The Relationship Between Marxism and Keynesianism

      [Recently I forwarded to a number of friends an article by a semi-Marxist, left-Keynesian, Prabhat Patnaik, that appeared on the MRZine web site. My friend Kirby responded, looking for some more clarification about the relationship between Keynesianism and Marxism. Here’s his letter and my response. —Scott H.]

------------------------------- Original message -----------------------------
From: kirby ...
> OK....this guy mentions Keynes too.  I'm confused.  Does this mean that 
> Marxists, in general, think that Keynes was correct, in so far as his theory 
> would be the best that capitalism could do -- of course, while rejecting 
> capitalism itself?  That is, one can have the best application of a theory, 
> even if the theory is flawed.  

[Date: Jan. 15, 2009]

Hi Kirby and everybody,

The relationship between Keynes and the wide variety of people who consider themselves to be Marxists is complex and varies a lot from one Marxist to another. I know you don’t like long letters, but this will take a bit of space to explain.

1. The first thing to note is that Keynes himself agreed with Marx on one very central point—that “Say’s Law” is invalid. Say’s so-called “Law” says that capitalist production generates its own markets, and therefore that there cannot possibly be any “gluts” (overproduction) of goods in relation to market demand. While this is obviously ridiculous, it is actually one of the most fundamental (if seldom fully acknowledged) principles in bourgeois economics. (You may recall that Steve Keen talked about this in his book Debunking Economics that our book club read a couple years ago. See especially pages 189-199.)

It is true of course that a factory which produces some particular commodity pays for raw materials, overhead, and also pays its workers some wages, and therefore it generates some new market demand. But because a large part of the new value produced by the workers goes to the capitalists, who already have pretty much all they need and want of necessities and even of luxury goods, the capitalists themselves may not actually use their additional profits to buy things themselves. Thus the market generated is actually always less than equal to the full value of the new commodities produced. (Things are kept going for a while because of the credit system, but eventually there is a financial crisis when the credit bubble bursts and the underlying overproduction of both commodities and factories and machinery themselves becomes evident. This is what is happening at the present time in the U.S. and world economy.)

So Keynes did recognize that “Say’s Law” is bunk, and that gluts or overproduction of commodities may occur. (He was either ignorant that Marx had got there first, or else chose for diplomatic reasons not to mention the fact.) He further recognized what a lot of other bourgeois economists did in practice before him—especially Gunnar Myrdal in Sweden—that if there is insufficient market demand for the goods being produced, the government can through deficit financing either put money into the hands of the working class to allow them to buy the excess goods, or else it may buy the excess production itself (which is then considerably shifted towards what capitalist governments most want to buy—weapons).

Keynes himself didn’t fully understand that there are real limits to the degree and period of time which this government deficit spending to prop up capitalism can continue. He seemed to think that it might only be necessary for brief periods to “prime the pump” and get the economy moving again. And he and his followers have sometimes put forth the idea that during boom periods it should be possible for the government to actually run surpluses to make up for the deficits during recessionary periods. This is total bullshit. There might on some occasions be government surpluses, but they will never be able to make up for the deficits that are necessary in most years.

Moreover, over time and in general (despite secondary ups and downs), these deficits must get ever larger, and must even grow at ever faster rates! This is because the surplus value itself, which is extracted from the workers during the capitalist production process, constantly grows and is extracted at an ever faster pace (because of productivity improvements, etc.). What this means is that it becomes more and more difficult to keep the economy going even by increasing Keynesian government deficits. Thus we see at the present time that the deficits needed in the U.S. alone are now exceeding $1 trillion dollars a year! (Eventually, almost certainly within the next decade, the dollar will collapse and Keynesianism will have reached its dead-end.)

2. One of the main differences, among those who consider themselves to be Marxists, with respect to Keynes is how much they agree with Keynes and how much they see through Keynes and really understand and agree with Marx.

Amazingly enough, however, it is possible to go too far in this direction, and disagree with Keynes even where he agreed with Marx! This is surprisingly common with respect to the matter of “Say’s Law” itself. Thus Bob Avakian and his RCP actually accept “Say’s Law”, though not openly by name. In their 1984 book, America In Decline, which they still uphold on matters of theoretical political economy—though not their prediction of world war and/or revolution in the 1980s!—they say for example: “The expansion of capital requires the continual perfecting of the division of labor and generates its own demand and markets.” (p. 260) Instead of grasping how overproduction is actually inherent in capitalist production itself (because of the extraction of surplus value), the RCP theory is that economic crises are due to the “anarchy” of capitalist production (i.e., the fact that there is no overall production plan which all of society follows). While there is this anarchy in capitalist production, it is an almost negligible secondary factor for the most part as a factor leading to economic crises. (Anarchy of production leads to great wastefulness, which actually promotes further capitalist production! Only to the extent that anarchy also leads to major bottlenecks does it restrict capitalist production, and this is rare except occasionally during wars—as when the Allies bombed the German ball-bearing plants during World War II.)

Thus at this extreme end of the Marxist spectrum with regard to Keynes, we have absolutely total disagreement with Keynes.

3. Then there is the large middle group of rather ill-educated Marxists that don’t know quite what they think about Keynes and Keynesianism.

Engels said that since socialism became a science it has become necessary to pursue it as a science—that is, to study it! Unfortunately, a lot of Marxists don’t really do this, especially when it comes to the most difficult branch of Marxist theory, the political economy of capitalism. Probably only a small fraction of American Marxists have read even volume 1 of Marx’s Capital, for example, and probably only a few handfuls have read all three volumes together with what was intended to be the fourth volume, Theories of Surplus Value. (And it is in TSV where Marx most clearly and strongly condemns Say and his “law”.)

Without a clear understanding of the essentials of Marxist political economy many of these folks are in no position to evaluate Keynes properly. Nevertheless, I suspect that many of them sort of nervously go along with a lot of Keynesian thinking because they do not have much in the way of an alternative.

4. Now we come to the Marxists who agree with Keynes in his rejection of “Say’s Law”, and also agree that Keynesian deficit financing can postpone and/or mitigate recessions and depressions for a while—but not forever! This is where I stand.

5. Then there is the Monthly Review school, Paul Sweezy and his followers centered around that magazine, and whose most prominent person is now John Bellamy Foster, the current editor of MR. These folks have always given Keynes (and bourgeois followers of Keynes such as Hyman Minsky) way too much attention and credit to suit me. But I think they mostly do understand that Keynesianism does have definite limits and must eventually fail.

6. Finally, at the other end of the Marxist spectrum when it comes to Keynes, there are those who clearly accept not only Keynes’ criticism of “Say’s Law”, but also—to one degree or another—his theories that the capitalist economy can be managed and controlled, so that at most there are only mild recessions and definitely no outright depressions. Prabhat Patnaik, the author of the article I sent around, is in this group. While influenced by Marxist political economy, they don’t really understand it, in my opinion.

They often claim, as Patnaik does, that crises are due to those managing the economy allowing credit bubbles, and other valuation bubbles to develop, which—when they inevitably pop—cause the crisis. It is true that the popping of such bubbles does occur near the start of every serious overproduction crisis, but the bubbles are not the cause. In fact, the development of these bubbles is what has put off the crisis for as long as it did. Bubbles are necessary to the capitalist system, and that is certainly true for the most central bubble, the consumer credit bubble. Patnaik thinks that some other means of keeping the economy going are possible besides the expansion of credit and asset bubbles, but there actually are no such means. The capitalists have been trying for two centuries to come up with such a thing, and have failed miserably. More than that, once you understand the true underlying causes of overproduction in the very system of extracting surplus value from the workers, you will see that only credit bubbles of one sort or another can allow the system to work at all! If you don’t pay the workers enough to buy back what they produce, then you must sell it to them on credit.

This group is definitely more Keynesian than they are Marxist, in my view, which means more bourgeois in their economic thinking than Marxist.

Probably most self-identified Marxists who talk favorably about Keynes or Keynesianism, and the possibilities of permanently controlling the capitalist economy with Keynesian measures, are either in this last group, or else may have one foot or perhaps just a few toes in the Monthly Review camp.

I’m sending this out to some of my Marxist friends, so we’ll see if they have different ideas about the relationship of Marxism and Keynesianism. [Note added 4/18/09: So far there have not been any other comments about this.]


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