Commentary on Political Economy

Friday 1 July 2011

Comment on Gavyn Davies latest Post

This is a good short piece from Davies that touches all the right buttons so far as a strictly "technical" analysis of the US debt ceiling is concerned. What we wished to point out here, however, is that the times when the capitalist economy is in "crisis" are precisely the times when "strictly technical" analysis is no longer sufficient to understand what is happening. It is in times of "crisis" that what are the "economic rules" that guide the day-to-day "management" of the capitalist economy rapidly lose their "matter-of-factness" and become.... "problematic" in the sense that the antagonistic interests on which this economy is based come to the fore and become much harder "to reconcile".

We wish to emphasise two premises that we will not be able to review here - for that reason we invite readers to visit our site (still "underconstruction", where we provide initial "hints" about an alternative politico-economic approach to these matters).
The first matter is that the role of the State in the US and other capitalist economies tends to expand after every "recession or financial or disinflationary or deflationary crisis" with the exception of the period of the so-called Great Moderation - during which capital made a concerted and colossal attempt to reconfigure and reduce the boundaries of State intervention in the economy. Each "crisis" is caused by "financial expansion" (much in the way theorised by Hyman Minsky) with a "consequent" finance-induced recession that necessitates the fresh "intervention" of the State to assume the "debts" that were deemed to be "private" back under its wing, directly as "public debt" (something Martin Wolf referred to as "notionally public debt").

This is a point that Joseph Belbruno has pushed for a while in FT Comments over the past year and a half and that Gillian Tett (we note) picked up in her last piece.

The next premise (to bring this to a close) is that these "economic and financial crises" are much more than just "economic and financial": they actually concern "real problems" in determining "the burden of adjustment" between social classes - and between nations! Within this premise, it is possible to see a "fracture" in the US and European bourgeois elites on exactly how to deal with these problems (again something originally pointed out by Belbruno and explicitly followed by Gillian Tett in one of her recent pieces). This is a "fracture" that is very serious and that concerns above all two very different ways of seeing the role of the State in the capitalist economy. The gravity of this "fracture" is such that the outcome cannot be taken for granted. Good week-end to all! 

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