Hcreati+e destructionH which identify HcrisisH and Hdise;uilibriuH as the +ery
)SS)%.) of capitalisEE
&n Schupeter, the capitalist way -4# of 3the crisis is for the capitalist entrepreneurial Spirit! to 5)6
$SS)5# its Will to <ower through %)W fors of /-M&%$#&-% o+er wor,ers 0consuers!2. -f course,
Schupeter /&SG4&S)S this political antagonis by highlighting the in+enti+eness! of the inno+ati+e
entrepreneur!, the creati+ity! of .5)$#&>) destruction! 0shopferische Rerstorung2. '4#, if Mins,y had
bothered to loo, into Schupeters <8&(-S-<8&.$( antecedents with his lecturer in >ienna 0'oh6
'awer,, the capitalist Mar9!2 and the S-.&-(-G&.$( 0e+olutionary!2 foundations of his theory in Mar9
0see long footnote at start of .h.F of the J#heorieJ2, Mins,y ight ha+e had a chance to .-M6<5)8)%/ this
reality.
&n this conte9t, it is worthwhile to reflect briefly once ore on :eyness own etaphysical! notions of
classical e;uilibriu!,uncertainty!, anial spirits!, arginal efficiency of capital! and the 3le+itating 0y
word2 interest rate!".again we are confronted with <$#8)#&. 0Gree, pathos, 3powerlessness2 bourgeois
notions that fail to understand the nature of political antagonis in a capitalist society. 0Well ay we agree
with 5obert S,idels,y Sin his re+iew of Schupeter & cited belowT who sharply reinds us that :eynes was a
teatotaller #reasury official cofortable in aristocratic lounges, while Schupeter was a horse6riding
woaniser".and failed entrepreneurE 'ut note also that S,idels,y chides the Magistri (udi! Sref. to
8erann 8esses no+elT or acadeic econoists for conducting a eaningless gae rather than the +ital
historico6sociological analysis of a Schupeter. $gain, one could ob7ect that it is S,idels,ys own coent
that Schup contributed little to econoics! that re+eals his own analytical preconceptions.2
%o, the ai is %-# to define! +alue 0(atin finis, end or liit2 but to understand its political rele+ance or actu6
ality 0& prefer this to 3re6ality which refers to thing! 3+alue is %-# a thing but a social relation2.
5egards.
Be need to remember with ch/mp that it is not 2/st the 7-7 backgro/nd that is rele0ant
to interpreting the real effect of 8inno0ation9 on wage antagonism. 'his aspect can be
made explicit by analyIing f/rther the 8moti0ation9 behind 8inno0ation9 which has to do
withC.the acc/m/lation of capital :D< so m/ch so that6 despite wishing to deny this6
ch/mp act/ally allows that 8entreprene/rs9 will e0ent/ally become capitalists
themsel0esD 7efore he does that6 howe0er6 in the 3'heorie5 he de0otes a whole chapter to
the meaning of 8!apital9.
'his is an &&,'?4> chapter beca/se ch/mp goes o/t of his way :and yo/ can
'=#!" his discomfortD< explaining away 8capital9 as 8the p/rchasing power9 of the
factors of prod/ction :machines6 tools6 labo/r-power<D ?n other words6 he insists that
8capital9 contrib/tes nothing to 8inno0ation96 is ,=' the (&4> aim or goal or p/rs/it or
p/rpose :Tweck< of the 8entreprene/r9 and therefore 8?nno0ation9 has really nothing to
do with 4cc/m/lation of !apitalDD &xtraordinary concept/al somersa/lt from ch/mp6
b/t one that is absol/tely necessary if he wishes to establish the 8?ndi0id/alitat96 the
8;eistigkeit9 of the 3#nternehmehr9D
?ndeed6 gi0en the s/bs/mption of the process of inno0ation into the prod/cti0e sphere 1
already clearly ded/ctible from his reference to Beber5s (ationalisier/ng at the 0ery start
of !h.2 of the 3'heorie5 1 ch/mp has to resol0e this e0ident inconsistency or 8aporia9
by seeking to define 8capital9 as a ,&#'(4> factor of prod/ctionD.
4ct/ally6 $insky does allow for the role of 8acc/m/lation9 1 and hence the antagonism
of the wage relation. 7/t he ne0er consistently takes this /p6 preferring 8to ac./iesce9 in
the financialC9>imits9 of capitalismD +et the (&4> >?$?' of capitalism is to be fo/nd
in the wage relation itselfD
"ence6 $insky writes abo/t 8the @eil of $oney9 :in 3F?"5< b/t he disting/ishes between
the 3neoclassical5 0ersion where /ltimately 3money5 is only a /nit of acco/nt so that
8goods are exchanged with goods9C.and *eynes5s 0ersion where 3money5 is a m/ch
more s/bstantial 3@eil5 in that it determines what $insky calls 8the d/al pricing system9
whereby 8financial assets9 are separated from 8prod/cti0e9 ones and priced separately.
'he e0ent/al 8mispricing9 that easily arises d/e to this 8&%4(4'?=,9 :cf. $arx5s
3'renn/ng5< then res/lts in 8spec/lati0e pyramids9 of debt that /ltimately lead to
financial collapse of the ;F! type. o essentially this 0alidates o/r interpretation of
*eynes and his description of money in !h621 of the ;'.
7/t6 again6 $insky does not explain why the 8spec/lati0e pyramid9 m/st collapse 1 or
differently p/t6 why inflation is s/ch a bad thing6 why it occ/rs at allD "ayek6 for
instance6 points o/t in 8%rices and %rod/ction9 that what matters is not price stability b/t
price 8ne/trality96 in other words a monetary system managed to ens/re that 8relati0e9
prices do not change so as to affect a change in the demand for 0ario/s factors of
prod/ction and cons/mption goods that is inconsistent with 8intertemporal e./ilibri/m9
:bro/ght abo/t by 8free market competition9 1 remember that for "ayek 8perfect
competition9 is meaningless 1 see rele0ant chapter in 8?nd.U&con.=rder9<.
@ $: and others 6 & guess, once Martin Wolf used the word HrepressionH, it was ine+itable that it would coe to
this. )arlier, & ;uoted :arl =aspers on how a little philosophy leads far fro the world but a lot of it brings us bac,
to it. #he proble is not with Mr. :eynes 0or Wolf or :rugan2 alone 6 you will recall SchupeterJs JpessiisJ
about the future of capitalis 0in J.apitalis, Socialis and /eocracyJ2. $s & tried to establish with y brief
re+iew of :eynes and Schupeter, it is capitalis itself 6 its social relations of production 6 that leads us toward
greater.....HrepressionH 6 and not 7ust in the sphere of finance, but also, as <rof. 5ogoff reinded us, in the
sphere of all 0E2 technical inno+ation. #his HrepressionH 0through State inter+ention but in other ways also2 is not
introduced He9ternallyH by HsocialistH forces. 5ather, this is HrepressionH that is becoing e+ery day ore
essential....to protect the capitalist syste itselfEE
8ere is the parado9E &t is not the HsocialistsH that bring about HrepressionH * it is the need to protect Hthe society of
capitalH fro the destructi+e dys6functions of capitalist social relations that brings us further toward this
denoueent. & want to as, the ;uestion, to which & ha+e been see,ing an answer through the study of uch
ore penetrating inds fro Mar9 through :eynes and Schupeter to Wolf and :rugan....#he ;uestion is*
where is this leading us toL and, what are the alternati+esL
& a sure all we agree that a little iagination, if not philosophy, is needed here.
Schump and Keynes State and Monopoly, a dialectic of repression.
4s ? ha0e so/ght to stress in my contrib/tions6 we ha0e a 8combined9 de0elopment to
confront in this ad0anced stage of capitalist 8de0elopment9 :&ntwickl/ng<. =n one side6
with *eynes6 we experience the need for the tate to play an e0er-increasing role in the
capitalist economy in order to s/stain 8aggregate demand9 and maintain politically-
acceptable le0els of 8employment9 and 8welfare9 to ens/re social peace and the s/r0i0al
of capitalism itself. 'his process we ha0e called 8b/rea/cratiIation9 and its historical
agency is 8the collecti0e capitalist9 or 8the tate-%lan9.
=n the other side6 we ha0e seen with ch/mpeter how 8technological inno0ation9 brings
abo/t the 8concentration9 of capitalist firms into 8monopolies9 or 8oligopolies9 that ha0e
8command9 o0er these processes and /se :ab/se< to maintain market share and
profitability e0en at the expense of employment in direct opposition to 8tate-%lan9
expansionary economic policies. 'his process we ha0e styled 8rationaliIation9 :or
internaliIation of capitalist command within one firm 1 what 'ronti calls 8concentraIione
dei capitali9 res/lting in 8concentraIione del capitale9 which brings workers together in
one place by s/bs/ming the prod/cti0e process 1 th/s capital appropriates the
8socialiIed9 prod/cti0e process b/t treats workers as separate entities<. 'his process has
now 8progressed9 so far6 to s/ch an extentC.that the monopoly capitalist firms constit/te
a direct challenge :D< to the more 8democratic9 legitimacy6 a/thority and 8efficacy9 of the
tate-%lan.
:'he recent example of 7% is absol/tely exemplary in this case 1 the =bama
4dministration was forced to admit6 in the face of p/blic alarm at the en0ironmental
crisis in the ;/lf of $exicoC.that it did n o t ha0e the technical means to deal with the
3crisis5C. 4nd that only 7ritish %etrole/m co/ld deal with itD 'his is a fact so remarkable
as to constit/te a radical de0elopment in the history of capitalism itselfD<
'hese6 ? belie0e6 are the twin problems of ad0anced capitalism. 'he attempt by modern
3nation-states5 to find 8technocratic9 sol/tions are bo/nd to fail. 7/t their 8politiciIation9
leads to 8sol/tions9 that6 as ? will attempt to show in f/t/re 3wolfexchanges56 leads well
3beyond5 the 3limits5 imposed by capitalist social relations of prod/ction.
1. 5eport joseph belbruno O =une AD M*AKa O <eralin,
<S* $s fate would ha+e it, the 1# this +ery day re+iews a boo, by &an 'reer on these thees called H#he
)nd of the 1ree Mar,etH. <lease note the difference* & a certainly not arguing that Hthe State6<lanH
threatens capitalis 6 & a saying that it tries to protect it 6 and & a not saying that the Hfree ar,etH is
threatened 6 & say that there ne+er was a Hfree ar,etH. 5ather, & a analysing the processes of
HbureaucratisationH of state ser+ices and HrationalisationH of production and distribution to show that the
antagonis that engenders these processes calls into ;uestion the legitiacy of e9isting social relations
and, as a direct pro6duct of these processes, brings us closer to the de+elopent of....alternati+es.
#here is no opposition or antithesis in y schee between HStateH and Hfree ar,etH 6 because Hthe StateH
and HonopolyH are pro6ducts of the sae social antagonis that is the basis 0or JengineJ2 of capitalis. &n a
way, &an 'reer is arguing soething that happened long ago in the ythical pre6history of capitalis 6
soething close to SchupeterJs Jideal typesJ of Hcircular flowH 0:reislauf2 and Hpure copetitionH 0reinen
Wettbewerbs2 that he hiself argued ne+er e9isted.
http*UUwww.ft.coU...6DDAQQfeabdcD.htl
5eport joseph belbruno O =une AD M*CMa O <eralin,
<<S* =ust to a,e this as clear as & can, participants ay appreciate that y +ery notion of Hsociety of
capitalH is entirely antithetical to &an 'reerJs opposition of HStateH +ersus Hfree ar,etH. #he need for the
State Hto repressH or JregulateH financial and industrial capitalist firs arises Hfro withinH the relations of
production and is not e 9 t e r n a l to those relations. What is He9ternalH or HantagonisticH to capital is the
Jli+ing labourJ of wor,ers. 0<lease note that by Jwor,ersJ & do not intend echanics in o+eralls or farers
brandishing sic,les* & intend all wage eployees 6 which include technicians, lecturers and, yes, e+en
7ournalists.2
'ut 'reers ain topic is the state capitalis! of .hina and 5ussia, which does not concern us here.
Schumpeter, Innovation, Markets and Profit Motive.
ch/mpeter5s 8theory of economic de0elopment9 m/st be placed in the philosophical-
intellect/al context of the 8empiriocriticism9 of &rnst $ach adopted and expo/nded by
the 3Biener *reis5 :the @ienna circle of philosophy< according to which science m/st be
based on 3experience5 and m/st dispel all 3metaphysical5 notions.
!ontrary to the neoclassical economic concept of 8general e./ilibri/m96 the experiential
reality of capitalism is that the economy is rarely in a state of 8e./ilibri/m9. ch/mpeter
notes that what we witness in capitalist history are rather phenomena associated with dis-
e./ilibria: the capitalist economy is in a constant state of 8e0ol/tion9 :&ntwickl/ng<
which entails both 8trans-formation9 and 8growth9. ?n short6 classical and neo-classical
economic theory with their 8>aw of @al/e9 :whether >abo/r-@al/e or #tility< co/ld not
explain theoretically the reality of capitalist 8de0elopment9. &./ilibri/m and the >aw of
@al/e lead only to economic 8stagnation96 they represent only a 8circ/lar flow9
:*reisla/f< of goods exchanged in a state of 8p/re competition9 :reinen Bettbewerbs<.
Bhat needed to be explained was the empirical existence of 8crises9 and 8growth9 in a
capitalist economy 1 b/t 8growth9 /nderstood not as mere 8./antitati0e expansion9 or
8greater o/tp/t9 :which is what *eynes /nderstood<6 b/t rather 8growth9 as
8de0elopment9 :&ntwickl/ng<6 as ./alitati0e leap6 asC.progress6 asC.9?nno0ation9.
ch/mpeter pays gratef/l trib/te to $arx for being the only classical theoretician to
identify the 8e0ol/tionary9 force of capitalism. 7/t he co/ld not espo/se $arx5s
8metaphysical9 notions of 80al/e9 or 8socially necessary labo/r time9. 'he ./estion then
arose for ch/mpeter: if 80al/e9 or 8/tility9 are not capable of explaining the e0ident
8empirical phenomena9 of capitalist 8crisis9 and 8de0elopment96 what other dri0ing force
or 8agency9 is there that is 8endogeno/s96 8intrinsic9 to capitalism that determines and
explains its historical beha0io/rM
"ere ch/mpeter realiIes immediately that the one factor that can lead capitalism o/t of
its 8circ/lar flow96 the factor that leads to the formation of new 8enterprises9 and new
8markets96 is the process that 8destroys9 old 8enterprises96 that 8destroys9 old 8markets9
andC.9creates9 new goods and ser0ices6 a process of 8entreprene/rial ?nno0ation9 that
gi0es new 8enterprises9 a 8competiti0e edge9 and leads to the formation of new 8firms9
that rapidly 8con./er9 the 8market9 and by so doing establish new 8monopolies9 able to
absorb higher 8profits9 and6 indeed6 to create more 8profits9 from new 8markets9 as these
new firms 8expand9 the 8needs9 or 8demand9 of 8cons/mers9.
ch/mpeter takes pains to explain :in 87/siness !ycles9< that it is not 8cons/mer
demand9 that dri0es 8?nno0ation9 beca/se6 if anything6 this demand tends to be
8conser0ati0e9 and 8retrograde9. ,o6 what m/st dri0e this demand is an 8inno0ati0e96
8entreprene/rial spirit9 :#nternehmergeist< that dri0es the process of 8technological
inno0ation9 in a dramatic dis-e./ilibrating6 8crisis-ind/cing9 str/ggle of 8creati0e
destr/ction9 :shopferische Terstor/ng<.
'hree ./estions arise at this precise and dramatic 2/nct/re:- first6 if indeed it is the 8spirit
of the entreprene/r9 :#nternehmergeist< that dri0es the process of 8inno0ation96 how then
can this necessarily 8s/b2ecti0e9C.9pirit9 :;eist< be the pro-d/ct of the 8ob2ecti0e9
process of capitalist pro-d/ctionM "ow can something as 8s/b2ecti0e9 as 8the spirit of the
entreprene/r9 gi0e rise to and occasion a complex technico-scientific process that takes
place in large monopolistic firms that already constit/ted the reality of capitalism in
ch/mpeter5s own timeM
4nd the second ./estion is6 e0en ass/ming6 as ch/mpeter allowed in his later work
:87/siness !ycles9< that the process of 8inno0ation9 and 8creati0e destr/ction9 is indeed
s/bs/med within the large 8monopolistic firm9 rather than in the heroic fig/re of the
indi0id/al 8entreprene/r96 - e0en allowing all this6 what is it then that 8moti0ates9
inno0ation and de0elopmentM Bhy indeed do 8entreprene/rial indi0id/als or firms9
engage in this 8inno0ati0e9 process of 8creati0e destr/ction9 except to maximiIe profits
or market share or a mixt/re of bothM
'he third ./estion6 a corollary of the pre0io/s two6 is the most important: - what does
8profit9 mean in this process of 8&ntwickl/ng9M
?n a f/t/re contrib/tion we will look at the extreme lengths ch/mpeter went :in the
3'heory5 and in 37/siness !ycles5< to dis-co/nt the profit moti0e as the 8dri0er9 of
8inno0ation9 and capitalist 8de0elopment9. 1 Bhich is why he did not tackle the meaning
and so/rce of 8profit96 relying s/rely on 7ohm-7awerk5s theory of interest.
'he abo0e presentation shows how in effect ch/mpeter co/ld 8empirically9 contest the
scientific rele0ance of 8e./ilibri/m96 which co/ld only ser0e 8didactic9 or 8he/ristic9
:"ayek in ?U&=< p/rposes. &0en in his re0iew of 7ohm-7awerk6 ch/mp had stressed
the 8elegance9 of his theory and its empirical fo/ndation. 7/t ch/mp5s own
philosophical attachment to 8empiricism9 - whilst it dro0e him to confront the 8reality9
of crisis and cycle and de0elopment as 8intrinsic9 moments or aspects of capitalism - was
always going to relegate him to the sphere of mere obser0ation and so pre0ent him from
/nderstanding the reality 7&"?,A the empirical data. ?ndeed6 the 8s/b2ecti0ism9 of the
8#nternehmergeist96 ch/mp5s trib/te to bo/rgeois 8?ndi0id/alitat96 co/ld ,=' be
reconciled with the 3(ationalisier/ng5 propo/nded by Beber :as ch/mp wished at
footnote 2 of !h.2 of 3'heorie5< precisely beca/se the 8ob2ecti0e9 8organiIational9
s/bs/mption of the process of 8?nno0ation9 relegated the 8entreprene/r9 to a mere
8manager9 and depri0ed the 8captain of ind/stry9 of its 8?ndi0id/alitat9 within the
process of 8?nno0ation9.
:4gain the whole 8science of management9 and 8theory of the organiIation9 that recently
recei0ed great bo/rgeois approbation with the award of the ,obel %riIe to =li0er
Billiamson6 achie0e nothing more than '= $4* capitalist command behind 8the
theory of the firm9 and 8transaction costs9 and 8contract/al enforcement9- %#(&>+6
again6 '= A?;#?& the real nat/re of the 8political9 antagonism within the capitalist
firm as a str/ct/re of !=$$4,A6 of force and 0iolence6 in terms of 8rational
expectations9 or 8bo/nded rationality9 1 again within that 3(ationalisier/ng5 indicated by
Beber. 'he 8limited rationality9 of the firm 1 the 8rationality9 that de-limits its
8bo/ndaries9 Kcf. (.!oase6 8'he >imits of the Firm9L and de-termines its 8internal
organiIation9 1 is clearly an 8instr/mental rationality9 that only ser0es to hide the o0erall
f/nction or agency of the 8firm9 as a str/ct/re of command. &@&, the red/ction of
8profit maximiIation9 for the p/rpose of retaining 8market share9 can only be seen as an
orientation toward the realiIation of profit and the extraction of 80al/e9.<
Bhat is lacking in ch/mpeter is the ability and willingness to admit6 to acknowledge
and /nderstand that the 8entreprene/r9 4>= is 8constrained9 and 8compelled9 by the
relations of prod/ction. Bhat is lacking is the 8moti0ation9 as 8will to power96 as the
need to command and control the process of pro-d/ction '"(=#;" and 7+ $&4,
=F 8inno0ation9. 'he 3!=$-%#>?=,5 of the 8entreprene/r9 or 8monopolistic firm9 is
the comp/lsion of 8profit-making9 1 '"4' is the 8battlefield96 the 8system of forces9 in
which indi0id/al capitalists m/st 8com-pete9 or fight. ,=' for the sake of 8competition9
or 8inno0ation9 :as ch/mp always attempts to arg/e 1 see esp. !h. =n 3!apital5 in the
'heorie<6 b/t rather '= (&-%(=A#!& the relations of prod/ction that ha0e bro/ght
abo/t the 8domination9 or 8command9 of the capitalist-entreprene/r. o here the fig/re
of the entreprene/r starts to e-merge in its '(#& !"4(4!'&(C.as 8!apitalist9D
7/t once the 8moti0ation9 of the entreprene/r is explained and com-prehended6 what
(&#>' from it6 its 8o/t-come9 is ,=' the 8entreprene/rial9 f/nction b/t (4'"&(
the 8political9 f/nction of 8command9 of the antagonism of the relations of prod/ction 1
and here we ret/rn to Beber5s 8leitender ;eist9 which is a m/ch more consistent agency
or fig/re 4' '"& &,A of the 3(ationalisier/ng/7/rea/cratisation5.
A. <lease allow e a rapid e9planation of SchupeterJs philosophical relation to Hepirio6criticisH or
HMachisH. &n his J8istory of )conoic $nalysisJ, Schupeter praised the HeleganceH of his >ienna lecturer,
)ugene 'oh6'awer,, whose theory of HroundaboutnessH as the origin of HinterestH or HprofitH 0:apitalzins2
he espoused. =ust as HepiricisH allowed 'oh6'awer, to refuse 0not refute2 the classical Hlabour theory
of +alueH because it is Hunobser+ableH, HetaphysicalH or HessentialistcH, so Schupeter intuited that neo6
classical Harginal utilityH and He;uilibriuH were e;ually HetaphysicalH notions that could only ser+e as
Hideal typesH or as HheuristicH de+ices.
?et, what & was arguing below is that 7ust as his HepiricistH orientation allowed Schupeter to concentrate
on the HrealityH of capitalist business cycles and HcrisesH leading to He+olutionUde+elopentH 0)ntwic,lung2, it
was this sae HepiricisH that confined hi to the Hsuperficial....obser+ationH of the causes of this cyclical
de+elopent in the Hsub7ecti+istH notion of Hentrepreneurial inno+ationH. When we ne9t coe to e9aine the
real, ob7ecti+e Hoti+ationH behind Hentrepreneurial inno+ationH, we will find the HcopulsionH of class
antagonis rather than SchupeterJs H&ndi+idualitatH of the Hcaptain of industryH.
@ $: 6 8i. 5est assured* & donJt thin, Wolf will e+er need y ad+ocacy 0though & was a barrister2. 'ut soe
of the coents do deser+e a caning....though ercifully a a7ority are ;uite insightful, e+en when they are
wrong and pro+ocati+e.
#here is no 8egelian J$ufhebungJ when a concept does not contain in its historical anifestation...its own
Ho+ercoingH or HsupersessionH 0Mar9ists call this a HcontradictionH, but it is a ost poleical ter2. %ow,
there is nothing in present technologies that HneedsH 0historically2 to be HsupersededH by new onesE
Schupeter certainly understood that, which is why he described capitalis and its Hcreati+e destructionH as
siply a historical econoical syste, with no hidden HdialecticH in it. -f course, this was entirely in ,eeping
with his epirio6critical! bac,ground which & briefly described before.
'ut the real 8egelian HdialecticalH point you will find in the bit you re7ect 6 wor,ing6class HantagonisH. #here,
if you cobine 8egel and 5icardo 0& hope to do that soon once & coplete the criti;ue of Schupeter2 you
will get a truly intellectually stiulating e9aple of J$ufhebungJ. .heers.
@ $: 6 8i. 5est assured* & donJt thin, Wolf will e+er need y ad+ocacy 0though & was a barrister2. 'ut soe
of the coents do deser+e a caning....though ercifully a a7ority are ;uite insightful, e+en when they are
wrong and pro+ocati+e.
#here is no 8egelian J$ufhebungJ when a concept does not contain in its historical anifestation...its own
Ho+ercoingH or HsupersessionH 0Mar9ists call this a HcontradictionH, but it is a ost poleical ter2. %ow,
there is nothing in present technologies that HneedsH 0historically2 to be HsupersededH by new onesE
Schupeter certainly understood that, which is why he described capitalis and its Hcreati+e destructionH as
siply a historical econoical syste, with no hidden HdialecticH in it. -f course, this was entirely in ,eeping
with his epirio6critical! bac,ground which & briefly described before.
'ut the real 8egelian HdialecticalH point you will find in the bit you re7ect 6 wor,ing6class HantagonisH. #here,
if you cobine 8egel and 5icardo 0& hope to do that soon once & coplete the criti;ue of Schupeter2 you
will get a truly intellectually stiulating e9aple of J$ufhebungJ. .heers.
@ Sepp and .arol Wilco9 and others.
<hilip Stephens in his .olun on '< and the disaster in the Gulf of Me9ico offers a superb application of the
analytical fraewor, & a trying to de+elop here. -n one side is the -baa $dinistration 0the State6<lan2
see,ing to lay blae on an oligopolistic fir! 0'<2 for failing to use its technological! apparatus 0pro+iding
both a social ser+ice and a profit! opportunity2 in a way consistent with the social! needs of safety and
en+ironental care. What Stephens is saying is that '< can only pro+ide and obey the technical!
constraints so it a,es little sense to blae it for what is a political! failure 0Webers leitender Geist!2* the
need for the political leadership to re6orient the source and pro+ision of energy away fro oil e9ploration
and to direct the bureaucracy! to enforce this through legislation.
&ncreasingly, therefore, the need for the technological inno+ati+e process! to be repressed! 0Wolfs thee2
by eans of bureaucratic rationalization! becoes so systeic! or political! that it calls into ;uestion the
entire basis of goals! or oti+ation! or purpose! 0Rwec,2 pursued both by the State6<lan 0-baa2 and by
the oligopolistic fir! 0'<2".so as to protect the society of capital! itselfE We can see then what the real
liit! of capitalis is".which, incidentally, is a lot ore than what Mins,y suggested in his 1inance and
Stability! analysis & discussed below. #he HliitH of capitalis is the growing i6possibility of the Hpolitical
leadershipH to reconcile the truly social needs of the Hsociety of capitalH with the pri+atistic Hprofit oti+eH of
both the Hbureaucratic State6<lanH on one side and the Hrationalised capitalist enterpriseH on the otherE
%ow, #8$# is J$ufhebungJEE
Martin Wolf* @ipergus, a poor coent. )9cessi+e go+ernent spending certainly did not lead to the
recession. #hat is beyond stupid. #he theory that e9pansi+e onetary policy led to the recession is ore
debatable. & thin, it is largely a straw an. 4S onetary policy played a sall role in creating the housing
bubble, for reasons & e9plain in the final chapter of the re+ised +ersion of y boo,, 1i9ing Global 1inance.
#he alin+estent theory is a theory, thatJs all. &t played a odest role, too, in the recession. 1ar ore
iportant was the instability of the financial syste. Mins,y is a better guide than 8aye, on this, not least
because he understood that a copetiti+e ar,et econoy is not necessarily self6stabilising. 'ut Mins,y did
not ser+e the role of being a prophet for a free ar,et religion, which is why he reains coprehensi+ely
ignored, particularly by the 4S right.
Hayek and Schumpeter
>ery iportant to bear in ind 8aye,s distinction between di+ision of ,nowledge! replacing di+ision of
labour! at a tie when inforation technology! is rapidly replacing anufacturing industry as the leading
sector of capitalist industry. 8aye, uses this in connection with 3prices as sources of econoic co6
ordination!, ensuring the social ososis and the signalling of inforation 0,nowledge2! regarding the
allocation of resources.
@ Sepp 6 ?our obser+ations pro+ide e with a wonderful opportunity to illustrate the point & was a,ing with
$: tying together the Hepirio6criticisH of the $ustrian School with the criti;ue of SchupeterJs
H&ndi+idualitatH or HGeistH at the origins of Hentrepreneurial technical inno+ationH and, therefore, Hcreati+e
destructionH.
8,ot only was my
first technical training largely scientific in the narrow sense of the
word b/t also what little training ? had in philosophy or scientific
method was entirely in the school of &rnst $ach and later of the logical
positi0ists.9 :?ndi0id/alism and &conomic =rder<
$s you ,now, 8aye, li,e Schupeter starts fro this notion of Hindi+idual freedoH which he translated into
the political diension of H(ibertyH and contrasted with the Hcollecti+ist SerfdoH. 1or 8aye, it is the
HfreedoH of the Hindi+idualH that guarantees the Hfree e9changeH that ta,es place in the Har,etH. $nd it
follows therefore that the notion of ar,et He;uilibriuH 6 regardless of whether it rests on HutilityH or soe
other inscrutable HetaphysicalH eleent 6 is entirely dependent on this Hfree e9changeH which will in+ariably
lead to the contractual or HsynallagaticH finding of the He;uilibriu priceH. 0& drew the 8obbes6
Schopenhauer68aye, line as opposed to 5ousseau68egel6Mar9 in the first 3wolfe9change.2
Gi+en the philosophical6scientific foundation of 8aye,Js econoic theory on Hobser+able factsH, it follows that
HpricesH are necessarily He;uilibriu pricesH and that therefore ar,et transactions conducted HfreelyH are
the best eans of ensuring that resources are allocated optially not in an absolute sense, but in an
epirical! sense, sub7ect to the inforation a+ailable, which is itself signalled! by ar,et prices. 1or 8aye,,
prices fi9ed in Hfree ar,etsH are the best source of HinforationH for the achie+eent of resource allocation
or co6ordination! and in+estent and the search for these HpricesH is what leads to He;uilibriuH. #o the
di+ision of labour!, 8aye, substitutes the di+ision of ,nowledge! as the social reality that enables the
ar,et to act as the social ind!, as it were. -ptial allocation of resources is siply inscrutable! because
all that is +isible! are prices".and prices pro+ide the best e9change of inforation possible for the co6
ordination of econoic decisions.
?n the light of o/r analysis of the meaning of a state of e./ilibri/m
it sho/ld be easy to say what is the real content of the assertion that a
tendency toward e./ilibri/m exists. ?t can hardly mean anything b/t
that6 /nder certain conditions6 the knowledge and intentions of the
different members of society are s/pposed to come more and more
into agreement or6 to p/t the same thing in less general and less exact
b/t more concrete terms6 that the expectations of the people and partic/larly
of the entreprene/rs will become more and more correct. ?n
this form the assertion of the existence of a tendency toward e./ilibri/m
is clearly an empirical proposition6 that is6 an assertion abo/t
what happens in the real world which o/ght6 at least in principle6 to
be capable of 0erification. :?bid.6p.45<
$ny Hdi+ergenceH fro He;uilibriuH can only be teporary if Har,et agentsH are allowed to fi9 these prices
HfreelyH because o+er tie! prices will tend to ad7ust toward e;uilibriu! were it not for the fact that
inforation! changes continually. .onse;uently, the role of the State ust be not that of a State6<lan as in
:eynes but that of a HState of (awH, that is a State that does not interfere or inter+ene in the Hfree ar,et
e9changeH and HliitsH itself to ensuring that Hindi+idualsH are HfreeH to fi9 HpricesH in the ar,et.
'oth 8aye, and Schupeter understood ;uite clearly that He;uilibriuH was only a HheuristicH or Hideal typeH
construction rarely occurring in reality. 08aye, uses the latter ter in &nd. $nd )con.-rd!.2 8aye, attac,ed
neoclassical e;uilibriu theory! for its tautological! character, for fi9ing prices a priori in a tieless!
fraewor, in which ar,et participants ha+e coplete and siultaneous inforation of factors affecting
prices. 8aye, calls this the (ogic of <ure .hoice!.
'he statement that6 if people know e0erything6 they are in e./ilibri/m
is tr/e simply beca/se that is how we define e./ilibri/m.:p.4V<
1or 8aye, prices are deterined a posteriori or e9 post facto. #hus, the e;uilibriu! they lead to is an
inter6teporal e;uilibriu!, not necessarily one of optial allocation! li,e Walrasian e;uilibriu because all
ar,et players do not ha+e perfect ,nowledge! or inforation!. #herefore the best that can be said is that
ar,et prices offer the best e;uilibriu! possible precisely because, unli,e the Walrasian stationary!
e;uilibriu, perfect ,nowledge! would iply socialistic! or planned! co6ordination of the allocation of
resources in society.
Bhile s/ch a position represents in one sense a position of e./ilibri/m6
it is clear that it is not an e./ilibri/m in the special sense in which e./ilibri/m is regarded as a sort of
optim/m position6 :in 8&conomics and *nowledge9<.
&t is entirely e+ident fro this suary that 8aye,s criticis of tautologis! that he o+ed against
Walrasian e;uilibriu is absolutely applicable to his own theory of ar,et prices!E Whereas neoclassical
e;uilibriu theory starts with a siultaneous tautology! where ar,et prices are deterined by ,nown and
unchangeable ;uantities of e9changeable goods in a tieless stationary fraewor,, 8aye, falls into the
e;ui+alent trap of assuing tautologically e9 post facto that ar,et prices are e;uilibriu prices!".because
the free! ar,et says soEE
$nd the ianent stupidity of 8aye,s theory does not stop thereE 'ecause with the sanctiony of a
fastidious protestant clergyan he goes on to pontificate about how the ar,et! ust necessarily be the
best for of social organization 0of courseE 'ecause the ar,et says soE2 to which the only alternati+e
0whyL2 is totalitarian dictatorship!E
$an in a
complex society can ha0e no choice b/t between ad2 /sting himself to
what to him m/st seem the blind forces of the social process and obeying
the orders of a s/perior. o long as he knows only the hard discipline
of the market6 he may well think the direction by some other
intelligent h/man brain preferableO b/t6 when he tries it6 he soon disco0ers
that the former still lea0es him at least some choice6 while the
latter lea0es him none6 and that it is better to ha0e a choice between
se0eral /npleasant alternati0es than being coerced into one.
8aye, fro &ndi+idualis and )conoic -rder!, p.FQ
0Such e9ecrable intellectual bestiality is only pardonable in a learned an such as 8aye, only because he
had to endure the horrific e9perience of %azi and So+iet totalitarianis. 'ut it is hard to contain the ,ind of
disdain for 8aye, that Martin Wolf displayed in the rear,s & ;uoted 7ust below in this foru.2
&t follows necessarily that for 8aye, the role of the State ust be liited to that of a 5echtsstaat! or State
of (aw! that preser+es indi+idual property rights! and the free e9change! of the self6regulating ar,et!.
'y contrast, with the ad+enturous e9uberance of a superb horsean, Schupeter attac,s the +ery notions
of HcopetitionH and Har,etsH. 1ar fro being HfreeH, ar,ets are in reality sub7ect to distortions arising fro
the HonopolisticH ad+antages brought on by Hinno+ationH and creati+e destructionH. Schupeter is light
years ahead of 8aye, because he focuses on the historical6e+olutionary aspects of capitalis in ters of its
producti+e transforation 0inno+ation2 and institutional organisational e+olution 0onopoly!2.
We can see thus how far historically and HepiricallyH superior SchupeterJs analysis of capitalis was and
why it has had so uch ore proinence intellectually than 8aye,Js analysis. We can also see how both
8aye,Js and SchupeterJs analyses were based on the epirical obser+ation of actual econoic facts and
institutions. 'ut whereas 8aye, proceeded to ipose an HidealH odel of Har,et e;uilibriuH conditional on
the political guarantee of Hfree e9changeH and Hprice deterinationH, Schupeter accepted the historical
reality of the capitalist Hbusiness cycleH and of its HcrisesH to de+elop his H#heory of )conoic /e+elopentH
according to Hentrepreneurial inno+ationH and Hcreati+e destructionH as the distinguishing features of
capitalis.
Schupeter insisted that &nno+ation! was a process endogenous, intrinsic! to capitalis because he
wished to highlight the e+olutionary! and hence scientific! nature of his analysis. 'ut, as can easily be
percei+ed, his e+olutionary! concepts are so epirical! and sub7ecti+e! that they can only be ad+entitious!
and accidental! in relation to capitalis itself, which e9plains why Schup engaged in incredible contortions
to deny the profit oti+e! or the accuulation of capital! as the real forces behind entrepreneurial
inno+ation!.
$s a result of his analytical6philosophical approach, there can be no ;uestion of 8egelian J$ufhebungJ in
SchupeterJs notion of Hcreati+e destructionH and of inno+ation!. ?et, as & will try to show, a careful critical
e9aination of these central Schupeterian concepts re+eals unista,ably that the Hoti+ationsH and the
Hantagonistic forcesH that engender the are certainly co6prehensible broadly as J$ufhebungJ. %ot
Htechnical inno+ationsH thesel+es but rather the Hsocial relationsH that they ebody and that bring the into
being, not the process of creati+e destruction! but the forces that pro6duce it are what we ust co6
prehend ore incisi+ely if we wish to ad+ance and enhance our analysis of capitalis itself.

@ Sepp and $: 6 $s you can see fro the presentation below, Schupeter was certainly closer
to 8aye,Js HMachisH 0or Hepirio6criticisH2 than to 8egel or e+en Mar9. 'oth J$ustriansJ were
so far reo+ed fro 8egelian philosophy that their first allegiance was always to 'oh6'awer,
with his HroundaboutnessH and the Harginal utilityH theory fro =e+ons and Gossen to Walras.
<lease reeber that in 8egelian philosophy there is no J$ufhebungJ....without HantagonisHE So
if you wish to interpret Schupeter in a 8egelian +ein, you ust first do +iolence to his own
ideology, you ust burst open his HhypostatisedH concepts and e9pose the to the light of history.
#he HepiricisH of his concepts is the real source of their Hsub7ecti+isH or HsuperficialityH 6 7ust
as they are in :eynesE 0&ndeed, this is the ost disappointing and pro+ocati+e HbourgeoisH aspect
of :eynesJs econoic theory 6 the ludicrous obscurantist, alost ystical6agical6irrational
notions of Hanial spiritsH, HuncertaintyH and Harginal efficiency of capitalH.2
#he only way you can resurrect 8egelian dialectics out of Schupeter is in the notion of
H)ntwic,lungH 0He+olutionH or Hde+elopentH2. 'ut before you can do that, you ha+e to go
HbeyondH Schupeter and as, hi what the real forces behind H)ntwic,lungH and Hschopferische
RerstorungH 0creati+e destructionH2 and H&nno+ationH really are. Soon & will try to argue that
Schupeter was e9treely +ague about this, and that indeed he bent o+er bac,wards to deny
that the oti+e behind Hinno+ationH and HentrepreneurshipH was anything other than.... the thrill of
HentrepreneurshipHE
My arguent fro here is ob+ious* the Hoti+eH behind HentrepreneurshipH can only be Hthe
accuulation of capitalH, in other words Hcoand o+er li+ing labourH. $nd therefore Hinno+ationH
and Hcreati+e destructionH are processes aied at securing and strengthening this HcoandH.
$nd this is why Htechnological inno+ationH is not and cannot be reo+ed fro the Hantagonis of
the wage relationH.
$s a result, e+en the process of HrepressionH proposed by Martin Wolf for this foru ust be read
in this light* HrepressionH by the State6<lan of certain fors of capitalist HenterpriseH 0now firly in
the hands of powerful HonopoliesH that in+alidate any +elleity of Har,et freedoH as espoused
by 8aye,2 are coproised not only by the HinfluenceH of HonopoliesH o+er the political
leadership of the State6<lan. $bo+e all, the regulation of capitalist in+estent decisions aied at
protecting and preser+ing capitalist social relations under the relentless antagonis of wor,ers
becoes incopatible with the preser+ation of those capitalist social relations thesel+esE $nd
this is the real J$ufhebungJ that we should tac,le soon.
0%e9t we will deal with 3&nno+ation first fro its subsuption! within the onopolistic fir
soething that neutralizes the sub7ecti+eUspiritual! role of the entrepreneur!. 'ut second we will
;uery the oti+e! behind 3&nno+ation and its location Shistorico6logicalT within the capitalist
rationale of profit6a,ing and accuulation of capital!. &n this regard, Schups strenuous efforts
0in .h on .apital in 3#heorie2 only ser+e to confir the suspicion".and turn it into a certainty.
&ronically, Schup is the best ad+ocate for our +ersion of the oti+ation!E 'ut third, we will loo,
at the practicalUepirical! u s e s of inno+ation! which again should re+eal the forcefulness of
our thesis.2
1. 5eport joseph belbruno O =une AQ AF*AKp O <eralin,
& ha+e 7ust read yesterdayJs .olun by #ony =ac,son that participants ay lin, below. $nyone who wishes
to reflect on and under6stand or co6prehend the truly Jre+olutionaryJ iplications of the Je9plosi+eJ inter6play
between so+ereign debt and capitalist relations of production siply ust parse this .olun word for word.
0#he theoretical fraewor, of analysis is soething & ha+e tried to outline especially in the last
Jwolfe9changeJ with lengthy criti;ues of :eynes and Schupeter.2
=apan ay be a special case, perhaps. 'ut the theoretical resonance of =ac,sonJs H7ournalisticH presentation
is siply uncanny. #here are two possibilities* either #ony =ac,son is a politico6econoic genius....or
else....Hthe facts 7ust spea, for thesel+esH. &f the latter, we are surely at a draatic historical 7uncture.
http*UUwww.ft.coU...6DDAQQfeabdcD.htl
=ac,sons article is reproduced below.
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
Claudio Napoleoni, in Il Pensiero Economic del 900, commentin! Schump, objects that
inno"ations tend to #a$ and #ane #ith economic cycles, not the other #ay around% 8e
also notes that Schup, rightly, did not see onopolies! as eleents that would affect in and of
thesel+es the +iability of capitalis% &!ain, this is 'urther e"idence o' the len!ths to #hich
Schump #ent to put the cart be'ore the horse( Inno"ation )E*+,E anta!onism-
inno"ation )E*+,E crisis and cycle .or economic /'luctuations01- inno"ation )E*+,E
pro'it- and tendentially credit )E*+,E inno"ation .thou!h in /)usiness Cycles0 he
concedes that lo!ical priority is not necessarily historical priority1%
0=ust read <aul Sweezys essay on Schupeter and the #heory of &nno+ations! in 3#he <resent
as 8istory which proposes the sae criticis & ha+e been elaborating here in ters of the profit
oti+e! and accuulation! as the dri+er of inno+ation!. Sweezy also identifies the in+ersion!
that Schupeter operates whereby inno+ation! pro6duces profits and not the other way around.
Sweezy concludes that it is possible for there to be a separate social group of inno+ators! as
hypothesized by Schupeter but his is unli,ely sociologically gi+en that inno+ation! has
ob+iously been incorporated! in the large corporation. );ually, the profit6oti+e is sufficient to
e9plain inno+ation! and this sets it at least on an e;ual hypothetical footing with the
entrepreneur!.
What differentiates our approach is the antagonistic! eleent and this ay be especially +alid
in an oligopolistic! setting where accuulation! is not so iportant anyore 0as profit6
a9iisation2 and where on the contrary the conser+ati+e! tendency ight be stronger were it
not for the antagonis of the wage relation.
&t is to be noted in this conte9t that Sweezy ne+er anages to o+ercoe critically the law of
+alue! e+en in its Mar9ist for so that +alue! is seen erely as a ;uantity! and e9ploitation! as
ere theft! of surplus +alue. $gain this is confired by Sweezys underconsuptionist! thesis in
3#he #heory of .apitalist /e+elopent and 0with 'aran2 in 3Monopoly .apitalis. 1or if indeed
capitalist accuulation is a factor independent of wor,ers antagonis, then the tendency to
o+eraccuulate! is the ob+erse of the edal with underconsuption!.2
'ut for us the ;uestion now, e+en in light of Sweezys criticis, is to concentrate on the lin,
between accuulation! and antagonis. #his sees to ha+e two aspects*6 the e9ternal!
definition of ar,ets! and copetition! where the process of trustification! that is
bureaucratization and rationalization 6 brings about a no+el definition of these categories as
social capital! and society of capital!. $nd this is the deocratic! oent of consuer
deand! being anaged! by the State6<lan and by oligopolistic! beha+iour 0cf. also 8aye,s
interesting essay in &nd. $nd )con.-rder, 1ree )nterprise and .opetiti+e -rder!2.
-n the internal! side there is the actual antagonistic content! of inno+ation!. &ndeed, as the
oligopolistic! concentration ounts and absorbs society! into capital!, so does the internal!
diension of the fir control! and rationalize! the entire chain of coand! that goes fro
anageent to the wor,place 0cf. -. Williason and .oase2 to establish the dictatorship of the
factory! 0in #rontian analysis2.
2e ha"e then a democratic society in appearance only that needs to re!ulate capital-
and an authoritarian #orkplace #here capitalist command 'inds direct e$pression and is
e$ercised%
2hat #e ha"e to do is to dra# this line, #hich o"ercomes Schump0s back3to3'ront
statement o' the problem and also S#ee4y0s 5ar$ist rele!ation o' these "ital matters o'
inno"ation to the capitalist /!reedy0 search 'or pro'its, that is, to matters o'
distribution, #hereby inno"ation ,E5&INS S6I77 & /S8)9EC6I:E0 &C6I:I6;, a matter
o' /!reed0 and not o' /anta!onism0% 6hese t#o sides must be distin!uished and separated%
)ecause once a!ain S#ee4y like Schump rele!ates the #hole problem o' capitalist
de"elopment to the mere distribution o' producti"e output and to the !reed o'
capitalist accumulation but lea"in! unchallen!ed the la# o' "alue itsel', and the crisis
at the heart o' capitalist relations o' production .the #a!e relation anta!onism1%
Sall wonder, then, that Sweezy can proceed to the analysis of the So+iet or socialist
econoy!".in the sae breathE 8ere, a criti;ue of the criti;ue helps clarify our analysis.
#o clarify the abo+e* the 3sub7ecti+e side of 3inno+ation is ob+iously 3the profit oti+e, the dri+e to
accuulate capital. 'ut this is only 3the sub7ecti+e side of the reality. #o see only this side to
3accuulation is to iss the reality entirely, to see it only fro the side of 3greed and 3rapacity,
fro the 3oral perspecti+e. ?et once we ac,nowledge that capitalist coand is soething
ore than the su of 3indi+idual decisions 03&ndi+idualitat2, once capital has becoe 3social
capital with ob+ious iplications for ar,et copetition!, then 3inno+ation becoes a direct e96
pression or ani6festation of social antagonisE
$nd this is all the ore so, when one considers the role of the State6<lan in this process. &t is
possible to de+elop the analysis by regarding the corporation! as an attept to pri+atize! and to
con6fine! the e+er ore political! nature of the wage6relation antagonis.
What this new perspecti+e occasions is the re6collocation of the dualis stateUcapitalist fir! on
one hand and deocratic societyUauthoritarian fir! on the other. #his is the 3arcanu that we
need to confront and to sol+e. 0See also .acciari on 3&l <olitico in 8egel.2
&t sees that the antagonis of rationalization! increasingly seeps through both in the
bureaucratic! diension and then e9plodes! at the State6political! le+el in the for of political
decisions that try to copensate for the antagoniss that pri+ate! capital cannot contain 0deficits
are a clear outcoe2 either at the econoic! le+el 0deficits, again2 or at the leadership! le+el 0the
State cannot correct the loss of 3rationalised coand2.
What & thin, is crucial to understand here is that there is a growing 3continuu de+eloping
between what is 3public and what is 3pri+ate so that 3State and 3enterprise becoe one and the
sae thing. $t that 7uncture, the 3ideological dualis, the 3baseUsuperstructure, 3stateUci+il
society, 3stateUcorporation all these collapse into one and changing one is identical with
changing the other.
0#he 8aye, study cited abo+e S1ree )nterprise and Mar,et -rder!T is interesting in that 8aye,
reflects on the liits of 3the ar,et and on the 3price signals needed to ensure social
reproduction note his di+ision of ,nowledge! as against di+ision of labour!, which is itself ;uite
syptoatic of the shift in the 3nature of social relations of pro6duction away fro 3anufacturing
to 3inforation.2
PH&N6+5 +* 6HE +PE,&( .*iscal Crisis and Po#erlessness o' the State3
Plan1
#he foru topic chosen by Martin Wolf raises epochal and fundaental ;uestions about the
nature and effecti+eness of 3nation6states in ad+anced capitalist societies. &t is iperati+e that we
sur+ey critically the succession of daily e+ents and coentary in order to draw soe strategic
politico6econoic conclusions about the current significance and li,ely unfolding of the present
crisis!. &n the pre+ious 3wolfe9change & sought to outline an analytical fraewor, that traced the
origin of the present 3crisis of capitalis on parallel chains of econoic de+elopents. #he first
was theorised by :eynes and represented the rise of the collecti+e capitalist!, the State6<lan, as
a per+asi+e bureaucracy! to replace the self6regulating ar,et! to stabilise the capitalist
econoy against deflation and high uneployent arising fro the downward rigidity of noinal
wages, itself the conse;uence of the growing political cohesion of Western wor,ing classes fro
the late nineteenth century.
#he second elaborated on Schupeters theory of capitalist de+elopent based on the crisis6
inducing rationalisation! of capitalist technologies of production 0&nno+ation! and creati+e
destruction!2 and the conse;uent concentration! of the ar,et echanis! 0internal, through
integration of econoic functions within anagerial lines of coand, and e9ternal, through
consolidation of corporate oligopolies!2.
My central thesis is that the current so+ereign6debt! induced fiscal crisis of the State6<lan is
critical! in that the State6<lan is forced by the inter6play of these two forces into a cobined loss
of legitiacy 0or political authority2 and econoic effecti+eness 0powerlessness2 that seriously
threaten its pi+otal role in the preser+ation of capitalist relations of production.
#o illustrate the effecti+eness! of this thesis in e9plaining the unfolding politico6econoic e+ents,
& ha+e turned to three gloriously insightful coentaries in Mondays 1# 0lin,ed below2. What &
as, participants to do is to read these coentaries and".connect the dots.
&n the first coentary, #ony =ac,son argues that
6he less sunny "ie# is that risin! consumer debt has been encoura!ed by !o"ernments
to dis!uise the 'act that the real incomes o' the rank and 'ile ha"e been !oin! no#here < in
stark contrast to the pri"ile!ed 'e#% Certainly, #hene"er the debt bubble has looked like
burstin!, !o"ernments ha"e ridden to the rescue% &nd in the recent crisis, this has meant
substitutin! public debt 'or pri"ate on a heroic scale, =>?%
'ut gi+en that the State6<lan 0capitalist go+ernent2 has reached the outward liit of
indebtedness consistent with aintaining acceptable le+els of eployent and growth, it needs
to shift the burden of in+estent growth bac, onto corporations! 0pri+ate enterprise2 which, in
turn, due to what =ac,son calls the fallacy of coposition! are both financially and politically
unable to replace the State6<lan in what by rights is its central politico6econoic role.
1urtherore, as /a+id 5oth,opf argues with a7estic lucidity, shifting this strategic burden bac,
on corporations! whose inno+ation6induced cople9ities! ha+e already created a phanto
balance6sheet! of to9ic assets that entangles the State6<lan in a deathly spiral of oral hazards!,
poses systeic ris,s! for the entire capitalist econoy and indeed for society itselfE &n his words,
this latest =phantom? balance sheet in"ites the creation o' an almost endless supply o'
'urther risks% I' markets continue to belie"e there are entire classes o' assets that
!o"ernments just #ill not ha"e the !uts to cut loose, this third balance sheet has in'inite
e$pansion possibilities@% 6his in turn creates hu!e burdens on the !o"ernments that
most can ill3a''ord, =A?%
$nd the tas, becoes especially diabolical when onetary authorities are re;uired to anticipate
the occurrence of ore asset bubbles! induced by the need 6 once again brought about by social
and political antagoniss that & attribute to the wage relation 6 to aintain acceptable li+ing and
eployent standards. $s $ndrew (arge concludes with adirable terseness,
In the case o' 'inancial stability, #hile instability is ob"ious, by the time that point is
reached policy has 'ailed% Instead, policy to pre"ent a state o' instability 'rom arisin! has
to be based on unobser"able probabilities, =B?%
6he politico3economic conclusions to be dra#n 'rom this analysis are o' dramatic
importance% *or #e ha"e reached a sta!e at #hich the contra3diction bet#een the social
!uarantee o' the State3Plan and the "ery systemic nature o' the risk incurred by
pri"ate corporations becomes absolute < #here in 'act there is po#er #ithout
responsibility on both sides, as the State3Plan loses its democratic po#er to mana!e the
capitalist economy, #hile the corporates lose their ability to initiate economic !ro#th
responsiblyC 2hat #e ha"e is the sub"ersion o' democracyC
I', indeed, the phantom balance sheet constituted by the risk3takin! technolo!ical
inno"ation o' enterprises keeps !ro#in!, then the State3Plan cannot maintain the 'iction
o' e''ecti"e political control o"er the society o' capital < to a point #here /corporates0
must be re3appropriated or nationalised( the e$propriators become the e$propriatedC
SAT http*UUwww.ft.coU...6DDAQQfeabdcD.htl 0#.=ac,son on State as 3Sugar6/addy2
SFT http*UUwww.ft.coUcsUsUDUMMFaVcCF6KKFD6AAdf6baKB6DDAQQfeabdcD.htl
05oth,opf on 3<hanto 'alance Sheets2
SCT http*UUwww.ft.coUcsUsUDUBcBCccKP6KKFD6AAdf6baKB6DDAQQfeabdcD.htl
0(arge on 3Systeic 5is, as 34nobser+able <robabilities2
INTEEST ! INTE"EST #The $racture of the State"Plan%
For what else is 8so0ereign debt9M ?t is an 8obligation9 owed by the whole 8society9 to
certain of its 8indi0id/als9. o0ereign Aebt is an obligation inc/rred by the 8totality9 of
the comm/nity to a 8sector9 of itself6 to a 8fraction9 of the comm/nityC.and that is why
so0ereign debt is the 8Fract/re9 of the tate-%lan. Bhat is at stake here is the
8separation9 of the interests of 8society9 as re-presented by the 8tate-%lan9 from the
interests of the 0ario/s 8fractions9 of society6 the 8partic/lar9 or 8indi0id/al9 interests
that are owed this 8obligation9 by the tate.
4s it t/rns o/t6 the 8obligation9 on the part of the tate is in the legal shape of 8bonds9
that yield a certain 8interest9 to 8bond holders9.
4nd this is where the 8fract/re9 is: the fract/re of the tate is reflected in the fract/re of
society between those who will 8pay9 the interest and those who will recei0e the interest
paid. 'he 0ital thing to remember is that the 8bond holders9 now demand that the tate
respect and obser0e its 8obligation9 to pay the interest on the debt. 7/t this 8obligation9
is a 8legal9 obligation and6 as s/ch6 can only be 8enforced9 by the tate. o what the
tate is being re./ired here is to respect an 8obligation9 that 8separates9 and 8di0ides9 its
8society9 or 8comm/nity96 an obligation that sets one class of citiIens against another
class for the sake of maintaining 7='" the 8/nity9 of the 8comm-/nity9 4,A the 8inter-
est9 :being in common< of its 8fractions9D
?t is ./ite ob0io/s that this circle simply cannot be s./ared. 7eca/se here the 8morality9
of the tate respecting its 8debt obligations9 /nder its own laws to pay 8interest9 to one
8sector9 or 8fraction9 of its society is simply incompatible with the 0ery financial and
economic s/r0i0al of the tate. 4nd if the tate cannot s/r0i0e 8financially and
economically96 if the tate cannot s/r0i0e 8fiscally9Cthen it becomes a non-tate6 it
becomes a 8failed tate9C.and the 8fract/re9 of the tate becomes the 8factionalism9 or
8fractionalism96 the 8separation96 the 8non-inter-est9 of 8society9 or of the 8comm-
/nity9.
8o0ereign debt9 indicates that point at which the 8indi0id/al interests9 of the members
of 8society9 become incompatible with the 8inter-est of the comm-/nity9. 'he fail/re of
the tate is the fract/re of society.
7/t the most telling point of all is that the tate itself in a capitalist society finds its only
rationality and inter-est in the 8indi0id/alism9 of its membersD 4nd this is the 0ery
8interest9 :the debt obligation< that is 8fract/ring9 and threatening the 0ery existence of
the tate 1 the debt interest that is bankr/pting the tateD
'"?6 my friends6 is 8the fract/re of the tate-%lan9. 'his is the dilemma that the tate is
called to resol0e: either it pays the 8interest9 and so fract/res the 8comm-/nity9 or it
/pholds the 8inter-est9 to maintain the hope of /niting the comm/nity.
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
5eport joseph belbruno O =une AM AA*DFa O <eralin,
@ a,azaran and @ Ma,oto 8on7o
Many than,s for your coents and encourageent. $s you can see, & ha+e cobined the present foru
thee on Hso+ereign debtH with the pre+ious one on Hfinancial repressionH to outline soe theses on the
present state of the capitalist econoy. &f you wish, you ay loo, also at y pre+ious inter+entions at
Jwolfe9changesJ where you will notice that & a trying to de+elop those new concepts and theories that will
clarify the political strategies needed to coe out of this Hperennial crisisH.
DE*ICI6S &ND ,EP,ESSI+N( .*racture o' the State3Plan, Part A1
$s we saw in the <hanto! and &nter6est! pieces below, the capitalist corporate sector now is of such
diensions that the social antagonis on which it thri+es 0wage relation, profitability2 poses systeic ris,s!
to the entire society of capital 0speculati+e bubbles, en+ironental and social costs, destructi+e business
cycles with underin+estent and high uneployent, growing ine;uality of incoe distribution2. &ndeed, so
deeply are the interests! of the corporate sector entrenched in the society of capital! that corporations are
now ipelled to rationalise the ipact of their operations as being in the public inter6est!, that is not 7ust for
the financial gain of their shareholders! but also for the benefit of a far greater nuber of social inter6ests!
referred to as sta,eholders!. SQT
#he legitiacy! of the State6<lan rests solely on its ability to preser+e and foster a capitalist corporate
sector that is supposed to create social wealth through in+estent and growth. &n reality, howe+er, the
corporate sector unleashes +iolent antagoniss and e9cesses that pose e9plosi+e systeic ris,s! to the
+ery reproduction of the society of capital SVT. &n turn, these ounting systeic ris,s! force the State6<lan to
apply further repression! 0ountains of laws and penalties, icroscopic policing2 that are restricted and
confined to preser+ing the capitalist relations of production 0the society of capital and the corporate sector2
that cause the antagonis and the social ra+ages in the first placeESFT
8ence, the State6<lan pays interest! 0on its debt obligations2 to the corporate sector in order to preser+e the
inter6est! 0the social fabric, social and industrial peace, the en+ironent2 of the society of capital only to see
its deficits! 0so+ereign debt2 ount because the capitalist corporate sector only produces fresh antagoniss
and fresh ra+ages that re;uire e+en ore repression! and deficits! by the State6<lan.SCT #he outcoe is a
clear e9asperation or fracture! of the State6<lan caught in a deadly downward spiral of deficits! and
repression!, of crisis after crisis!, that can only render it both financially 0deficits2 and legislati+ely
0repression2 powerless! and ineffectual! with e+ery new cycle. SAT
What 5obert S,idels,y SFT and any other :eynesians! fail to understand 0copare 5obert 5eichs
description of the '< crisis as a contest between citizenship interests and shareholder interests!2 with their
throwbac,s to the Great /epression and :eyness theorisation of that crisis! is that the present crisis differs
in both ;uality and e9tent fro what :eynes faced bac, thenE 0'ut see y references abo+e to 8yan
Mins,y and Sylos6(abini.2 #hese good intentions! will siply not do anyore. We need new ideas, new
theoretical concepts to de+elop new political strategies that can confront #8&S crisis!.
co SAT http*UUwww.ft. U...6DDAQQfeabdcD.htl 0-baa not in control re '<, econoy2
SFT http*UUwww.ft.coU...6DDAQQfeabdcD.htl 0S,idels,y on Who go+erns, <arliaent or ar,etsL!
SCT http*UUwww.ft.coU...6DDAQQfeabdcD.htl 0=ohn Gapper on '<s penalisation for 4S $din policy choices
corps seen to ha+e deep poc,ets!N reference to 5obert 5eich2
SQT http*UUwww.ft.coU...6DDAQQfeabdcD.htlW /angerous (iaisons how businesses are learning to wor, with
their new sta,eholders
SVT -n the growing systeic! occurrence of blac, swan! or systeic ris,s!, see here
http*UUwww.lesecho...s6cygnes6noirs.ht
1. 5eport joseph belbruno O =une FD K*FFa O <eralin,
@ a,azaran #han,s for the intelligent reply. 'elie+e it or not, & was already preparing a piece on the
transition fro :eynesian State6<lan! to what & call the current .risis6State!. #he naes already suggest
the nature and significance of the transition! as well as the 3differentia specifica between the two State6
1ors!. & call State61or! the specific configuration or institutional asset! of the State as a direct pro6duct
or result of a gi+en le+el of capitalist de+elopent!, that is of the social antagonis originating fro the
wage relation!. #hese theoretical eleents you will be able to discern fro all y pre+ious inter+entions at
this and pre+ious 3wolfe9changes. 0#he sae goes for the other atters you raise +alidly regarding the
e9ploitation of .hinese wor,ers, which & ha+e co+ered at soe length in +arious pre+ious contributions.2
15-M 3S#$#)6<($% #- 3.5&S&S6S#$#)
#he classical liberal State6of6(aw that pre+ailed in the nineteenth century was brought down by the parallel
capitalist processes of corporate concentration! 0e9ternal to the fir and leading to oligopolies!2 and of
rationalisation! 0internal transforation of the labour process and of the anagerial structure of the fir2
producing goods for consuption in a ass ar,et!. #hese de+elopents in capitalist industry led to the
corresponding transforation of the whole of society! into a society of capital!, that is to say into a social
factory! where the old liberal! State of (aw! 05echtstaat2 becae a Social State! 0Sozialstaat2 or State6
<lan! able to ediate effecti+ely the relationship of the capitalist class with a assified!, #aylorised,
politically hoogeneous and copact wor,ing class 0politically represented by social6deocratic or 3labour
parties2.
#he old liberal State6of6(aw could still be theorised by .lassical <olitical )conoy and (iberal <olitical
#heory as being a neutral, autonoous, independent guardian! State watching o+er a self6regulating
ar,et echanis! responding to the (aw of >alue! and tending to e;uilibriu! with national onetary
systes regulated under the Gold Sterling )9change Standard. 'ut it was the profound and irretrie+able
collapse of this liberal State61or! in the Great /epression under the weight of the capitalist de+elopents
we 7ust described that led :eynes and 5oose+elt to respond with the %ew /eal Settleent! and the
subse;uent establishent of the new Gold /ollar )9change Standard at 'retton Woods after World War
#wo. 0-n all these thees the supree account is still :. <olanyis #he Great #ransforation!.2
#his :eynesian65oose+eltian State6<lan! was supposed to reedy the crisis! created by the inability of
social capital! to deal with and contain the antagonis of the new political coposition of the ass wor,er!
by pro+iding a bureaucratic! and parliaentary! syste of ediation of this antagonis through the
up,eep of aggregate deand! and social and welfare planning!. 8ence, State6<lan!. 0#he %ew /eal
literature is +ast. Search <rof. .S Maiers wor, for a superb re+iew.2
:eyness analysis was always aied at State econoic policies 0fiscal and onetary2 that would return the
econoy to full6eployent e;uilibriu!. 8yan Mins,y had already drawn a clear distinction between
different capitaliss! or stages of capitalis, in order to stress the inherent financial instability! of this latest
type! of capitalis 0please refer to the lin,s pro+ided2. ?et Mins,y, in y +iew, failed to theorise the
dynaic! eleents of this analysis and to go beyond a superficial :eynesian! ephasis on financial
instability! and dise;uilibriu! without see,ing to enucleate the uch ore iportant antagonistic forces
behind the process of capitalist rationalisation! 0technological and anagerial inno+ation2 designed as a
specific capitalistic 4S) of 3crises!. %either :eynes nor Mins,y considered a point at which the State6<lan
could no longer ediate and reedy capitalist crises! but would itself occasion a rising wa+e of fiscal
crises, systeic ris,s!, of blac,6swan e+ents! that ha+e trans6fored it into a ere tool for crisis
anageent! a .risis6State!* 6 which is precisely the condition of fracture of the State6<lan! that & ha+e
described in this 3wolfe9change. 0<lease refer to y <hanto! and &nter6est! contributions.2SAT,SFT
&n sharp contrast to :eynes and Mins,y, and in an in+erted way 0fro the point of +iew of capitalE2,
Schupeter chose instead to focus precisely on this capitalistic 4S) of crises! to re6launch capitalist
industry toward an e9pansion of its coand o+er li+ing labour through econoic growth! and
technological de+elopent! by ephasising the e+olutionary! aspects of capitalist crises! and business
cycles! as intrinsic features of capitalis.SCT
What :eynesians see to fail copletely to co6prehend is the blindingly6ob+ious, utterly irreparable crisis
of the :eynesian State6<lan!, of this %ew /eal Settleent! which has been brought about not so uch by
Mins,ian financial instability! 0which is an effect rather than the cause2 but by the growing antagonis of the
wage relation that the State6<lan! left unresol+ed and could ne+er resol+e. &ndeed, there can be little doubt
that :eynes hiself was entirely pessiistic about the ability of the State6<lan to resol+e class conflict and
to a+oid the tendency to stagnation of the capitalist econoy in the long run! 0reeber his aphoris, in
the long run were all dead!2.
&f you li,e, the proble with :eynesian! approaches to the current crisis! is that they approach it as 7ust
another crisis!, another episode in the sae chain of identical capitalist crises!. #herefore, they fail to
grasp what is new! in this crisis!, what sets it apart fro the others, and what needs to be done to confront
this no+elty!. :eynesians ha+e forgotten 0to put an ironic and reproachful twist on the recent boo, on debt
crises! by 5ogoff and 5einhardt2".that #his #ie &S /ifferent!E #his is the failure that & will attept to
reedy in the near future. :indest 5egards.
SAT http*UUwww.le+yins....orgUpubsUwpKQ.pdf 0Mins,ys 1&82
SFT http*UUwww.lesecho...s6cygnes6noirs.ht 0on the rise of systeic ris,s!, blac, swans!2
SCT http*UUarno.uniaas.nlUshow.cgiLfidIAVQF
Mario #ronti coents interestingly on :eynes 0Sull $utonoia del <olitico, p.MQ ff2*
&n the past & was ore enthusiastic for the :eynesian re+olutionN today, instead, & see uch ore its liits
in the sense that it appears increasingly as the epirical finding of a historical passage that had already
occurred, of a basic need of capitalist structuresN but it has not theoretical or strategic force, of describing an
asset for the future and this is the sense in which it does not function todayN the :eynesian solution"lac,s
political breadth, the breadth of political theory".!
#ronti warns against reducing political criti;ue to the structural because then the ipact of the forer is lost
or absorbed in the ob7ecti+e echaniss!. &nstead, the crisis pro+o,ed should place in a direct
relationship".the producti+e relations with the power relations, a collision between the ode of production
and the state, without further ediations either fro society or fro the political syste! 0pp. MQ6V2.
#his is what we are attepting with the analysis of the fracture of the State6<lan! which reo+es the ability
of the State to ediate the interests of capital in fa+our of growth and de+elopent. $nd this reo+es the
greatest source of legitiacy! of the role of the State its ability to re6direct producti+e forces toward
sustained growth and de+elopent. 1iscal roo for anoeu+re shrin,s, while the ability to shrin, deficits
leads to greater conflicts o+er sharing the burden of fiscality. &t is social antagonis that pushes le+els of
capitalist concentration and rationalization that pose systeic ris,s! for the society of capital that the State
needs to repress but is unable to do because its fiscal burden is already +ery high and it needs to resort to
pri+ate enterprise to re6start the engine of growth because otherwise the growth! could not be 7ustified in
ters of capitalist enterprise 0crowding out!2.
&ndeed, it is possible to argue that e+en the e9tent of bureaucratization! needs to contract in the nae of
deficit cuts and efficiencies! in the public ser+ice e+en as repression! rises because the State needs to
diinish the le+el of public in+estent! seen by capital as political in+asion of its sphere of coand.
- akaIaran 1 'hanks once again for yo/r helpf/l comments. 4s yo/ can see 8the wage
relation9 is central to my analytical scheme of capitalism. Bhat ? intend by 8wage
relation9 is not limited to nominal monetary wage negotiations. ?t is a m/ch broader
notion that mo0es far away from wage negotiations and distrib/tion of income to the
m/ch more cr/cial notion of the nat/re of work and the nat/re of prod/ction. 'he
antagonism of the wage relation wo/ld be relati0ely easy to fix if it was confined to
contract/al negotiations with capital as to the retrib/tion of workers. 'he point here is
m/ch more important than that: - antagonism o0er the wage relation extends to the act/al
s/bordination of li0ing labo/r to capitalist command in the process of prod/ction :of
goods and ser0ices< and6 therefore6 also to the nat/re of the work that workers are coerced
to perform /nder capitalist command in the workplace and6 by extension6 the nat/re of
the pro-d/cts created in the capitalist prod/cti0e process.
'he 0ice of all modern economists :academic or 2o/rnalistic or professional< is to neglect
this dimension of capitalist social relations of prod/ction for reasons that seem ob0io/s to
me: - beca/se considering these elements of 8the economy9 wo/ld lead to the immediate
political challenge of both the prod/cti0e process in the workplace :how we work< as
well as the distrib/ti0e process in the sphere of cons/mption :what we prod/ce and how
it is distrib/ted<. 'hese are 8explosi0e9 ./estions that bo/rgeois economists find it
impossible to address beca/se they call into ./estion the 0ery legitimacy of the society of
capital6 of its 8corporate sector9 and of its 8tate-%lan9 that is now red/ced to a 8!risis-
tate9. Bhat makes them 8explosi0e9 is the fact that the antagonism of the wage relation
can no longer be 8mediated9 thro/gh inflation and e0en less thro/gh 8a/sterity
meas/res96 b/t rather in0ests im-mediately the 8political sphere9 of the !risis-tate.
For bo/rgeois economists to confront these absol/tely cr/cial and critical elements of
8economic9 analysis wo/ld necessarily draw them into accepting that 8the economy9 is
not a ./antifiable entity that can be described6 let alone /nderstood6 with a system of
mathematical form/lae and e./ations leading to a :metaphysical< 8e./ilibri/m9. (ather6
8the capitalist economy9 is a set of relationships of power6 of domination and command
especially in the sphere of prod/ction6 in the workplace6 which is why 8the wage
relation9 is inel/ctably central to it. ?n my next contrib/tion ? will explain my
interpretation of the meaning of 8%/blic Aebt9.
- 4* 1 4 point well taken6 if ? may. 'here is a 8meas/rement9 problem that arises when
we look at 8economic9 categories6 and most poignantly with regard to 8monetary9
meas/res. 'he contrib/tion on the 8meaning of p/blic debt9 wished to raise precisely this
8meas/rement problem9 that ? strongly belie0e grows each day more 8critical9 to the
analysis of capitalism as its act/al 8crisis9 /nfolds. For ? belie0e that a time is fast
approaching when the 8meas/rement9 of 8economic categories9 :the monetary 0al/e of
8p/blic debt96 for instance< become 8./estionable9 in the sense that they no longer reflect
any 8reality9 except the 8dys-f/nction9 of the capitalist economy seen as a 8social
system9 or as a 8set of instit/tions9.
,ot only 8monetary meas/rement9 becomes problematic6 b/t indeed the 8categories9
themsel0es :D< come into ./estion :8p/blic debt96 ;A%6 8inflation96 8real9 as against
8nominal9C.90al/es9< 1 all these categories come into ./estion precisely beca/se of the
central problem that ? ha0e raised: - that 8bo/rgeois economic science9 no longer is able
to grasp the increasingly 8political9 character of the antagonisms hidden behind those
8scientific9 categories c/rrently employed.
'o ill/strate this point ? wo/ld point to $artin Bolf5s !ol/mn in today5s F' raising the
8categorical9 problem of central-bank 8money-printing9. Bhat ? find exciting and
engrossing in Bolf5s approach is his clear 0ision of the 8instit/tional9 :read 8political9<
aspects of capitalism. :&ric >onergan5s comment below can also be read in this context6 ?
think.<
For this p/rpose6 ? am linking here a wonderf/l s/mmary of %ost-*eynesian ?nstit/tional
analysis by %rof. Bhalen K1L who co-wrote st/dies with "yman $insky bringing together
the *eynesian and ch/mpeterian approach to capitalism. ?n my pre0io/s post ? also
referred to the latest ,obel %riIe la/reate6 =li0er Billiamson5s work on 8'he >ogic of
&conomic =rganisation9 K2L and 8the logic of the firm9 that clearly theorise this
8instit/tional9 character of the capitalist economy and show it clearly and /nmistakeably
:altho/gh from a per0erse and despicable capitalist perspecti0e of 8economic efficiency9<
for what it is:- a system of command and domination of dead labo/r Kcapital< o0er li0ing
labo/r KworkersL in something called 8the market9 Kanother capitalist instit/tionLL.
'he fact that we can finally && this 8political9 dimension of capitalism behind all the
8mystifications9 of 8economic science9 is certainly an indication of the 8decadence9 of
this 8system9 and ? hope to deepen the analysis of capitalism in coming posts6 starting
with a critical look at ch/mpeter5s and $insky5s acco/nt of the instr/cti0e relationship
between capitalist 8inno0ation9 and 8finance9. *indest (egards6 and thanks again for
raising these 0ital matters.
- epp: "i. For yo/r benefit6 ? am also linking %osen5s re0iew of the Rapanese economy
already appended by $artin Bolf to one of his recent col/mns:
http://www.bankofengland.co./k/p/blications/speeches/2010/speech4P4.pdf
K1Lhttp://digitalcommons.ilr.cornell.ed//cgi/0iewcontent.cgiMarticleE102VUcontextEintl0f
:Bhalen on %ost-*eynesian ?nstit/tional analysis 1 $insky<.
K2Lhttp://books.google.com.a//booksM
idE@J?Ag;2>"@g!UprintsecEfrontco0erUd.Eoli0erWwilliamsonUso/rceEblUotsE(Fd
5mip,sXUsigEip?2Ff7baAt0yenfdk&0tVH@-
d&UhlEenUeiEeRwg'=r+74/Jce!P'?UsaEJUoiEbookXres/ltUctEres/ltUresn/mEY
U0edE0!ASSV4&w7Ig*#0EonepageU.UfEfalse :=li0er Billiamson<
KPLhttp://www.ft.com/cms/s/0/20ba1db0-He2f-11df-G4aY-00144feabdc0.html
:>/ke Rohnson on 8dysf/nctional9 large corporations6 7%<
T&E ME'NIN( !$ )P*+,I- .E+T/ #or 0hy the State"Plan has 1ecome a -risis"
State% a re"statement.
? wo/ld implore all contrib/tors to read the following extract from ch/mpeter5s great
st/dent %aolo ylos->abini which encaps/lates the 8fract/re of the *eynesian tate-
%lan9: -
8%/blic expendit/re6 if prod/cti0e KprofitableL6 has a do/ble positi0e effect on national
prod/ct: one positi0e that consists in the growth of prod/ction6 and the other temporaryC
in that by increasing demand it creates in0estment opport/nities for pri0ate enterprise.
#nprod/cti0e K/nprofitableL p/blic expendit/re6 instead6 has only this temporary effect
that lasts only as long as it K/nprod/cti0e expendit/reL lasts. ?f the proportion of
/nprod/cti0e expendit/re on total expendit/re grows6 it is probable that the rate of
growth of p/blic expendit/re will exceed the rate of growth of national prod/ct: and
thisC.cannot last indefinitely69 :p.2556 8=ligopoly U'echnical %rogress96 1GY2<.
4nd here is the cr/nch. 7eca/se what we ha0e witnessed since the start of the 8tate-
%lan9 with its 8aggregate demand management9 :which *eynes clearly intended as a
8temporary9 stim/l/s< is that the rate of growth of 8/nprod/cti0e9 :that is6 /nprofitable<
in0estments has far exceeded that of 8profitable9 in0estments mercilessly and inexorably.
7/t the tate-%lan has been able to disg/ise this by 8pri0atising9 capitalist in0estments
and allowing the pri0ate sector to book profits that were entirely dependent on
expansionary fiscal and monetary policies from the tate-%lan. +et this 8pri0atisation9 of
apparently 8prod/cti0e9 in0estments was 8profitable9 only in appearance beca/se it was
based in large and catastrophic part on the inflation of 8asset b/bbles9 and spec/lati0e
in0estments that finally exploded in the ;reat Financial !risisD
*eynes in the ;eneral 'heory was so foc/sed on the short term that he /nderestimated
the theoretical-political limits of p/blic expendit/re and so failed to reflect on the impact
of these 8limits9 on his theory. &0en (oose0elt5s ,ew Aeal 4dministration was 0ery
ca/tio/s :too ca/tio/s for *eynes< in taking /p 8profitable9 direct in0estments for fear of
trespassing on 8pri0ate enterprise9 territory :see note in ylos->abini6 3=e%'56 p25V<.
Bith the benefit of hindsight6 we can see that 8the *eynesian tate-%lan9 was ne0er
0iable as a strategy for s/stained capitalist growth. 4s $insky and ylos->abini :scholars
of *eynes and ch/mpeter respecti0ely< ha0e shown6 the whole edifice of the tate-%lan
was b/ilt on a doomed 8pyramid of credit96 a 8%onIi-like scheme9 that was bo/nd to
collapse. 4nd collapse it has done in dramatic fashion. :ee links below.<
'he 8fract/re9 of the tate-%lan and its trans-formation into a 8!risis-tate9 consists
precisely in this: that to the extent that the tate-%lan tries to maintain social 8stability9 it
can only do so by maintaining p/blic expendit/re e0en /nder the g/ise of 8pri0ate
in0estment96 b/t this 8pri0ate in0estment9 is 8profitable9 only in a diminishing sphere of
capitalist acti0ity controlled by large oligopolies or else thro/gh 8spec/lati0e9 acti0ities.
?n both cases6 faced with growing social antagonism6 8pri0ate enterprise9 ass/mes s/ch a
scale and control o0er global capitalist in0estments that it poses 8systemic risks9 to the
society of capital. =nce these 8systemic risks9 come o/t into the open6 the tate-%lan is
then obliged to take o0er the fiscal b/rden of this 8phantom profitability9 in the form of
8p/blic deficits9 which the tate-%lan either seeks to hono/r6 only to face bankr/ptcy6 or
else tries 8to inflate away9 thro/gh hyperinflation6 which clearly 8de-stabilises9 the
capitalist system.
K1L http://www.le0yinstit/te.org/p/bs/wpH4.pdf :$insky5s Financial ?nstability
"ypothesis<
K2L http://sead-p/b.cilea.it/index.php/%>S/arterly(e0iew/article/0iewFile/5G-YV/HP
:ylos->abini on %rospects for Borld &conomy<
KPL http://12G.P.20.41/eps/mac/papers/0004/0004024.pdf
K4L http://www.bankofengland.co./k/p/blications/speeches/2010/speech4P4.pdf :%osen
on Rapan<
6IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
A. joseph belbruno O =une AP K*AMa O <eralin,
O -ptions
@ $: #han,s for the interesting lin,. <rof. 'ernstein is right about the possessi+e
indi+idualis! of the #ea <arty. We e9ained it already in the pre+ious 3wolfe9change with
8aye,, and e+en below in the <hanto! piece that sets Schupeter apart fro the $ustrian
School. 'ut <rof. 'ernstein is rather wea, on 8egel.
#o stay within the topic of this foru, & ha+e written a brief piece lin,ing the notion of public
deficits! with 8egels political philosophy. ?ou will see fro this that it is not true to say that
the #ea <arty! ebers deand nothing! or as, for nothing!. #rue, their ideas and clais
ay not be clear. 'ut their deands ste fro the irreconcilable conflict between an
indi+idualis! sha,en by an econoy in recession, on one side, and their resentent at the
State 0the $dinistration2 for incurring the debt! that they wrongly blae for causing the
recession. What they do not understand is that it is their indi+idualist! religion 0E2 which lies
at the heart of the legitiacy of the capitalist State that has caused the so+ereign debt! in
the first placeE....<recisely because, as Martin Wolf would say, a society cannot be in debt
with".itself!E
&%#)5)S# -5 &%#)56)S# 0#he 1racture of the State6<lan2
1or what else is so+ereign debt!L &t is an obligation! owed by the whole society! to certain
of its indi+iduals!. So+ereign /ebt is an obligation incurred by the totality! of the counity
to a sector! of itself, to a fraction! of the counity".and that is why so+ereign debt is the
1racture! of the State6<lan. What is at sta,e here is the separation! of the interests of
society! as re6presented by the State6<lan! fro the interests of the +arious fractions! of
society, the particular! or indi+idual! interests that are owed this obligation! by the State.
$s it turns out, the obligation! on the part of the State is in the legal shape of bonds! that
yield a certain interest! to bond holders!.
$nd this is where the fracture! is* the fracture of the State is reflected in the fracture of
society between those who will pay! the interest and those who will recei+e the interest paid.
#he +ital thing to reeber is that the bond holders! now deand that the State respect
and obser+e its obligation! to pay the interest on the debt. 'ut this obligation! is a legal!
obligation and, as such, can only be enforced! by the State. So what the State is being
re;uired here is to respect an obligation! that separates! and di+ides! its society! or
counity!, an obligation that sets one class of citizens against another class for the sa,e
of aintaining '-#8 the unity! of the co6unity! $%/ the inter6est! 0being in coon2 of
its fractions!E
&t is ;uite ob+ious that this circle siply cannot be s;uared. 'ecause here the orality! of
the State respecting its debt obligations! under its own laws to pay interest! to one sector!
or fraction! of its society is siply incopatible with the +ery financial and econoic sur+i+al
of the State. $nd if the State cannot sur+i+e financially and econoically!, if the State
cannot sur+i+e fiscally!"then it becoes a non6State, it becoes a failed State!".and the
fracture! of the State becoes the factionalis! or fractionalis!, the separation!, the
non6inter6est! of society! or of the co6unity!.
So+ereign debt! indicates that point at which the indi+idual interests! of the ebers of
society! becoe incopatible with the inter6est of the co6unity!. #he failure of the State
is the fracture of society.
'ut the ost telling point of all is that the State itself in a capitalist society finds its only
rationality and inter6est in the indi+idualis! of its ebersE $nd this is the +ery interest!
0the debt obligation2 that is fracturing! and threatening the +ery e9istence of the State the
debt interest that is ban,rupting the StateE
#8&S is the fracture of the State6<lan!. #his is the dilea that the State is called to
resol+e* either it pays the interest! and so fractures the co6unity! or it upholds the inter6
est! to aintain the hope of uniting the counity.
A. 5eport joseph belbruno O =une AK Q*QMa O <eralin,
O -ptions
@ $: & do not thin, that people ha+e reflected! fully on the +ast iplications of this
phenoenon we call the downward rigidity of noinal wages! and the epochal
transforations this has wrought on the asset of capitalist institutions starting with the
%ew /eal Settleent!, through to 'retton Woods, and then the era of fle9ible e9change
rates leading to the Global 1inancial .risis!.
$s you can see fro any of the coents below and across the board e+en in other
financial papers, but particularly 0belie+e it or not2 in acadeic econoics, the +ast
a7ority of coentators see current e+ents through the spectacles of con+entional
analysis!, whether it be 3:eynesian or 3neoclassic. #here is a catastrophic obstinacy to
see capitalist social relations of production 3sub specie aeternitatis!, as if they were
iutable aspects of huan society or 0(ord help usE2 of huan nature!. My last two
inter+entions were eant to highlight this draatic if e+ident apory! or contra6diction!* the
capitalist State is now powerless! to reedy 0through fiscal and onetary policy2 and
ediate 0through bureaucratic rationalisation2 the irresoluble antagonis of the wage
relation. Siply and star,ly put, #he :eynesian State6<lan is ban,rupt!, financially and
politically.
Martin Wolf is right to denounce the ca+een! those theoreticians and coentators
who indeed are so far reo+ed fro the reality of ad+anced capitalis that they ay as
well 7oin the tribes of %eanderthal or Stonehenge. ?et the proble is that we are
witnessing the unra+elling of the :eynesian %ew /eal Settleent! soething that was
theorised already ebryonically by 8yan Mins,y, although & ha+e found an earlier +ery
terse forulation in <aolo Sylos6(abinis -ligopoly and #echnical <rogress!. &t is
interesting to note that Mins,y and Sylos6(abini were students of the two giants of
twentieth century bourgeois econoics!, :eynes and Schupeter respecti+ely.
So it is no accident that an attenti+e and genial obser+er li,e Martin Wolf has turned his
attention to these theoreticians. &ndeed, & ust say that the best current analyses of
capitalist de+elopents are to be found not in the efforts of acadeic econoists whose
ethods and theories are increasingly de+oid of any rele+ance to reality, but rather in the
coentaries of soe 7ournalistic reporters and coentators. $nd & belie+e that there is
a reason for this, one that & identified in y tie at .abridge. #he fact is that acadeic
econoists are no longer the independent 3liberal professionals of the postwar era when
uni+ersities were still outside! the producti+e6in+estent cycle of capital. $s & realised at
.abridge with the )conoics 1aculty, acadeics are now nothing ore than wage
eployees. #heir necessary subordination! to the +arious re+iew echaniss of their
eployent ;uite siply .-)5.)S the into ,eeping at least the appearance of
discipline!, credibility! and responsibility! uch the sae way as central ban,ers.
$cadeics ha+e lost their independence! or rather, li,e central ban,ers, they are
independent! only to the degree that they reain technocratic!, that is wor, within the
strict and rigid confines of their discipline! or profession! 0now 3illiberal, alas2.
#he ine+itable outcoe is that not only has acadeic research been conditioned as to the
conclusions! it reaches. 'ut also, ore iportant as & found out in .abridge,
econoists are not e+en allowed to as, the right ;uestions!E #here is no need to e9plain
at length what this does to any presuption acadeic econoists ha+e of approaching
anything e+en reotely resebling science!. 4nder the conditions that pre+ail in
ad+anced capitalis and the subsuption or subordination! of acadeic institutions to
the coand of capital, econoic science! entirely loses its ability to reflect critically on
the institutional unfolding of the real social relations of production.
Which is why, once again, this foru is effecti+ely one of the last refuges of critical thin,ers
wishing to challenge". the con+entional wisdo!.
A. joseph belbruno O =une AM AA*DFa O <eralin,
O -ptions
@ a,azaran and @ Ma,oto 8on7o
Many than,s for your coents and enourageent. $s you can see, & ha+e cobined the
present foru thee on Hso+ereign debtH with the pre+ious one on Hfinancial repressionH to
outline soe theses on the present state of the capitalist econoy. &f you wish, you ay loo,
also at y pre+ious inter+entions at Jwolfe9changesJ where you will notice that & a trying to
de+elop those new concepts and theories that will clarify the political strategies needed to
coe out of this Hperennial crisisH.
/)1&.&#S $%/ 5)<5)SS&-%* 01racture of the State6<lan, <art F2
$s we saw in the <hanto! and &nter6est! pieces below, the capitalist corporate sector now
is of such diensions that the social antagonis on which it thri+es 0wage relation,
profitability2 poses systeic ris,s! to the entire society of capital 0speculati+e bubbles,
en+ironental and social costs, destructi+e business cycles with underin+estent and high
uneployent, growing ine;uality of incoe distribution2. &ndeed, so deeply are the
interests! of the corporate sector entrenched in the society of capital! that corporations are
now ipelled to rationalise the ipact of their operations as being in the public inter6est!,
that is not 7ust for the financial gain of their shareholders! but also for the benefit of a far
greater nuber of social inter6ests! referred to as sta,eholders!. SQT
#he legitiacy! of the State6<lan rests solely on its ability to preser+e and foster a capitalist
corporate sector that is supposed to create social wealth through in+estent and growth. &n
reality, howe+er, the corporate sector unleashes +iolent antagoniss and e9cesses that pose
e9plosi+e systeic ris,s! to the +ery reproduction of the society of capital SVT. &n turn, these
ounting systeic ris,s! force the State6<lan to apply further repression! 0ountains of
laws and penalties, icroscopic policing2 that are restricted and confined to preser+ing SFT
the capitalist relations of production 0the society of capital and the corporate sector2 that
cause the antagonis and the social ra+ages in the first placeESFT
8ence, the State6<lan pays interest! 0on its debt obligations2 to the corporate sector in order
to preser+e the inter6est! 0the social fabric, social and industrial peace, the en+ironent2 of
the society of capital only to see its deficits! 0so+ereign debt2 ount because the capitalist
corporate sector only produces fresh antagoniss and fresh ra+ages that re;uire e+en ore
repression! and deficits! by the State6<lan.SCT #he outcoe is a clear e9asperation or
fracture! of the State6<lan caught in a deadly downward spiral of deficits! and repression!,
of crisis after crisis!, that can only render it both financially 0deficits2 and legislati+ely
0repression2 powerless! and ineffectual! with e+ery new cycle. SAT
What 5obert S,idels,y SFT and any other :eynesians! fail to understand 0copare 5obert
5eichs description of the '< crisis as a contest between citizenship interests and
shareholder interests!2 with their throwbac,s to the Great /epression and :eyness
theorisation of that crisis! is that the present crisis differs in both ;uality and e9tent fro
what :eynes faced bac, thenE 0'ut see y references abo+e to 8yan Mins,y and Sylos6
(abini.2 #hese good intentions! will siply not do anyore. We need new ideas, new
theoretical concepts to de+elop new political strategies that can confront #8&S crisis!.
SAT http*UUwww.ft.coU...6DDAQQfeabdcD.htl 0-baa not in control re '<, econoy2
SFT http*UUwww.ft.coU...6DDAQQfeabdcD.htl 0S,idels,y on Who go+erns, <arliaent or
ar,etsL!
SCT http*UUwww.ft.coU...6DDAQQfeabdcD.htl 0=ohn Gapper on '<s penalisation for 4S $din
policy choices corps seen to ha+e deep poc,ets!N reference to 5obert 5eich2
SQT http*UUwww.ft.coU...6DDAQQfeabdcD.htlW /angerous (iaisons how businesses are
learning to wor, with their new sta,eholders
SVT -n the growing systeic! occurrence of blac, swan! or systeic ris,s!, see here
http*UUwww.lesecho...s6cygnes6noirs.ht
A. 5eport joseph belbruno O =une FD K*FFa O <eralin,
O -ptions
@ a,azaran #han,s for the intelligent reply. 'elie+e it or not, & was already preparing a
piece on the transition fro :eynesian State6<lan! to what & call the current .risis6State!.
#he naes already suggest the nature and significance of the transition! as well as the
3differentia specifica between the two State61ors!. & call State61or! the specific
configuration or institutional asset! of the State as a direct pro6duct or result of a gi+en
le+el of capitalist de+elopent!, that is of the social antagonis originating fro the
wage relation!. #hese theoretical eleents you will be able to discern fro all y
pre+ious inter+entions at this and pre+ious 3wolfe9changes. 0#he sae goes for the other
atters you raise +alidly regarding the e9ploitation of .hinese wor,ers, which & ha+e
co+ered at soe length in +arious pre+ious contributions.2
15-M 3S#$#)6<($% #- 3.5&S&S6S#$#)
#he classical liberal State6of6(aw that pre+ailed in the nineteenth century was brought
down by the parallel capitalist processes of corporate concentration! 0e9ternal to the fir
and leading to oligopolies!2 and of rationalisation! 0internal transforation of the labour
process and of the anagerial structure of the fir2 producing goods for consuption in a
ass ar,et!. #hese de+elopents in capitalist industry led to the corresponding
transforation of the whole of society! into a society of capital!, that is to say into a
social factory! where the old liberal! State of (aw! 05echtstaat2 becae a Social State!
0Sozialstaat2 or State6<lan! able to ediate effecti+ely the relationship of the capitalist
class with a assified!, #aylorised, politically hoogeneous and copact wor,ing class
0politically represented by social6deocratic or 3labour parties2.
#he old liberal State6of6(aw could still be theorised by .lassical <olitical )conoy and
(iberal <olitical #heory as being a neutral, autonoous, independent guardian! State
watching o+er a self6regulating ar,et echanis! responding to the (aw of >alue! and
tending to e;uilibriu! with national onetary systes regulated under the Gold Sterling
)9change Standard. 'ut it was the profound and irretrie+able collapse of this liberal
State61or! in the Great /epression under the weight of the capitalist de+elopents we
7ust described that led :eynes and 5oose+elt to respond with the %ew /eal Settleent!
and the subse;uent establishent of the new Gold /ollar )9change Standard at 'retton
Woods after World War #wo. 0-n all these thees the supree account is still :. <olanyis
#he Great #ransforation!.2
#his :eynesian65oose+eltian State6<lan! was supposed to reedy the crisis! created by
the inability of social capital! to deal with and contain the antagonis of the new political
coposition of the ass wor,er! by pro+iding a bureaucratic! and parliaentary!
syste of ediation of this antagonis through the up,eep of aggregate deand! and
social and welfare planning!. 8ence, State6<lan!. 0#he %ew /eal literature is +ast.
Search <rof. .S Maiers wor, for a superb re+iew.2
:eyness analysis was always aied at State econoic policies 0fiscal and onetary2 that
would return the econoy to full6eployent e;uilibriu!. 8yan Mins,y had already
drawn a clear distinction between different capitaliss! or stages of capitalis, in order to
stress the inherent financial instability! of this latest type! of capitalis 0please refer to
the lin,s pro+ided2. ?et Mins,y, in y +iew, failed to theorise the dynaic! eleents of this
analysis and to go beyond a superficial :eynesian! ephasis on financial instability! and
dise;uilibriu! without see,ing to enucleate the uch ore iportant antagonistic forces
behind the process of capitalist rationalisation! 0technological and anagerial inno+ation2
designed as a specific capitalistic 4S) of 3crises!. %either :eynes nor Mins,y considered
a point at which the State6<lan could no longer ediate and reedy capitalist crises! but
would itself occasion a rising wa+e of fiscal crises, systeic ris,s!, of blac,6swan e+ents!
that ha+e trans6fored it into a ere tool for crisis anageent! a .risis6State!* 6
which is precisely the condition of fracture of the State6<lan! that & ha+e described in this
3wolfe9change. 0<lease refer to y <hanto! and &nter6est! contributions.2SAT,SFT
&n sharp contrast to :eynes and Mins,y, and in an in+erted way 0fro the point of +iew of
capitalE2, Schupeter chose instead to focus precisely on this capitalistic 4S) of crises!
to re6launch capitalist industry toward an e9pansion of its coand o+er li+ing labour
through econoic growth! and technological de+elopent! by ephasising the
e+olutionary! aspects of capitalist crises! and business cycles! as intrinsic features of
capitalis.SCT
What :eynesians see to fail copletely to co6prehend is the blindingly6ob+ious, utterly
irreparable crisis of the :eynesian State6<lan!, of this %ew /eal Settleent! which has
been brought about not so uch by Mins,ian financial instability! 0which is an effect
rather than the cause2 but by the growing antagonis of the wage relation that the State6
<lan! left unresol+ed and could ne+er resol+e. &ndeed, there can be little doubt that
:eynes hiself was entirely pessiistic about the ability of the State6<lan to resol+e class
conflict and to a+oid the tendency to stagnation of the capitalist econoy in the long run!
0reeber his aphoris, in the long run were all dead!2.
&f you li,e, the proble with :eynesian! approaches to the current crisis! is that they
approach it as 7ust another crisis!, another episode in the sae chain of identical
capitalist crises!. #herefore, they fail to grasp what is new! in this crisis!, what sets it
apart fro the others, and what needs to be done to confront this no+elty!. :eynesians
ha+e forgotten 0to put an ironic and reproachful twist on the recent boo, on debt crises!
by 5ogoff and 5einhardt2".that #his #ie &S /ifferent!E #his is the failure that & will
attept to reedy in the near future. :indest 5egards.
SAT http*UUwww.le+yins....orgUpubsUwpKQ.pdf 0Mins,ys 1&82
SFT http*UUwww.lesecho...s6cygnes6noirs.ht 0on the rise of systeic ris,s!, blac, swans!2
SCT http*UUarno.uniaas.nlUshow.cgiLfidIAVQF
A. joseph belbruno O =une FA P*QFa O <eralin,
O -ptions
#8) M)$%&%G -1 <4'(&. /)'#! 0or Why the State6<lan has becoe a .risis6State2
a re6stateent.
& would iplore all contributors to read the following e9tract fro Schupeters great
student <aolo Sylos6(abini which encapsulates the fracture of the :eynesian State6<lan!*
6
<ublic e9penditure, if producti+e SprofitableT, has a double positi+e effect on national
product* one positi+e that consists in the growth of production, and the other teporary"
in that by increasing deand it creates in+estent opportunities for pri+ate enterprise.
4nproducti+e SunprofitableT public e9penditure, instead, has only this teporary effect that
lasts only as long as it Sunproducti+e e9penditureT lasts. &f the proportion of unproducti+e
e9penditure on total e9penditure grows, it is probable that the rate of growth of public
e9penditure will e9ceed the rate of growth of national product* and this".cannot last
indefinitely,! 0p.FVV, -ligopoly X#echnical <rogress!, ABMF2.
$nd here is the crunch. 'ecause what we ha+e witnessed since the start of the State6
<lan! with its aggregate deand anageent! 0which :eynes clearly intended as a
teporary! stiulus2 is that the rate of growth of unproducti+e! 0that is, unprofitable2
in+estents has far e9ceeded that of profitable! in+estents ercilessly and ine9orably.
'ut the State6<lan has been able to disguise this by pri+atising! capitalist in+estents
and allowing the pri+ate sector to boo, profits that were entirely dependent on
e9pansionary fiscal and onetary policies fro the State6<lan. ?et this pri+atisation! of
apparently producti+e! in+estents was profitable! only in appearance because it was
based in large and catastrophic part on the inflation of asset bubbles! and speculati+e
in+estents that finally e9ploded in the Great 1inancial .risisE
:eynes in the General #heory was so focused on the short ter that he underestiated
the theoretical6political liits of public e9penditure and so failed to reflect on the ipact of
these liits! on his theory. )+en 5oose+elts %ew /eal $dinistration was +ery cautious
0too cautious for :eynes2 in ta,ing up profitable! direct in+estents for fear of trespassing
on pri+ate enterprise! territory.
With the benefit of hindsight, we can see that the :eynesian State6<lan! was ne+er +iable
as a strategy for sustained capitalist growth. $s Mins,y and Sylos6(abini 0scholars of
:eynes and Schupeter respecti+ely2 ha+e shown, the whole edifice of the State6<lan
was built on a dooed pyraid of credit!, a <onzi6li,e schee! that was bound to
collapse. $nd collapse it has done in draatic fashion. 0See lin,s below.2
#he fracture! of the State6<lan and its trans6foration into a .risis6State! consists
precisely in this* that to the e9tent that the State6<lan tries to aintain social stability! it
can only do so by aintaining public e9penditure e+en under the guise of pri+ate
in+estent!, but this pri+ate in+estent! is profitable! only in a diinishing sphere of
capitalist acti+ity controlled by large oligopolies or else through speculati+e! acti+ities. &n
both cases, faced with growing social antagonis, pri+ate enterprise! assues such a
scale and control o+er global capitalist in+estents that it poses systeic ris,s! to the
society of capital. -nce these systeic ris,s! coe out into the open, the State6<lan is
then obliged to ta,e o+er the fiscal burden of this phanto profitability! in the for of
public deficits! which the State6<lan either see,s to honour, only to face ban,ruptcy, or
else tries to inflate away! through hyperinflation, which clearly de6stabilises! the capitalist
syste.
SAT http*UUwww.le+yins....orgUpubsUwpKQ.pdf 0Mins,ys 1inancial &nstability 8ypothesis2
SFT http*UUsead6pub.ci...U+iew1ileUVB6MPUKC
0Sylos6(abini on <rospects for World )conoy2
A. joseph belbruno O =une FF Q*DCa O <eralin,
O -ptions
@ a,azaran #han,s once again for your helpful coents. $s you can see the wage
relation! is central to our analytical criti;ue of capitalis. #he wage relation! is not liited to
noinal onetary wage negotiations. &t is a uch broader notion that o+es far away fro
wage negotiations and distribution of incoe to the uch ore crucial notion of the nature of
wor, and the nature of production. #he antagonis of the wage relation would be relati+ely
easy for capitalists to fi9 if it was confined to contractual negotiations with capital as to the
retribution of wor,ers. #he point here is uch ore iportant than that* 6 antagonis o+er
the wage relation e9tends to the actual subordination of li+ing labour to capitalist coand
in the process of production 0of goods and ser+ices2 and, therefore, also to the nature of the
wor, that wor,ers are coerced to perfor under capitalist coand in the wor,place and, by
e9tension, the nature of the pro6ducts created in the capitalist producti+e process.
?ou will appreciate that e+en adirably enlightened econoists li,e Mins,y entirely by6
passes this critical! aspect of capitalis only to concentrate on its financial instability!
which, if anything, is an effect of wage6relation antagonis but not its cause. $nd he also
failed to capture critically! the aazing Schupeterian insights into the capitalistic use! of
technological inno+ation as a practical tool of capitalist coand inside and outside the
wor,place. 0Schupeter hiself encouraged the de+elopent of an econoic sociology! in
this regard.2
?ou would ha+e noticed that bourgeois econoic science! has 7ust awarded a %obel <rize
to -li+er Williason whose wor,, once again, can be described as a Schupeter6inspired
icroeconoic6anagerial! study of the capitalist corporation as a structure of coand!
that bypasses ar,et or price echaniss! to internalise these political functions within the
corporate! hierarchy 0legally, adinistrati+ely as well2. 08aye,s analysis of the price
echanis! as an econoy of inforation! is siilar and offers iportant analytical clues.2
#he +ice of odern econoists 0acadeic or 7ournalistic or professional2 is to neglect this
diension of capitalist social relations of production for reasons that see ob+ious to e* 6
because considering these eleents of the econoy! would lead to the iediate political
challenge of both the producti+e process in the wor,place 0how we wor,2 as well as the
distributi+e process in the sphere of consuption 0what we produce and how it is
distributed2. #hese are e9plosi+e! ;uestions that bourgeois econoists find it ipossible to
address because they call into ;uestion the +ery legitiacy of the society of capital, of its
corporate sector! and of its State6<lan! that is now reduced to a .risis6State!. What a,es
the e9plosi+e! is the fact that the antagonis of the wage relation can no longer be
ediated! through inflation and e+en less through austerity easures!, but rather in+ests
i6ediately the political sphere! of the .risis6State.
1or bourgeois econoists to confront these crucial, critical eleents of econoic! analysis
would necessarily draw the into accepting that the econoy! is not a ;uantifiable entity
that can be described, let alone understood, with a syste of atheatical forulae and
e;uations leading to a 0etaphysical2 e;uilibriu!. 5ather, the capitalist econoy! is a set
of relationships of power, of doination and coand especially in the sphere of production,
in the wor,place, which is why the wage relation! is ineluctably central to it.
01or a theoretical introduction to these thees & would recoend 5aniero <anzieris wor,.
<lease google his nae. <anzieri is one of the greatest theoreticians of the last century. #he
fact that scholars li,e hi are ignored by bourgeois science! is in itself a ringing indictent
of the coplete contept these people ha+e of wor,ers, their reality and their interests.2
.heers.
http*UUlibco.orgU...y6raniero6panzieri
@ Geran Monetarist 6 & thin, (onergan has a point. H'ond +igilantesH 0or J1inanz,apitalJ2
ha+e truly nowhere to go because there are truly no alternati+e currencies to the dollar and
the euro for the to blac,ail go+ernents 0Hcapital stri,eH2. & ha+e coented on this
before. -f course, they are always +ery welcoe to buy reninbi and rublesE 0.an you
iagine Western capitalists in the war ebrace of Mao and <utinL #hatJs a laughE....-r
they can hide gold Sliited aountsT or cash Seaten up by inflationT or buy real assets
Sunprofitable, ris,yT li,e the .hinese dictatorship. .heers.
A. joseph belbruno O =une FF Q*DCa O <eralin,
O -ptions
@ a,azaran #han,s once again for your helpful coents. $s you can see the wage
relation! is central to our analytical criti;ue of capitalis. #he wage relation! is not liited to
noinal onetary wage negotiations. &t is a uch broader notion that o+es far away fro
wage negotiations and distribution of incoe to the uch ore crucial notion of the nature of
wor, and the nature of production. #he antagonis of the wage relation would be relati+ely
easy for capitalists to fi9 if it was confined to contractual negotiations with capital as to the
retribution of wor,ers. #he point here is uch ore iportant than that* 6 antagonis o+er
the wage relation e9tends to the actual subordination of li+ing labour to capitalist coand
in the process of production 0of goods and ser+ices2 and, therefore, also to the nature of the
wor, that wor,ers are coerced to perfor under capitalist coand in the wor,place and, by
e9tension, the nature of the pro6ducts created in the capitalist producti+e process.
?ou will appreciate that e+en adirably enlightened econoists li,e Mins,y entirely by6
passes this critical! aspect of capitalis only to concentrate on its financial instability!
which, if anything, is an effect of wage6relation antagonis but not its cause. $nd he also
failed to capture critically! the aazing Schupeterian insights into the capitalistic use! of
technological inno+ation as a practical tool of capitalist coand inside and outside the
wor,place. 0Schupeter hiself encouraged the de+elopent of an econoic sociology! in
this regard.2
?ou would ha+e noticed that bourgeois econoic science! has 7ust awarded a %obel <rize
to -li+er Williason whose wor,, once again, can be described as a Schupeter6inspired
icroeconoic6anagerial! study of the capitalist corporation as a structure of coand!
that bypasses ar,et or price echaniss! to internalise these political functions within the
corporate! hierarchy 0legally, adinistrati+ely as well2. 08aye,s analysis of the price
echanis! as an econoy of inforation! is siilar and offers iportant analytical clues.2
#he +ice of odern econoists 0acadeic or 7ournalistic or professional2 is to neglect this
diension of capitalist social relations of production for reasons that see ob+ious to e* 6
because considering these eleents of the econoy! would lead to the iediate political
challenge of both the producti+e process in the wor,place 0how we wor,2 as well as the
distributi+e process in the sphere of consuption 0what we produce and how it is
distributed2. #hese are e9plosi+e! ;uestions that bourgeois econoists find it ipossible to
address because they call into ;uestion the +ery legitiacy of the society of capital, of its
corporate sector! and of its State6<lan! that is now reduced to a .risis6State!. What a,es
the e9plosi+e! is the fact that the antagonis of the wage relation can no longer be
ediated! through inflation and e+en less through austerity easures!, but rather in+ests
i6ediately the political sphere! of the .risis6State.
1or bourgeois econoists to confront these crucial, critical eleents of econoic! analysis
would necessarily draw the into accepting that the econoy! is not a ;uantifiable entity
that can be described, let alone understood, with a syste of atheatical forulae and
e;uations leading to a 0etaphysical2 e;uilibriu!. 5ather, the capitalist econoy! is a set
of relationships of power, of doination and coand especially in the sphere of production,
in the wor,place, which is why the wage relation! is ineluctably central to it.
01or a theoretical introduction to these thees & would recoend 5aniero <anzieris wor,.
<lease google his nae. <anzieri is one of the greatest theoreticians of the last century. #he
fact that scholars li,e hi are ignored by bourgeois science! is in itself a ringing indictent
of the coplete contept these people ha+e of wor,ers, their reality and their interests.2
.heers.
http*UUlibco.orgU...y6raniero6panzieri
@ Geran Monetarist 6 & thin, (onergan has a point. H'ond +igilantesH 0or J1inanz,apitalJ2
ha+e truly nowhere to go because there are truly no alternati+e currencies to the dollar and
the euro for the to blac,ail go+ernents 0Hcapital stri,eH2. & ha+e coented on this
before. -f course, they are always +ery welcoe to buy reninbi and rublesE 0.an you
iagine Western capitalists in the war ebrace of Mao and <utinL #hatJs a laughE....-r
they can hide gold Sliited aountsT or cash Seaten up by inflationT or buy real assets
Sunprofitable, ris,yT li,e the .hinese dictatorship. .heers.
A. joseph belbruno O =une FC AD*CVa O <eralin,
O -ptions
<<S* $pologiesE 8ere is that Wray ,in, again
http*UUwww.cfeps.o...6pdfUW<FF6Wray.pdf
1. 5eport joseph belbruno O =uly B P*FKa O <eralin,
3G5$SS8-<<)5S $%/ $%#S 5)>&S&#)/ %eoclassical #heory
)ntsagung 5enunciation. #o renounce iediate gratification of needs in e9change for a future reward is
possibly one of the distinguishing features of being huan. #he +ery process of reflection!, of pausing to
thin,, in+ol+es a conscious act, a waiting! that is a weighing of options a process of figuring out entally,
of pro67ecting ideas into the future. #hat is the destiny of technology!, the practical ipleentation
0ipleent! eans instruent!, tool, technical de+ice2 of huan ideas huan beings were hoo faber
before e+ol+ing through li+ing labour to the status of hoo sapiens.
)+ery technical act of pro6duction therefore ust in+ol+e a waiting!, a renunciation!".)ntsagung. #his is
the philosophical foundation of $ustrian School econoics, fro Schopenhauer through 'oh6'awer, to
8aye, and Schupeter. &n a capitalist society, profit! is the reward of the capitalist or, in Schupeter, of the
inno+ati+e entrepreneur, 7ust as in .hristian eschatology the <rotestant )thic decrees that access to 8ea+en
is the 7ust reward of the ascetic self6denial of the faithful, the clia9 of the $s,esis, the ascension! to
paradise through the steep slope of huan sinful e9istence, or the arduous clib to the suit of %ir+ana
0Schopenhauer2.
#his is the rationale that led 'oh6'awer, to 7ustify profit! or interest! as the reward of the capitalist for
eploying roundabout! technological ethods of pro6duction that delay! final consuption of worldly
resources. 8aye, has perhaps the best and ost succinct illustration of this process of reasoning in <rices
and <roduction! 0at p.BQ2*6
H&t sees soething of a parado9".'ut the fact is that when the growing deand for finished consuersJ
goods has ta,en away part of the non6specific producersJ goods re;uired,
those reaining are no longer sufficient for the long processes, and the particular ,inds of specific goods
re;uired for the processes which would 7ust be long enough to eploy the total ;uantity of those nonspecific
producersJ goods do Wnot yet e9ist. #he situation would be siilar to that of a people of an isolated island, if,
after ha+ing partially constructed an enorous achine which was to pro+ide the with all necessities, they
found out that they had e9hausted all their sa+ings and a+ailable free capital before the new achine could
turn out its product.
#hey would then ha+e no choice but to abandon teporarily the wor, on the new process and to
de+ote all their labour to producing their daily food without any capital. -nly after they had put thesel+es in
a position in which new supplies of food were a+ailable could they proceed to attept to get the new
achinery into operation.A &n the actual world, howe+er, where the accuulation of capital has peritted a
growth of population far beyond the nuber
which could find eployent without capital, as a general rule the single wor,an will not be able to
produce enough for a li+ing without the help of capital and he ay, therefore, teporarily becoe
uneployable. $nd the sae will apply to all goods and ser+ices whose use re;uires the co6operation of
other goods and ser+ices which, after a change in the structure of production of this ,ind, ay not be
a+ailable in the necessary ;uantity.H
%ow it is absolutely clear where the error in this reasoning lies* 8aye, 0and 'oh6'awer, before hi2 has
transfored a technical! atter of production 0in fact, an engineering issue of how to deploy e9isting social
resources to achie+e a proposed le+el of social production2 into a 7ustification, an apology for the capitalist
ownership of the eans of production, for their ability to choose what and how to produce new resources,
and for their clai to a profitable! distribution of the new resources in their fa+our and to the wor,ers
detrientE #his is at the +ery best a non se;uitur and at worst an aboinable sleight6of6handE
-nce ore, we can see how capital, far fro being a otor of wealth creation and social progress, is fast
becoing a hideous barrier to the de+elopent of huan social resources. &n this regard, & in+ite readers to
re6read y reply below to 3,areny,arl for y criticis of this arguent by 'ill Gross in his ost recent
<&M.- newsletter.
-f course, this non se;uitur applies to arginal utility theory! tout court. #he ar,et! 0supply6
and6deand2 distribution of product! to labour and capital as factors of production! already
presupposes a gi+en ownership! 0and therefore pre6e9isting distribution!2 of these factors!,
which a,es the e9ercise circuitous!. 0What is presupposed also is that there are uni;ue
technologies! of production for each ;uantity of product!.2 -n the other hand, if we assue a
gi+en distribution! 0Walrasian endowent!2 of these factors!, then we can adopt =' .lar,s
elegant e9position 0in )ssentials of )conoic #heory!2 of how the arginal utilities! of
coodities deterine! their ar,et prices. #he difficulty, howe+er, is that because arginal
utility! is a sub7ecti+e easure! when we try to find out how to measure arginal utilities".we
need to loo, at ar,et prices!E .lar, considers another tac,, which is the arginal producti+ity!
of labor and capital as factors of production! by see,ing to calculate their arginal! contribution
to product! in +arious proportions. 'ut once again this tas, is ipossible or circuitous because
we cannot easure the relati+e contributions of these producti+e factors in any goods, especially
in coposite! goods whose arginal utility! will in+ariably differ fro the su of the arginal
utilities! of their inputsE &n any case capital! itself is".a product of labour0E2 or other factors! such
as land! or entrepreneurship! or anageent! or other physical substances, so that its
contribution! to the arginal utility! of its product is siply ipossible to calculateE Worse still,
with arginal utility!, e9cept where only final products! are e9changed, it is ipossible to
deterine whether distribution is proportionate to the arginal producti+ity! of the factors of
production! or rather to the arginal utility! of the final product. #he difficulty is caused by the fact
that whereas arginal producti+ity! is easured by units of physical product!, arginal utility is
always and inscrutably sub7ecti+e! in nature so that utility! cannot for the basis for pricing! the
distribution of product between factors of production. Gi+en this 3discrepancy, it would be
possible to eploy two different technologies! 0that is, 3copositions of capital!2 to produce the
sae good. 'ut then we would not ,now whether the price! of the good 0which would ha+e to be
identical for the two technologies!2 was deterined by its ultiate arginal utility! or by the
arginal utility! of the factors of production!E 0$ +ersion of this criti;ue is in Maurice /obbs
3Storia del <ensiero )conoico, p.APP. Sraffas onopoly! criti;ue o+ed fro this parado9. -f
course, 8aye,s criti;ue of e;uilibriu! pro+ides the foundation for all criti;ues of arginal
utility!, including his own epirical! interteporal +ersion.2
&f .lassical <olitical )conoy analysed the originUfoundation! of )conoic acti+ity to arri+e at the
distribution! of its product. the outcoe!, and then assue its correspondence! with the
<olitical order the ar,et synthesis! of self6regulating! acti+ity re;uiring only a 5echtsstaat to
watch o+er! ci+il society 0burgerliche Gesellschaft2N then neoclassical theory a,es the outcoe!
0ar,et prices2 certify! epirically the appropriateness of production, the dissolution! of
production into a state of e;uilibriu! where the sub7ecti+e utility! of all econoic agents
re+eals! their foral e;uality! as ar,et participants! here not only is the <olitical state
earginated, but there is siply no possibility or ;uestion about the distribution! of production
because this is identified with e9change! which is proportionate to the arginal producti+ity! of
the factors of production! or, in e9treis, to the sub7ecti+e utility! of the ar,et participants. 0See
=' .lar,s e9position where arginal 4tility! corresponds to sub7ecti+e e9change! whereas
Marginal producti+ity! corresponds to the contributions of factors of production!.2 8ence, the
ar,et certifies! the foral e;uality of citizens! in ci+il society whilst preser+ing their liberties! in
the public sphere* that is the essence of liberalis!.
From Translators Preface to Bohm-Bawerks Positive Theory of Capital:
http://www.econli.or!/lirary/BohmBawerk/PTC".html
#f$ then$ interest is so p%rely a nat%ral phenomenon$ why has it met with so m%ch covert
&islike$ an& so m%ch scientific opposition' There are at least three reasons. First$ the element
on which all interest is ase&$ namely time$ has come to e a pec%liarly important factor in
mo&ern pro&%ction. (ll thin!s come to him who waits$ an&$ in economic life$ this &escries the
capitalist. B%t this fact involves that the lao%rin! classes who cannot wait$ an& cannot
compete with the pro&%ctiveness of len!thy processes$ are p%t in a position of pec%liar
&epen&ence: hence the possiility of e)ploitation of wa!e$ of %s%rio%s rates of interest$ of
%n*%st rents. +econ&$ from a moral point of view$ there is m%ch that is o*ectionale in the
fact that interest allows certain classes to live witho%t workin! an& to make this possiility
here&itary in their families. Thir&$ in this income there is no ratio etween !ain an& &esert.
Those who have little m%st accept +avin!s Bank interest for their har&-earne& shillin!s, those
who have m%ch have all the chances of on&s$ mort!a!es$ *oint-stock investments an& the
like. (ll the same$ so lon! as men &o p%t a &ifferent val%ation on present an& f%t%re !oo&s$
interest cannot e prevente&. (TP.34)
5eport joseph belbruno O =uly AK F*VKa O <eralin,
#he )ntrepreneur $s 1actor of <roduction * Schupeter as .ritic of 'oh6'awer, and 8aye,
#he $ustrian School attributes the origin of interest! or profit with 'oh6'awer, to the roundaboutness! of
production* gi+en that ore roundabout! ethods of production are ore producti+e! than less
roundabout! ethods, the capitalist is rewarded with interest! for delaying! the consuption of his wealth
for the sa,e of in+estent!.
We ha+e seen in our re+iew of 8aye,Js J<rices and <roduction that this is a non se;uitur because it lea+es
une9plained how the capitalist cae to own! the resources whose consuption he delays!, and how in any
e+ent this gi+es hi a legal right! to any share of the product of the roundabout! ethod of production. #he
capitalists entitleent! to profit is siply left une9plained in 'oh6'awer, and 8aye,. 0#his is a +ital
proble in 'oh6'awer,s account of interest, because the increase in producti+ity of roundabout!
ethods, e+en if allowed, does not e9plain the proportion! or share! of the increased product that is to be
appropriated by the owner of capital not in physical! and particularly not in onetary! ters, because of
the ipossibility of coparing different physical producti+e increents.2
'ut yet another ob7ection against the $ustrian! theory of interest and profit lies on a oti+ational! le+el* for
it is difficult to see also how a negati+e! eotion or purpose such as 3)ntsagung or renunciation! can e+er
gi+e rise to the positi+e! oti+ation leading the capitalist entrepreneur acti+ely to adopt!, in+ent! or
inno+ate! new, ore roundabout! ethods of production that occasion higher profits!E 5enunciation! or
waiting! ay well help e9plain interest! as a rent! that finance6capital in+estors! e9tract fro the use of
their capital. 'ut it will ne+er e9plain profits! which by definition re;uire acti+e! in+estent by capitalist
entrepreneurs!E $t least in Ma9 Webers original account of the <rotestant )thic!, undane wealth! was
seen as a aterial proof of the di+ine calling! 0'eruf2 of the self6denying, renouncing! or waiting! capitalist.
'ut 'oh6'awer,s account of interest! is deri+ed entirely fro Schopenhauers 3)ntsagung 0renunciation2
which he prescribed as a negati+e!, ascetic ascent! or 3$6s,esis to the suit of 3%ir+ana. &n this
(ebensphilosophie 0philosophy of life!2, wealth! can ne+er be seen as a reward! for 3)ntsagung*6 rather,
3)ntsagung can only lead to the non6being, freedo fro suffering! of 3%ir+ana.
$s 8aye, disco+ered with his insightful criti;ues of the Walrasian and neoclassical notions of e;uilibriu!
and pure copetition! 0in 3&ndi+idualis and )conoic -rder2, e+ery present state of econoic
e;uilibriu!, not only in the static! Walrasian +ersion but also e+en in 8aye,s own +ersion as
interteporal e;uilibriu!, by its +ery nature of being an e;uilibriu!, toward which the econoy is
constantly tending!, does not and cannot e9plain how and why the capitalist econoy constantly changes
and indeed re+olutionizes! its ethods of production to realise a greater profit.
Schupeters 3#heorie 0whose appropriate subtitle is )ine 4ntersuchung uber 4nternehergewinn"!, that
is, $ Study on )ntrepreneurial <rofits!E2 underscored his real purpose in writing it to e9plain the constant
e+olutionUde+elopent! 0)ntwic,lung2 of the capitalist econoy out of the static e;uilibriu circular flow!
0:reislauf2 by eans of the positi+e calling of the entrepreneurial spirit! and its acti+e search for
&nno+ation!, which only incidentally is rewarded with entrepreneurial profits!.
.apitalist industry had undergone an epochal trans6foration! late in the nineteenth century fro AMKD
onwards in what has coe to be ,nown as the Second &ndustrial 5e+olution!. 4nder the treendous weight
of capitalist financial, industrial and ar,et concentration with the eergence of large 7oint6stoc, copanies
or corporations first in the 4nited States and then in Gerany, not only had the copetiti+e ar,et! of the
earlier capitalis been o+ercoe by +ast oligopolies!, but also the capitalist process of production itself was
transfored fro artisanal production for relati+ely sall niche ar,ets! to one of ass production of
standardized coodities for ass ar,ets.
Schupeter pointedly ac,nowledged this transforation at the +ery beginning of .h.F of the 3#heorie, by
adopting e9plicitly Webers concept of scientific6technological rationalization!. Schupeter registers the
ipact that this e+ident concentration and trustification! is ha+ing on capitalis. 8e accepts that capitalist
industry has finally subsued e+en the process of scientific6technological in+ention! as well as #ayloristic
labour processes under its coand. &ndeed, he e+en concedes that in+ention! and scienceUtechnology
thesel+es can no longer be seen as separate, e9ogenous echaniss of change!
0>eranderungsechanisus2 of capitalis.
8is ost +aliant effort was to attept to rationalize and 7ustify capitalist social relations of production and the
e9istence of profit! in ters of".technological progress and inno+ation leading to econoic growth and
de+elopent!. Schupeter brea,s down the siple neoclassical assuption of the e9ogeneity! of
scientific6technological inputsN he accepts that these are now go+erned! by the capitalist fir. &ndeed, the
differentia specifica of capitalis is its ability to e9it! the circular flow! 0:reislauf2, to leap forward by eans
of and by pro6+o,ing a crisis fro which the )ntrepreneur can profit 0again, 4nternehergewinn ta,e pride
of place in the subtitle to the #heorie2.
#his is the 3>eranderungsechanisus 0echanis of change2 that is peculiar to capitalis. 1ar fro e+er
being in e;uilibriu!, the capitalist econoy is perennially unbalanced as it o+es fro an inno+ation6
induced! crisis to the ne9tE &n the 3#heorie Schupeter e9cogitated the process of &nno+ation!, of creati+e
destruction! 0schopferische Rerstorung2 and of the entrepreneurial Spirit! 04nternehergeist2 as a
desperate attept to contra6dict the soul6lessness! or disenchantent! of the capitalist ode of production
of its labour process and ore broadly its ethods of pro6duction and to introduce the &ndi+idualitat!,
the sub7ecti+ity! 0&chheit2 of the )ntrepreneur as the echanis of change! of capitalis. %owhere is this
ore e+ident than in his obstinate attept to separate the role of the capitalist as financier fro the role of
the inno+ati+e! entrepreneur both in the 3#heorie and in 3'usiness .ycles 0see chapters on .apital!2.
Gi+en the inescapability!, the ineluctable condition! of the disenchanted 5ationalisierung!, Schupeter
intuits that the freedo! of the 4nterneher is essential in order to escape! the circularity! of the circular
flow! 0:reislauf2 to which the capitalist econoy would be condened as it re+erted tendentially! toward the
static state of stationary e;uilibriu.
$ ;uotation fro H'usiness .yclesH clarifies the atter once and for all* 0.hapter on )ntrepreneurial
<rofits!2
H&n a stationary econoy, e+en if disturbed by action of e9ternal factors, both the entrepreneurial function
and the entrepreneurial profit would be absent, and so would the bul, of what is in coon parlance
described as profits. 1or, although there would be rents and ;uasi6rents of factors owned by firs 0also in
the case of a anager6proprietor, his Hearnings of anageentH or wages, to which we ay for the sa,e of
arguent add +arious interest ites2, and although there ay be onopoly gains and if we adit e9ternal
disturbances2 also windfalls and possibly speculati+e gains, all these ites would, in the conditions of a
stationary or e+en of a growing econoy, su up to uch saller totals than they do in reality. &nno+ation is
not only the ost iportant iediate source of gains, but also indirectly pro6duces, through the process it
sets going, ost of those situations fro which windfall gains and losses arise and in which speculati+e
opera6tions ac;uire significant scope.H
)ndlich aber ,ann es nicht in einen so gestaltenen >ol,wirtschaft ,eine :risen geben! 0KM2
<p. MDff discussion of pre+ious approaches to 3)ntwic,lugsproble.
/iscussion of Mar9, 0MQ2.
Walras and $ustrian School!N =' .lar, 0MP2
.h.F Webers 5ationalisierung
$utonoie des Welt des Wirtschaftens 0BD2
4nser <roble ist"! fro 3'lut,reislauf! to Wachstu and >erfall of the econoy >eranderung, <ost
,utsche to )isenbahn nature of transforation! not 'edingungen! for it 0BC6BQ2
Wir,ungen und 5uc,w6 des )ntw. 0BK2
Stati,U/ynai, 0BB2
&ntro 99+*
)ntrepreneur! +s. accuulation! 0Mar92 S only concerned with Mechanisus!
SPAnT not concerned with factors of change! but with >eranderungsechanisus.
Sall part of Mar9s theory! but note Ss later subsuption! of &nno+ation by Monopolies.
@9iii* )ndogenous! factors +s. .lar,s e9ternal data! SPDnT
)ffects on profit, credit, interest, rent.
@9ii* S coents on &nno+ation as adoption! of 'oh6'awer,s roundabout eth. -f prodtn.!SAVBT
/istinction between growth and )ntwic,lung, siilarity to Walras entrepreeurial act!
@9i* )ntrepreneur as hero!, will to con;uer!, captain of industry!, +ision!
@9* .reati+e destruction!, capitalistUentrepreneur
@i9* /e+elopent! concept
@+iii* )+olution! the essence of capitalis 3Stati,U:reislaufU!neighbourhood!
9+69+i* :reislaufUe;uilibriu 6 characteristics
-% M)#8-/ )conoic $nalysis!, )ntrepreneur and .apitalist.
A. 5e+ersal of .apitalist6)ntrepreneur U5ent6<rofit 5oles %egati+e to <ositi+e,
5enunciation 0)ntsagung2 to &nno+ation 0)ntscheidungU$ct2N 1inance to )nterpriseN
:reislaufU);uilibriu to )ntwic,lungU/e+elopent differentia specifica!.
F. )ntrepreneurial Spirit as #ragerU.arrier of >eranderungsechanisus. )leent of
)conoic $nalysis! as echanis! therefore tool! in wertfreiUneutral process that ust
be guided! 0difference with 8aye,L .f. /obb, 5obinson and etaphysics! labour6
+alueUutility2
C. &nno+ation!U#echnology0#echne2 as innersysteatisch! concept +s.
aussersysteatisch! factors* subsuption of wissentschaftlichUtechnologisch <rozess!
under &nno+ationsprozess 0>ergesellschaftlichungU5ationalisierung2.
Q. )ntrepreneurial <urposeUGoal6Rwec,URiel! 0)ntrprnrs will to con;uer!2
V. :risis guidance!Uleadership of )ntwic,lung and social repercussions! of &nno+ation
absence of leitender Geist! in 4nternehergeist.
#his is Schupeters entrepreneurial Beruf, the e;ui+alent of Webers leitender Geist 0leadership Spirit2,
what is necessary to transfor the theoretical static e;uilibriu! of neoclassical analysis into the dynaic!,
e+olutionUde+elopent! or Entwicklung of the 3#heorie.
Schupeters Unternehmergeist, although on one hand it is not reducible to the profit6oti+e! and in this
regard Schupeters attept to di+orce capitalistUfinancier! fro entrepreneur! is 7ustified 6, on the other
hand it is also not reducible to the sheer sub7ecti+ity! or Ichheit or Individualitat of the InnovationE #he ere
spirit of inno+ation ;uite siply cannot replace the uch broader Wille zur Macht of Webers Politiker. 'y the
tie he published 'usiness .ycles!, Schupeter was forced to concede that e+en the sub7ecti+e!,
entrepreneurial".spirit! had becoe totally integrated in the capitalist achinery! of production.
&t is noteworthy in this conte9t that Weber did not add the entrepreneur! to his Beruf studies,
6 not because he had not in;uired into the spirit of capitalis!, but because the entrepreneur
li,e the scientist had to be subordinated to the wertfrei 0+alue6free2 nature of his pursuits,
whereby entrepreneurs becae ere anagers! and the Wert, the Moral >alue could only
be understood 0Verstehen as a uch wider encopassing process of coand or
doination of the capitalist o+er the li+ing labour of wor,ers.
-nly at this social6politico6econoic! le+el can the role of the entrepreneur! be understood
as leitender Geist, as Wille zur MachtE Schupeters attept to add and copare the
Unternehmer to the Weberian Politiker through the siple wor,! of &nno+ation! was
dooed to fail fro the outset precisely because capitalis is uch ore than a siple
foral! 0alost artisticUspontaneous!2 process of shopferische !erstorungE 0.f. (owiths
description of %ietzsches Wille z. Macht as creati+e destruction! p.FBQ in >on 8egel z. %2
'ut, as .acciari genially points out, the oent of trans6crescence! 0noted belatedly by
Schupeter in .apitalis! is the oent of "risis at which the "reislauf is interrupted and
re+olutionized! by the capitalist not as entrepreneur! but rather as Politiker, which is
precisely where the capitalist enterprise eets and needs! the political form of the StateE
0.f. #rontis Stato e 5i+oluzione in &nghilterra! where he ephasizes the State6for! as
preceding the transition to capitalis although this is done in too +oluntarist! a anner.
#rontis +oluntaris! iplicit in the notion of autonoia del politico! could ha+e been
a+oided if he had pursued the ob+ious correspondence! of capitalist industry! and State6
for!.2
So in essence, as .acciari notes, Schupeter adheres to the neoclassical notions of
arginal utility and roundaboutness! as well as ar,et copetition and e+en circular6
flow e;uilibriu!. 'ut these notions, least of all &nno+ation!, do not and cannot capture
the socialization! 0>ergesellschaflichung2 of production and together with the
bureaucratizationUrationalization the necessary role of the State! as collecti+e
capitalist!. #his is a crucial factor that Mar9 hiself neglected, 7ust as he o+erloo,ed
e9ternalities! that is, use +alues! outside of the circulation of capital. 0-nce ore,
#rontis autonoia del politico! coes to ind.2
.acciari fails to see the positi+e! side of Schupeters entrepreneurial a c t! as against
the negati+ity! of 'oh6'awer,s 3)ntsagung in roundabout! production. 'ut he sees
genially the essential* what Weber brought to light*
)cco perche Weber parla del Politiker, non dell &prenditore. )gli non dientica l
&prenditore* ne a+e+a gia ricercato le origini. Ma, tra il ABDV e il ABAM, il problea
decisi+o di+iene la scelta politica sulla fora e sui tepi del rapporto scienza6s+iluppo,
le istituzioni politiche atte a assuere gli effetti dell inno+azione. &n realta, nessun
ercato puo piu funzionare in fora schupeteriana pura!. &n terini espliciti* nessun
&prenditore potrebbe piu esistere senza #tato,! 0<ens.%eg.e5az., pp.AVM6B2.
&n short, Schupeter brilliantly percei+ed that the J)ntsagungJ 0the J5enunciationJ or deferral of
consuption on the part of the capitalist gi+ing rise to JroundaboutJ ethods of production2 was
insufficient as a Hoti+ationH or HpurposeH 0Moti+ationURwec,URiel2 to e9plain the
He+olutionUde+elopentH 0)ntwic,lung2 of the capitalist econoy and also as an e9planation of
HprofitsH in capitalis. #hat is why he needed to find a Hdri+erH or HcarrierH 0#rager2 that could push
the HechanisH forward. 8e was so steadfast in his distinction that he e+en distinguished
between HcapitalistsH 0essentially JrentiersJ, rent6see,ing financiers2 and HentrepreneursH as two
separate functions in the >eranderungsechanisus of capitalis. My point will be 0with <aul
Sweezy2 that in doing so Schupeter neglected Haccuulation of capitalH as a oti+ation for
capitalists and also, on the Hsub7ecti+eUpoliticalH side, failed to see 0unli,e Weber2 that the
scientificUtechnical process of concentration and rationalisation 0WeberJs J5ationalisierungJ2 could
only ultiately be HcarriedH or e9ercised in a capitalist econoy by a Hpolitical agencyH 6 because
capitalis is essentially a political relation based on the alienation of li+ing labour and its
doination by dead ob7ectified labour under the wage relation.
'ut Schupeters ai is ne+er to reconcile! the wor,ings of the capitalist econoy with its
orderly, balanced!, e;uilibrated!".!de+elopent!. %o such reconciliation is possible* 6 the +ery
essence, the differentia specifica of the capitalist econoy is precisely the
>eranderungsechanisus! of this econoy the 4nternehergeist as the sub7ecti+e! #rager
of the process of &nno+ation, of the ne+er6e;uilibrated!, anti6circular shopferische Rerstorung, a
force as destructi+e as it is creati+e. #hus Schupeter places :risis and the doination of crisis!
at the centre of econoic growth6e+olution6de+elopent! 0)ntwic,lung2.
#his is the scientificUanalytical! 0wissenschaftliche2 disco+ery Schupeter a,es. #he
echanis! is innersysteatisch! 0endogenous, as against the factors listed by =' .lar,2. #his
trans6forational echanis! is wert6frei, it is the datu of scientific en;uiryUin+estigation
04ntersuchung2. 0S spea,s of the $utonoie des Welt der Wirtschatlichens! fro other social
spheres SBDT.2 #he neutrality! of this echanis! is what to Schupeters eyes distinguishes the
scientificity! of )ntwic,lung as against the oral6institutional! e9position in Mar9. What +itiates
Mar9s ethod is the coi9ture of econoic analysis! and sociologicalUinstitutional!
obser+ation as well as dogaticUoralizing poleic! 0S uses this word in #heorie 8e adds
laconically that his analysis co+ers only a fraction $ber ein 'au dec,t nur einen ,leinen #eil
der 1lache des seinen!, p.BF. See discussion of preceding theories in preceding pages of
#heorie2.
6he scienti'icity and "alue3neutrality o' the Inno"ationspro4ess is #hat ensures the
autonomyEseparation o' the Entrepreneur 'rom the pro'it moti"e, 'rom the Frisis3
inducin! repercussions o' creati"e destruction and technolo!ical trans3'ormation, and
'rom the anta!onism that it embodies% &t the same time, it preser"es the scienti'ic3
analytic neutrality o' the Kreislauf .market competition and eGuilibrium tendency1 that it
displaces or trans3'orms%
=ust as Weber places his <oliti,er with his leitender Geist at the top of the 5ationalisierung, so
does S place the 4nterneher with his 4nternehergeist at the origin of )ntwic,lung. 'ut the
unbalanced!, creati+ely6destructi+e! operation of the >eranderungsechanisus, of &nno+ation
ust not be go+erned!. %o reconciliation of the <olitical with the )conoic is possible here as
was sought by both classical political econoy and neoclassical theory with their
$utoati,U$utonoie. )ntwic,lung is a destiny! of the ar,et econoy! that ust be left to its
own de+ices. 0See 8aye, and the liberalist! ethos.2 #he ine+itability! of this process is the
destiny of techne$, of technological progress a ter that S places in in+erted coas.
#o the State is left the tas, to rationalizeUreconcile the disrupti+e effects of :risis though not in a
8egelian sense 01reiheit des Willens!2, but in a %ietzscheanUWeberian 0Wille zur Macht2 sense.
'ut this is the 3<roble that S fails to confront. #his is the e9act point where his 4nterneher
cannot replaceUdisplace Webers <oliti,er.
A. 5eport joseph belbruno O =uly AV F*VPa O <eralin, @ Sepp 6 ?es, once again your obser+ation
is an e9aple of how Hla classe politi;ueH 0the ruling elite2 or the State6<lan does ha+e the ability Hto planH,
to pro67ect the future HneedsH of capital that are based on Huse +aluesH 0including resources such as land,
inerals, wor,ers2. #his is the Weberian J5ationalisierungJ that & ha+e been discussing. #his is where the
<olitics and )conoics of Hpolitical econoyH coe together. #he proble with the Hcollecti+e capitalistH, the
State6<lan, is that these Huse +aluesH are subordinated to the need to pro6duce He9change +aluesH that re6
produce the coand or doination of capitalists o+er wor,ers.
<articularly in conditions of high capitalist concentration both the Hconsuer needsH of the population as well
as the HtechnologiesH adopted for production are subordinated to the need of capital to reproduce the
subordination of li+ing labour to the wage relation. #he Hsocial brainH of this process is the State6<lan 0la
classe politi;ue2. 'ut the Hsocial theroetreH of the ability or less of capital to e9ercise this
coandUdoination is HinflationH and HprofitabilityH 6 that is, the HonetaryUfinancialH diension of
capitalis. 8aye, was right* HpricesH are HsignalsH or HinforationH about the use of social resources. 8e
e+en spo,e of a Hdi+ision of inforationH as against a Hdi+ision of labourH. 0$sset bubbles are a special for
of 3inflation, but they are hard to detect which is what a,es the so dangerous to a capitalist econoy.2
#his is what we are o+ing towards.
'ut the HrationalH integration of Hindi+idualH plans and Heconoic e;uilibriuH 0otherwise called co6ordination
proble!2, which 8aye, attributed to Hthe ar,etH and which Schupeter neglected in his enthusias for the
HentrepreneurH to lead capitalis forward fro through HcrisisH by eans of Hinno+ationH or Hcreati+e
destructionH 6 this rational integration re;uires a Hpolitical inter+entionH, a <lan that e+en Mar9 neglectedE -f
course, the neoclassicals siply reduce all these probles to Hpri+ate endowentsH and Har,et6clearing
pricesH which ine+itably and tautologously lead to....He;uilibriuH.
0%ote that the $ustrian School relies on the 3self6regulating ar,et but also on 3sociologicalUbeha+ioural
neigh%ourhood predictions SS uses word, see &ntro notes abo+eT fro ar,et agents to e9plain 3con+ergence
to e;uilibriu or 3e;uilibriu neighbourhood.2
6he State in Cacciari0s /6he 8npolitical0(
#he endless de+elopent and transforation of production put the State in a dilea*
either to direct the de+elopent in an authoritarian fashion, which would aount to the
repression of 3ci+il society, or to subsue 3dialectically the de+elopent itself, at the ris,
of dissol+ing the States ethical for in the anarchy of conflicting sub7ecti+ities. &n both
cases the State is condened to ipotence,! 0<ref. by $lessandro .arrera, p.AP2.
<erhaps the .risis6States ipotence can be gauged by the com%ined political
phenoena we obser+e through this financial crisis* the e9asperation of 3legislati+e
repression and the frantic rationalization of growing 3systeic ris,s as inelucta%le
aspects of capitalist industrial production.
- sepp - +o/ can find earlier disc/ssions of Qentreprene/rial profitsQ in R7 !lark and in
7ohm-7awerk as well as the earliest disc/ssion in !antillonNs N&ssaiN :links pro0ided<. 4ll
these theoreticians see Q#nternehmergewinnQ as simple QrentQ that the Qentreprene/rQ
charges o0er the real factors of prod/ction :land and labo/r in !antillon6 and labo/r and
capital in 7ohm-7awerk and !lark< to compensate for his QriskQ in QmarketingQ
merchandise. 'hese are disting/ished from Qmanagerial labo/rQ which is a lower form of
rent.
ch/mpeter takes a radically different approach6 as ? disc/ssed below6 in that he places
the Qentreprene/rQ as a separate Qfactor of prod/ctionQ thro/gh Q?nno0ationQ which is the
so/rce of QprofitsQ and is the real Q@erander/ngsmechanism/sQ :transformational
mechanism< that drags the capitalist economy from Qcirc/lar-flow e./ilibri/mQ to
Qe0ol/tionary de0elopmentQ. "e transforms the Qnegati0eQ so/rce of profits in
neoclassical theory from QwaitingQ or Qro/ndabo/tnessQ of methods of prod/ction :which
is not to be conf/sed with the earlier Q4bstention theoryQ< to a Qpositi0eQ process of
Qcreati0e destr/ctionQ. ch/mpeter relegates QcapitalistsQ to mere QfinanciersQ li0ing on
QinterestQ.
$y next instalment will disc/ss directly the concept :7egriff< of Q?nno0ationQ and the
relation of Q#nternehmergewinnQ to Qcapitalist acc/m/lationQ. ?n other words6 what is the
real meaning of this Qtrans-formation/e0ol/tion/de0elopmentQ :&ntwickl/ng< that is the
tr/e distinction between ch/mpeterNs N'heorieN and R7 !larkNs N&ssentials of &conomic
'heoryN :p/blished in 1G0H6 fo/r years before<. Bhat is the meaning of QcrisisQ and how
can the entreprene/r Qg/ideQ the capitalist economy QsafelyQ o/t of the Qcirc/lar
flowQ....and this leads /s once more to the problem of Q0al/eQ :see comment below<.
http://oll.libertyf/nd.org/index.phpMoptionEcomXstaticxtUstaticfileEshow.php
ZPFtitleE2Y5U?temidE2H
http://books.google.com.a//booksM
idEBV544A$R>g+!UprintsecEfrontco0erUd.EessentialsWofWeconomicWtheoryUso/rc
eEblUotsE,m0ixb'.seUsigE(?J"7'1y4hf/5c=!lYF%A4%0T&UhlEenUeiE?y17'=
IY7?0=0S%Anp2oA4UsaEJUoiEbookXres/ltUctEres/ltUresn/mE5U0edE0!!4SV4&
w74#0EonepageU.UfEfalse
http://oll.libertyf/nd.org/index.phpMoptionEcomXstaticxtUstaticfileEshow.php
ZPFtitleE2YPU?temidE2H
- oNs/lli0an - ? agree with yo/r comment below that QpricesQ no longer QindicateQ m/ch.
4lready6 ch/mpeterNs own notion of Qtr/stified capitalismQ indicated a Q./alitati0e leapQ
from Qcompetiti0e capitalismQ where QpricesQ were set by the Qfree marketQ to the
Qoligopolistic or monopoly capitalismQ that we ha0e now. Bhen $artin Bolf brings into
./estion the whole Q0ast continent of /se 0al/esQ :as ? called it below< - the whole notion
of Qreso/rcesQ :en0ironmental6 h/man<6 what becomes immediately apparent is precisely
this QarbitrarinessQ of Qmanaged pricesQ - QmanagedQ thro/gh taxes6 s/bsidies6 all manner
of Qstate reg/lationQ :dealing especially with QexternalitiesQ6 that is6 the
en0ironmental/social Qra0agesQ of formally QcapitalistQ ind/stry< and6 not least6 by those
QoligopoliesQ that arose directly o/t of the s/bs/mption of the process of Qinno0ationQ
and Qtechnological progressQ that ch/mpeter so insightf/lly describedD 'he final
o/tcome is that QpricesQ now can be seen as Qartificially managed signalsQ increasingly
Qg/idedQ by the Qtate-%lanQ which6 by its inability/powerlessness to impose its Q%lanQ on
society6 becomes a Q!risis-tateQ. :4gain6 ? wo/ld in0ite yo/ to read my pre0io/s
NwolfexchangeN disc/ssions.<
5eport joseph belbruno O =uly AB F*FMa O <eralin,
& wanted briefly to draw the lines of this foru to lay ephasis on the profound Heconoic6theoreticalH
significance of Martin WolfJs topic for discussion which, despite his HdiploaticH phrasing and fraing of it, calls
into ;uestion the legitiacy of all Heconoic science and theoryH including both .lassical <olitical )conoy and
%eoclassical 0Marginal 4tility2 );uilibriu #heory.
#his is so because Heconoic theoryH to date has failed to account for what $lec <igou called He9ternalitiesH in an
organic6coprehensi+e fashion that placed the Huse +aluesH of the HresourcesH 0fro HlandH to Hthe en+ironentH2
that ser+e as Hfactors of productionH and are HeasuredH onetarily by HG/<H in ters of HgrowthH but which, in
the end, lead to HcatastrophicH social, political and e+en HeconoicH conse;uences.
<er+ersely, despite its ephasis on Hdistribution of incoeH, by placing HlabourH or Hsocially necessary labour
tieH at the centre of econoic en;uiry, .lassical <olitical )conoy neglected the all6iportant effects of the
production of coodities on the Hsocial fabricH of capitalist societies. #he classics posed an iplicit faith 0one
that e+en :arl Mar9 o+erloo,ed in his Hcriti;ue of political econoyH2 in the ability of Hthe ar,etH with its Hin+isible
handH to reconcile the needs of <olitics 0a fair and +iable society2 through the laws of )conoics.
'y contrast, neoclassical theory, by relying on the ability of Har,et copetitionH and Hthe price echanisH to
secure the Hoptial allocation of scarce resourcesH according to the sub7ecti+e HutilityH of econoic agents,
placed iplicit faith on the ability of Hthe self6regulating ar,etH and its He;uilibriuH to ensure Hoptial allocation
of resourcesH both in ters of their HuseH as well as HdistributionH.
What Martin Wolf has done here is register the HfailureH of econoic theory to account for ob+ious HibalancesH
in the operation of Hthe ar,etplace societyH to allocate social resources ade;uately to a+ert Hsysteic ris,sH or
HcatastrophesH that threaten the future not 7ust of Hthe ar,etplace societyH but indeed of our ci+ilisation itself.