Wednesday, January 19, 2011

Robert Pollin: "Back to Full Employment"

Read his generally excellent Boston Review article here.

This is a much-needed corrective to the consensus among Democrats and Republicans regarding the "need" for austerity and tax gifts for the rich. Pollin also does nice job of ridiculing the heinously flawed neoclassical analysis of employment (e.g. the neoclassical view that "it is a fundamental posit of our theory that all unemployment is necessarily voluntary").

But there are problems. He rightly notes that the obstacles to full-employment aren't merely technical or economic, but political. That is, he rightly says that the class compromise needed to make Keynesian social-democracy work is politically unstable, because capital eventually gets upset and breaks the pact as the political and economic confidence of workers increases.

For me, this is the single most important objection to social democratic politics. Yet, having made this important point, Pollin strays from it and suggests elsewhere that "healthy profits can be made" under such an arrangement. There is a question of how to read this claim: is he merely making certain kinds of moves to try to win over those who aren't yet ready for the claim that capitalism as such is the problem?

He is also a bit naive about Sweden I think. He basically gets things right, but underestimates the role of capital in thwarting the class compromise and he misses a more general point. That point is this: an inherently unstable system that only functions when capital is happy with it's rate of profit is a recipe for disaster. Even if capital continues to play nice for a while and maintain the class compromise, there are other sources of instability that threaten to upset capital. Inflation is only one example. To be sure, Pollin does point to the global political pressure on Sweden to adopt a neoliberal model, but the fact that such a move looked reasonable to Swedish policy makers speaks to an unjust configuration of class power on the one hand, and the contradictions of premising all economic well-being on decent profits for capital on the other. In other words, Pollin appears to have an unduly sanguine picture of what's possible within the confines of the capitalist state on the one hand, and doesn't take seriously enough the internal contradictions of capitalism as a system on the other.

Still, this is the kind of debate I'm happy to see in public as compared with what we usually have to stomach (e.g. Democrats asking each other "how much should we screw workers and cut services?"). We should be having more debates like this: between Keynesian left-liberals and more radical critics of capitalism. So it is more than a little frustrating that the "forum" put together by Boston Review to discuss Pollin's argument appears to have no serious Left critics at all. Though Pollin spends time discussing Marx and the left-wing arguments against achieving full-employment under capitalism, it doesn't appear that any of the participants in the forum will be defending such a position. This is a shame.

The Right response to the Pollin piece is nauseating and not even worth responding to. Reihan Salam's response is typical neo-classical garbage. He begins by acting skeptical about the idea "neoliberalism" suggesting that it is not a real historical phenomenon but a bit of a left-wing boogey-man. He is so far off-base in understanding how the world works, it's hardly worth reading what he thinks should be done to fix it. His argument seems to be that we need to "remove barriers" so that workers will get up off their "lazy" butts and go get a job. I don't really know what to say to that. Where does one begin? I sort of just want to ask Salam if he's ever heard of this place called "earth". Seriously, how many times over does this tripe have to be refuted and discredited before we stop wasting our time. To put it in a slightly klunky Marxist way, the only reason it still gets a hearing is because of its functional utility in maintaining unequal relations of power.

Thus, the best way to make sense of the neoclassical stuff is not to take it as a set of serious arguments, because in many ways that's not what it is. The best way to make sense of it is to understand it as an ideology, in the Marxist sense. There are numerous dimensions in which such an approach is fruitful: from remarks in the Grundrisse regarding ideological types of abstraction, to arguments to the effect that neoclassical economics merely expresses the point of view of the capitalist, i.e. that neoclassical economics is merely a commentary on a capitalist firm's financial accounting practices. Allowing the neoclassical view to assert itself as a "reasonable" participant in the debate is a bit like tolerating "intelligent designers" in scientific discussions.


Hank said...

I don't understand how they arrive at the idea that all unemployment is voluntary. I assume that's because I never finished my college education.

t said...

I'm pretty sure that not understanding it is the right position. I don't understand it either.

Technically, they don't "arrive" at the view that it's all voluntary. They just begin with it: it is a basic assumption built into their theory. The models they use also assume that there could never be a glut on the market, that markets are always efficient, etc. etc.

Typically, when you look out at the world and see that it contradicts your theory, you revise your theory. Neoclassical economists, however, don't think like this. They devise elaborate models, using sophisticated mathematics, and spend a lot of time deducing what follows given a certain model. But there's always a question of whether some model, internally coherent and consistent though it may be, actually helps us make sense of the world. There's a question of whether the world is really like the model. Typically one needs "bridging principles" that explain how a given model maps onto the world. But neoclassicals seem impatient with this question. It's almost as though they want to squeeze reality to fit their theory rather than the other way around.

Even by their own criterion of predictive power, their theory has been a spectacular failure in making sense of the recent crisis.

Though I don't totally agree with him, Krugman has been good on some of this stuff:

Also, David Harvey is good on this stuff.