S K M Technocracy ECB - by Joseph Belbruno

8/11/2019 S K M Technocracy ECB - by Joseph Belbruno

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http://blogs.ft.com/martin-wolf-exchange/2010/05/24/how-likely-is-financial-

repression/#respond

!"$%&'&( and *&+,&

&iocation 'o do stice to yor 3strian chool leanings6 the reason why

3strian theory is drawing so mch attention is that it is probably the only branch of

3economic theory that deals with the concept that is on eerybodys lips right now and isthe sbect of this form 3!risis.

s yo know6 een 7ritains %$ recently belieed that 8the days of boom and bst are

oer9. cademic economists hae been bsy with their pathetic mathematical eationsin general eilibrim and game theory6 whilst on the 3left the last remnant of socialist

thoght was the ,eo-(icardian chool at !ambridge raffa6 ;aregnani and %asinetti6

reiewed in my !ambridge mentors6 ;eoff "arcort6 book6 3ome !ambridge

!ontroersies in the 'heory of !apital that it did not een %&(!&?@& that the real3conflict in capitalist society is ,=' oer 3distribtion6 bt oer the political

3antagonism arising ot of the !=$$,A of 3obectified6 past6 A&A >7=( the

wage< oer the 3present6 actal6 open-ended >?@?,; >7=( of 3workers.

'his form of blindness toward the real sorce of 3conflict in capitalist society was

welcomed by the !ontinental !ommnist %arties becase it 3stified their 3politicalrole as parliamentary representaties of the distribtie< 3interests of workers in thedistribtion of social wealth6 whilst sparing them from the real task of abolishing the

3wage relation. ? hasten to add6 howeer6 that the historical and instittional form of

3spersession of the wage relation is far from clear at this stage. &en to this day the bestwe can manage is probably $arxs 3;rndrisse.> that the capitalist economy was based on the fndamental ,';=,?$ =F

'"& B;& (&>'?=, and that this most %=>?'?!> antagonism needed a%=>?'?!> 8mediation9 and 8leadership9DDD Bebers replacement of chmpeters

8entreprenerial pirit9 with his 8%=>?'?!> pirit9 or 8leadership9 8leitender ;eist9?'?!> ,B&( to the phenomenon of capitalist 3!(??.

'he sorce of capitalist 3crisis6 therefore6 had to come F(=$ B?'"?, the capitalist

8system9 its social relations of prodction< if it was to be more than st a 8des ex

machina9 like chmpeters 3nternehmergeist and if it reired a %=>?'?!>resoltion6 a 8mediation of !=,F>?!'?,; interests9 as in Beber.

?n or presentations below6 we soght to identify 'B= interconnected sorces of 3crisisin a capitalist economy. 'he first one was F(=$ 7&>=B and it is de to the antagonism

of the wage relation which at the leel of the 3nation-state or 3the collectie capitalist

with monopolistic control or sole athority oer the se of physical force ,A of thecrrency of 3money< at this leel the antagonism of the wage relation is 3mediated

predominantly throgh the interplay of 3?,F>'?=, throgh 3wage psh increases of

nominal wages< and 3,&$%>=+$&,'.

7t this 8trade-off9 and the 8flexibility9 that it gae 3nation-states in connection with the

system of 3flexible exchange rates at the end of 7retton Boods in 1GH1 =,>+ &(@&A

to lead to 8competitie dealations9 which in trn occasioned '"& &!=,A !&of 3crisis6 the one F(=$ 7=@& that inoles the attempt by capital in its most

3liid6 3mobile and 3fngible form6 F?,,!& !%?'>6 '= @=?A the conflict

and antagonism of the wage relation by @>=(??,; itself artificially throgh3speclatie or 3gambling actiities that go from 8financial innoation9 to 8crrency

speclation9 andC9capital flight9 or 8capital flows9


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Be can see ,=B how the 8two sorces9 of crisis arise both from the wage relation. Bith

its 3speclatie actiities aimed at @=?A?,; the wage relation finance capital hasemerged as the most irlent threat to the 8soereignty9 and 8athority9 of 3,'?=,-

''&C.by ndermining their 3crrencies. ?n response6 3nation-states hae soght

3to co-ordinate economic policies and6 in the extreme case of the &ropean nion6 tochange their 8$=,&'(+ 7=,A(?&9 throgh a 8!((&,!+ ,?=,9. ?n the

third 3wolfexchange we tied this deelopment p with the breakdown of 7retton Boods6

the deelopment of flexible exchange rates and $ndells theory of 8optimal crrencyareas9. Be will see why the &ropean crrency-nion soltion was incomplete and

reired a %=>?'?!> ,?=,.

'he 3exchange or 3trade-off between inflation and nemployment we mentioned aboewas gien a 3dynamic definition by $ilton Friedman with his concept of 8non-

accelerating inflation rate of nemployment9 ,?(?'+ ofthe !&,'(> 7,*. "ere6 once again6 we find the distinction between the 8pirit9

;eist< represented by the capitalist 8&ntreprener9 chmpeters 8nternehmergeist9eader9 Bebers 8leitender ;eist9>6 the point in estion right now

DD< the relation between the tate as 8collectie capitalist9 on one side ,A on the


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other side its maniplation of ?,F>'?=, and F?,,!?> (&%(&?=, or the

control and reglation of finance capital as its >'?$'& ''&$%' to gie ,&B

@?;=( to the wage relation and to 8indstrial capital96 to re-establish the ,&Jbetween capital and 8ale-creation9 away from 8the flights of fancy9 of finance capital6

to re-lanch the process of capital 8alorisation9 throgh greater 3prodctiity in its

@?'> ?'& where >> 3@>& is 8created9 ?, '"& B=(*%>!&DD

?n or next interention6 we will examine '"& >?$?' of this interplay6 throgh the

8monetary medim96 between %=>?'?!> >&A&("?% and the $!"?,&(+ ofcapitalist indstry 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 arets what we thin they ay want in future e+en thoughthey 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 isthat what we thin the arets ay want &% 14#45)! is a pro67ect of renewal of capitalist -MM$%/ o+erli+ing labour worers. &n #8&S conte9t, any :eynesian! +elleity of return to the old e;uilibria! ofneoclassical econoics S8$##)5S against the solid roc of the antagonis of the wage relation. #hepolitico6econoic pro67ect 0(atin, to throw o+er2 of capital M4S# ') M-5) than siply to pic up effecti+edeand! and return to full eployent!. #he $(4)!.

$nd it is in #8&S 8&G8(? S


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&%/&>&/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 rewardsand the distribution between different uses of a gi+en ;uantity of resources on the one hand, and the #heoryof -utput and )ployent as a whole on the other hand. So long as we liit oursel+es to the study of theindi+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 whatdeterines output and eployent as a whole, we re;uire the coplete theory of a Monetary )conoy,!0G#, h.FA2.

&t is >$( to note that what is issing in :eynes is a theoretical fraewor, or a political strategy, to re6startcapitalist G5-W#8!, a strategy to '5&%G '$: the capitalist syste away fro the politicization! thatState 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 thesyste ali+e, to buy social peace! 4%#&( full eployent is achie+ed. $# #8$# $(4)H 6 indeed it is the S4&%G($'-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


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that we discssed below. ? do this to alert pro-8*eynesian9 commentators to the

8tendency9 in their stance against 8speclators9 and 8casino capitalism9 toward tate

athoritarianism if this 3stance is not accompanied by a 3critical approach to the analysisof capitalism.

'he 8*eynesian9 call for the tate 8the collectie capitalist9< to (&;>'&3FinanIkapital against the deleterios excesses of its congenital search for 8paper gains9

- that is to say the search for ways 8to realiIe profits9 withot haing to go throgh the

8antagonistic9 process of 8alorisation9 in the workplace - shows s neiocally thatas one contribtor to this form K3&iocationL pointed ot recently< what lies at the

heart of this 3reformist call has geninely 3athoritarian tendencies against which we

mst gard.

?ndeed6 in the !omments to a $artin Bolf !olmn6 one particlar wit has st called for

8the liidation of the !ity of >ondon9 and6 behind a cascade of 8*eynesian9 erbiage6

&@&, started to inoke 8the oereign9KDDL6 by which he srely meant 3the tate6 taking

p direct inestments to maintain 8aggregate demand9. 'his is stff we had not heardsince "obbess 3>eiathan or since the days of mediaeal 8statolatrists9 like %fendorfDD?'+ of

adanced indstrial capitalist economies in the light of the growing political cohesion andantagonism of working classes in those contries.

'he higher leels of 8nemployment9 reslting from the nwillingness of 8indiidal9capitalists '= ?,@&' 3$=,&+ or '= "=(A it regardless of how low interest rates

fell which *eynes called 8the liidity trap9 - led *eynes to call for the A?(&!'

?,'&(@&,'?=, of the tate in the process of prodction of 8otpt9 so as to maintain a3politically acceptable leel of employment and to maintain 3social peace and6 with it6

the srial of the capitalist system.

*eynes cold already predict that this 3tendency cold only worsenC.9in the long rn9."is famos maxim that 8in the long rn 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 8ncertainty96 >> '"&& were !>&( ?;, that*eynes saw eer greater tate interention in the capitalist economy as an ineitable

8tendency9. imilarly6 *eyness famos conception of money as 8 >?,* 7&'B&&,

%(&&,' ,A F'(&9 einces inconftably the F&( that *eynes held forCtheF'(& of capitalist society or of 8society in general96 gien that a borgeois thinker

like him cold not enisage any ='"&( form of 8society9D


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+es6 becase B"' ? tate direct interention in the capitalist economy if not the

%%(=%(?'?=, of the ftreDM B"' ? ?' if not a political 3pro-ect a 8throwing

oer9 the hiats or chasm that exists in capitalist inestment between present and ftre?'?=, =F

3$=,&+ >?,* pro-ectio6 8throwing oer9< 7&'B&&, %(&&,' ,AF'(&DDD

Bith the ;erman ?dealist philosopher Fichte we cold call *eyness 3pro-ect to abolish

money as his 8pro-ectio per hiats irrationalem9 becase6 like religion where 3faithproides the 3bridge between the world and ;od6 *eynes wished to 3bridge or 3link the

3irrational hiats KchasmL between the present of borgeois society and its ftreCwithot the help of 3moneyD

problem. 'his tendency was particlarly eident dring 3the great moderation.

s we saw below6 in matre capitalist societies like those that preail now6 &@&, the

process of 3innoation described by chmpeter as the sorce of 3crisis and 3bsiness

cycles has been entirely sbsmed or 3taken oer or 3internalised within the strctre ofthe capitalist corporation or organiIation. nd we saw that6 indeed6 the control oer

3innoation has itself become a F=(!& pshing toward 3monopoly. ?t follows therefore

that the role of the 8entreprener9 is necessarily diminished to that of mere 3manager.

?f we concede then that 3innoation6 the process of research and deelopment has been

absorbed within the 3breacratic strctres of adanced capitalism pt differently6 if

the 8entreprenerial pirit9 has been 3integrated within the 3'echnie of 3corporate

management ?' 7&!=$& 7=>'&>+ !>&( then that the =(?;?, of 3crisesin a capitalist economy can be fond =,>+ in the social antagonism B?'"?, the

strctre and fnction of '&!",?!> or 3breacratic tate control of the 3wagerelation.

?t is entirely clear from or analysis that the &@&(?'+ of 3crises in a capitalist societycan be 3gaged6 can be measred broadly by the extent to which the tate-form itself

needs to interene %=>?'?!>>+ in the broad economy 7='" in terms of direct control

of prodction ,A in terms of reglation of economic actiity. ?t is at this precise point

that chmpeters 8entreprenerial pirit9 has to gie way to $ax Bebers 8leadershippirit9 leitender ;eist control of capitalist

enterprise actally &J%,A6 on one side6 ,A6 on the other side6 the extent to which

the '&!",?!> control recedes or contracts.

%t in ery blnt terms6 a capitalist 3crisis is the more 3systemic or dangeros the more it

becomes 3politicised in that it reires direct interention by the tate in areas that 3in

normal times cold be $,;&A 3technically6 by '&!",=!('.

'his all-important conclsion leads s to a deelopment that has %(&%='&,'>+ and

dramatically come to the fore of international attention where the essential tool ofpolitical !=$$,A of the 3wage relation takes place and that is '"& %=>?'?!>

!=,'(=> =F $=,&+6 inclding the control of capital flows.

'"? leads s A?(&!'>+ to the present 3trans-formation of the role played by

!&,'(> 7,* in the capitalist system. $=(& %&!?F?!>>+6 it leads s to an

examination of the central role that the &ropean !entral 7ank has been F=(!&A to

play in the crrent eroIone 3crisis. nd this is what ? hope to do in a ftre form.


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>+& ,A '"& ?(&,: 'echnocracy as (epression

=dysseswas crios as to what the irens sonded like6 so6 on !irceNs adice6 to aoid

being lred onto their island by their irresistible singing and perish6 he had all his sailors

plg their ears withbeeswaxand tie him to the mast. "e ordered his men to leae himtied to the mast6 no matter how mch he wold beg. Bhen he heard their beatifl song6

he ordered the sailors to ntie him bt they bond him tighter ntil they passed past the

island.

Be saw earlier how with *eynes it is the antagonism of workers expressed instittionally

as 8the downward rigidity of nominal wages9 that occasions a 8crisis9 of inestment in

which the inability of wages to adst to a leel sfficiently low to entice inestors ot of

the 8liidity trap9 leads to stagnation or recession. 'wo things ense: the tate mstinterene to proide the 8effectie demand9 that is missing in order to restore a politically

acceptable leel of employmentO and also the liidity proided by the tate will reslt ina rise in inflation that will sere to redce the gap between asset-linked loans and the

ability of indebted bsinesses and consmers to repay them see ;eneral 'heory6 !h.21.

For the financial repercssions of tate 3stabilisation after the ,ew Aeal6 see aboe all"yman $inskys 8Finance and tability: 'he limits of capitalism96 $ay 1GGP. $insky is

particlarly explicit abot the 8socialisation of debt9 sch as has occrred in the latest

8crisis9


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they rarely achiee 8more9 than st 8manage9 the antagonism that led to 8crisis9. ?t

trns ot that a l l the interention of the tate-%lan manages to achiee is to psh the

antagonism to a "?;"&( leel6 one that reires direct %=>?'?!> $&A?'?=, bythe highest elected officials in parliamentary democracies. ? read in this sense (omano

%rodis latest =pinion on the F' concerning the &s failed decision-making process oer

fiscal policy.?'?!> ?,7?>?'+ to sppress the antagonism of workers and to transfer

definitiely the costs of 8the crisis9 on to workers in terms of 8asterity9 and 8deflation9.7y the same token6 we find that those 8instittions9 that hae been established by the

tate-%lan with the express prpose of being 8independent9 of politics6 to aoid the

8political cycle9 and therefore to act 8technocratically9 (& F?>?,; $?&(7>+ to

come to terms with the new leel of antagonism that 8the crisis9 has nleashedD

>ike lysses ordering his sailors to tie him to the mast so as to aoid the irens fatallyallring oices6 the 8independent9 &ropean !entral 7ank was established by the tate-

%lan as a 8technocratic9 instittion apt to remoe monetary policy an essential tool of

8political mediation9 of 8crisis9 in *eynesian theory from the 8political pressres9 thatthe economic cycle wold ineitably apply on the 8correct6 disciplined scientific-

technocratic< condct9 of this policy6 and also to assre the command of the tate and

capital oer workers against the 8temptation9 of political leaders 8to accommodate9

monetary policy to assist with the creation of employment and the 8depreciation9 of debtobligations. ?n short6 it was an attempt to present as >B what was always pre and

simple %=>?'?!.

?f6 as a reslt 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 grond. 7t if the opposite occrs6 the ensing rigidity of central-bank policieswill only lead to a frther 8rigidity9 of the present tate regime. ?n both cases 8the room

to manoere9 that $ax Beber spoke abot in 3%arlament nd (egierng< will hae

been greatly redced for the capitalist class.

*&+,& ,A !"$%&'&(: !ycle6 !risis6 ;rowth %art ??+ the Qcollectie capitalistQ the tate< can stop

and reerse.

=nce the tate has re-established the identity between ?nestments and aings6 *eynes

concldes that ayNs >aw or Qthe laws of classical economicsQ< fnction normally.

&ilibrim is reached and the >aw of @ale according to which QotptQ is properlydistribted to each factor of prodction - profit6 interest6 rent and wages - can finally

operate in accordance with economic theory.

'he &&,'?> point here is that *eynes cold see Q&ilibrimQ and6 nlike the

classical political economists mith6 (icardo6 ay=%$&,'.....throgh ;(=B'"--

?,,=@'?=,DD

B"&(& in *eynes capitalism was always prone to ';,'?=, as we saw

earlier to capitalism. For

chmpeter Q?nnoationQ is '"& @&(+ &&,!& of capitalismD For all this6 see

7siness !ycles.=%$&,'96 there is 8&J%,?=,9 bt

there is ,= 8?,,=@'?=,9. ?n *eynes there is 8control of ;rowth9 bt no

8>&A&("?%-as- deelopment96 there is 8growth of !=,'(=>9 bt no 3ctie

domination of the prodctie process96 8actie >&A&("?%9 throgh ?nnoation.


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'here is a 8breacratic9 ''&-%>, to come ot of the 8!risis9 bt there is no

nderstanding of how the process of prodction itself6 the (ationalisation of 'echnology

can sere as %=>?'?!> >&A&("?%6 as A=$?,'?=,.

*eynes sees the ,&;'?@& aspect of working-class antagonism in the 8rigidity9 of

wages. 7t chmpeter sees the 8resistance9 to ?nnoationD "e sees the workersantagonism to 8new technologies9 that are ,A&$=!('?!6 '"=(?'(?,

forms of !=$$,A oer 8liing labor9DD !f. 7siness !ycles. 8reoltionary9 or6in the words of chmpeter6 8creatie destrctie9 transformational %=B&( =F

?,,=@'?=,D

'"? is the %=B&( of chmpeters 8&,'(&%(&,&(?> %?(?'9 or

8nternehmergeist9D chmpeter accepts the theoretical seflness of neo-classical8eilibrim9 analysis becase of its 8metaphysical9 alities of stification or apology

for capitalist 8market9 relations of prodction arising ot of the 8F(&& market96 ot of

8F(&& exchange9 in a 8&>F-(&;>'?,; $(*&'9 in which the participants

8F(&&>+ &J!",;&9 their original 8&,A=B$&,'9 as in Balrass system notfor nothing chmpeter considered Balras the greatest economistaw and the >B of @ale can =,>+ reslt in a8circlar flow9 'heory of &con. Aelpmnt.< a '&(?>& 8circlarity9 that ltimately

will tend to the ';,'?=, of 8pre competition9. ?ndeed6 for chmpeter the 8&!-

!&,'(?!?'+9 of capitalism6 its 8!&,'(?-F;>9 ality ? ,=' 8exogenos9 - ?'? '"& @&(+ ,'(& =F !%?'>?$DD For chmpeter6 8!risis9 is not st a

temporary 8dis-eilibrim96 an 8anomalos9 ?$-7>,!& in the system ,=D For

chmpeter 8!risis9 is the ,'(& of the capitalist economy6 its ery "&(' ,A

=>6 its empirical6 isible 8act-ality9 - and6 as we will see6 the antagonism of workersis its $='=(.

'= $=@& =' DD< of C.this 8!?(!>&9 DD


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antagonism of the wage relation behind the %=?'?@& responses of the

3nternehmegeist the 8pirit9 of the entreprener -6 the 8innoatie9 aspect of

8!(&'?@& destrction9 shopferische Terstorng@&A: capitalist innoation is seen in its

fll and bare gise as naked 8Bill to %ower9 as 8domination9 oer liing labor.'he &ntreprener $' ?,,=@'& or 8create9 ,&B 8technologies9 in order to

A=$?,'& the antagonism of workers by 8A&'(=+?,;9 the crrent methods or

=>A 8technologies9 of prodction = '= 8&J'&,A9 or 8A&@&>=%9 its %=B&(oer workers ?, '"& B=(*%>!& and in the =!?&'+ =F !%?'>DD

chmpeter mst hae been aware of this %=>?'?!> dimension of his 3'heorie of

8Aeelopment9 becase as soon as he states it he proceeds immediately !h. =n3!apital< to reassert at great length the 8innoatie9 and 8creatie9 motie of the

8entreprenerial pirit9 in both the indiidal ,A in the monopolistic firm< by seeking

to interpret and explain away the 8accmlation9 motie in his accont of 8!%?'>9 assimply an 8instrment96 a means-to-an-end 3?nnoation< for the capitalist

8entreprener9 indiidal or monopolistic firm< and not as , &,A ?, ?'&>FD

chmpeter specifically and explicitly A?'?,;?"& between 8inention9 which is

part of 8scientific research9 and ?,,=@'?=, which is a ;?A&A6 ?,'($&,'>6

%=>?'?!> B?>>-'=-%=B&( he called it 8Bill to !oner96 see ?ntro to 'h. =f

&con. Aelpt.< apt to 8dominate9 '"& $(*&'9 so as to establish a ,&B$=,=%=>+ that can control the market. 7' this 8control9 is ,&@&( ''?!6

,&@&( 7=>'& becase the 8pirit9 of capitalism6 the 8&ntreprenerial pirit9 is

3to dominate throgh technology9. !f. dis motto6 8@orsprng drch 'echnik9


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8$''?=,9 of the process of prodction and distribtion6 of capitalist social relations

of prodction6 of 8domination9 oer 8liing labor9 or workers.

Bhile 8technological (ationalisation9 makes this political process &,A=;&,=6 it is

always the !"(?$6 the 8leitender ;eist9 of the &ntreprener that is needed to psh

the process F=(B(A. 'herefore the &ntreprener $'&( or A=$?,'& theworkers by 7-=(A?,'?,; the 8technological (ationalisation9 to the '* or

;=> of A=$?,'?=, '"? ? ?-,-,-=-@--'-?-=-,DDD chmpeter promoted

the stdy of 8economic sociology9 in this regard. factor of prodctionD.

ctally6 $insky does allow for the role of 8accmlation9 and hence the antagonismof the wage relation. 7t he neer consistently takes this p6 preferring 8to aciesce9 in

the financialC9>imits9 of capitalismD +et the (&> >?$?' of capitalism is to be fond

in the wage relation itselfD

"ence6 $insky writes abot 8the @eil of $oney9 in 3F?"< bt he distingishes between

the 3neoclassical ersion where ltimately 3money is only a nit of accont so that

8goods are exchanged with goods9C.and *eyness ersion where 3money is a mch

more sbstantial 3@eil in that it determines what $insky calls 8the dal pricing system9whereby 8financial assets9 are separated from 8prodctie9 ones and priced separately.

'he eental 8mispricing9 that easily arises de to this 8&%('?=,9 cf. $arxs3'rennng< then reslts in 8speclatie pyramids9 of debt that ltimately lead to

financial collapse of the ;F! type. o essentially this alidates or interpretation of

*eynes and his description of money in !h621 of the ;'.

7t6 again6 $insky does not explain why the 8speclatie pyramid9 mst collapse or

differently pt6 why inflation is sch a bad thing6 why it occrs at allD "ayek6 for

instance6 points ot in 8%rices and %rodction9 that what matters is not price stability btprice 8netrality96 in other words a monetary system managed to ensre that 8relatie9

prices do not change so as to affect a change in the demand for arios factors of

prodction and consmption goods that is inconsistent with 8intertemporal eilibrim9broght abot by 8free market competition9 remember that for "ayek 8perfect

competition9 is meaningless see releant chapter in 8?nd.U&con.=rder9


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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 seeing 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.

s ? hae soght to stress in my contribtions6 we hae a 8combined9 deelopment to

confront in this adanced stage of capitalist 8deelopment9 &ntwicklng


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threatened 6 & say that there ne+er was a Hfree aretH. 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 aretH 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

5eportjoseph belbrunoO =une AD *Ca O


21/59

chmpeter pays gratefl tribte to $arx for being the only classical theoretician to

identify the 8eoltionary9 force of capitalism. 7t he cold not espose $arxs

8metaphysical9 notions of 8ale9 or 8socially necessary labor time9. 'he estion thenarose for chmpeter: if 8ale9 or 8tility9 are not capable of explaining the eident

8empirical phenomena9 of capitalist 8crisis9 and 8deelopment96 what other driing force

or 8agency9 is there that is 8endogenos96 8intrinsic9 to capitalism that determines andexplains its historical behaiorM

"ere chmpeter realiIes immediately that the one factor that can lead capitalism ot ofits 8circlar 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 serices6 a process of 8entreprenerial ?nnoation9 that

gies new 8enterprises9 a 8competitie edge9 and leads to the formation of new 8firms9that rapidly 8coner9 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 8consmers9.

chmpeter takes pains to explain in 87siness !ycles9< that it is not 8consmer

demand9 that dries 8?nnoation9 becase6 if anything6 this demand tends to be8conseratie9 and 8retrograde9. ,o6 what mst drie this demand is an 8innoatie96

8entreprenerial spirit9 nternehmergeist< that dries the process of 8technological

innoation9 in a dramatic dis-eilibrating6 8crisis-indcing9 strggle of 8creatiedestrction9 shopferische Terstorng


22/59

8innoation9 and capitalist 8deelopment9. Bhich is why he did not tackle the meaning

and sorce of 8profit96 relying srely on 7ohm-7awerks theory of interest.

'he aboe presentation shows how in effect chmpeter cold 8empirically9 contest thescientific releance of 8eilibrim96 which cold only sere 8didactic9 or 8heristic9

"ayek in ?U&=< prposes. &en in his reiew of 7ohm-7awerk6 chmp had stressedthe 8elegance9 of his theory and its empirical fondation. 7t chmps ownphilosophical attachment to 8empiricism9 - whilst it droe him to confront the 8reality9

of crisis and cycle and deelopment as 8intrinsic9 moments or aspects of capitalism - was

always going to relegate him to the sphere of mere obseration and so preent him fromnderstanding the reality 7&"?,A the empirical data. ?ndeed6 the 8sbectiism9 of the

8nternehmergeist96 chmps tribte to borgeois 8?ndiidalitat96 cold ,=' be

reconciled with the 3(ationalisierng proponded by Beber as chmp wished atfootnote 2 of !h.2 of 3'heorie< precisely becase the 8obectie9 8organiIational9

sbsmption of the process of 8?nnoation9 relegated the 8entreprener9 to a mere

8manager9 and depried the 8captain of indstry9 of its 8?ndiidalitat9 within the

process of 8?nnoation9.gain the whole 8science of management9 and 8theory of the organiIation9 that recently

receied great borgeois approbation with the award of the ,obel %riIe to =lier

Billiamson6 achiee nothing more than '= $* capitalist command behind 8thetheory of the firm9 and 8transaction costs9 and 8contractal enforcement9- %(&>+6

again6 '= A?;?& the real natre of the 8political9 antagonism within the capitalist

firm as a strctre of !=$$,A6 of force and iolence6 in terms of 8rationalexpectations9 or 8bonded rationality9 again within that 3(ationalisierng indicated by

Beber. 'he 8limited rationality9 of the firm the 8rationality9 that de-limits its

8bondaries9 Kcf. (.!oase6 8'he >imits of the Firm9L and de-termines its 8internal

organiIation9 is clearly an 8instrmental rationality9 that only seres to hide the oerall

fnction or agency of the 8firm9 as a strctre of command. &@&, the redction of8profit maximiIation9 for the prpose of retaining 8market share9 can only be seen as an

orientation toward the realiIation of profit and the extraction of 8ale9.= is 8constrained9 and 8compelled9 by therelations of prodction. Bhat is lacking is the 8motiation9 as 8will to power96 as the

need to command and control the process of pro-dction '"(=;" and 7+ $&,

=F 8innoation9. 'he 3!=$-%>?=, of the 8entreprener9 or 8monopolistic firm9 is

the complsion of 8profit-making9 '"' is the 8battlefield96 the 8system of forces9 inwhich indiidal capitalists mst 8com-pete9 or fight. ,=' for the sake of 8competition9

or 8innoation9 as chmp always attempts to arge see esp. !h. =n 3!apital in the'heorie


23/59

and here we retrn to Bebers 8leitender ;eist9 which is a mch more consistent agency

or figre ' '"& &,A of the 3(ationalisierng/7reacratisation.

A. 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)ntwiclung2, 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! bacground which & briefly described before.

'ut the real 8egelian HdialecticalH point you will find in the bit you re7ect 6 woring6class 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! bacground which & briefly described before.


24/59

'ut the real 8egelian HdialecticalH point you will find in the bit you re7ect 6 woring6class 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.


25/59

@ Sepp 6 ?our obser+ations pro+ide e with a wonderful opportunity to illustrate the point & was aing 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 theword bt also what little training ? had in philosophy or scientific

method was entirely in the school of &rnst $ach and later of the logical

positiists.9 ?ndiidalism and &conomic =rder?%

'ut gi+en that the State6


32/59

FT http*UUwww.ft.coUcsUsUDUFaVcCF6KKFD6AAdf6baKB6DDAQQfeabdcD.htl05othopf on 3


33/59

'"?6 my friends6 is 8the fractre of the tate-%lan9. 'his is the dilemma that the tate is

called to resole: either it pays the 8interest9 and so fractres the 8comm-nity9 or it

pholds the 8inter-est9 to maintain the hope of niting the commnity.

IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII

5eportjoseph belbrunoO =une A AA*DFa O


34/59

Minsy 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 AT http*UUwww.ft. U...6DDAQQfeabdcD.htl0-baa not in control re '


35/59

by pro+iding a bureaucratic! and parliaentary! syste of ediation of this antagonis through the

upeep of aggregate deand! and social and welfare planning!. 8ence, State6


36/59

#ronti warns against reducing political criti;ue to the structural because then the ipact of the forer is lostor absorbed in the ob7ecti+e echaniss!. &nstead, the crisis pro+oed should place in a directrelationship".the producti+e relations with the power relations, a collision between the ode of productionand the state, without further ediations either fro society or fro the political syste! 0pp. Q6V2.

#his is what we are attepting with the analysis of the fracture of the State6


37/59

* point well taken6 if ? may. 'here is a 8measrement9 problem that arises when

we look at 8economic9 categories6 and most poignantly with regard to 8monetary9measres. 'he contribtion on the 8meaning of pblic debt9 wished to raise precisely this

8measrement problem9 that ? strongly beliee grows each day more 8critical9 to the

analysis of capitalism as its actal 8crisis9 nfolds. For ? beliee that a time is fastapproaching when the 8measrement9 of 8economic categories9 the monetary ale of

8pblic debt96 for instance< become 8estionable9 in the sense that they no longer reflect

any 8reality9 except the 8dys-fnction9 of the capitalist economy seen as a 8socialsystem9 or as a 8set of instittions9.

,ot only 8monetary measrement9 becomes problematic6 bt indeed the 8categories9

themseles D< come into estion 8pblic debt96 ;A%6 8inflation96 8real9 as against8nominal9C.9ales9< all these categories come into estion precisely becase of the

central problem that ? hae raised: - that 8borgeois economic science9 no longer is able

to grasp the increasingly 8political9 character of the antagonisms hidden behind those

8scientific9 categories crrently employed.

'o illstrate this point ? wold point to $artin Bolfs !olmn in todays F' raising the8categorical9 problem of central-bank 8money-printing9. Bhat ? find exciting and

engrossing in Bolfs approach is his clear ision of the 8instittional9 read 8political9onergans comment below can also be read in this context6 ?think.abini which encapslates the 8fractre of the *eynesian tate-

%lan9: -

8%blic expenditre6 if prodctie KprofitableL6 has a doble positie effect on national

prodct: one positie that consists in the growth of prodction6 and the other temporaryC

in that by increasing demand it creates inestment opportnities for priate enterprise.nprodctie KnprofitableL pblic expenditre6 instead6 has only this temporary effect

that lasts only as long as it Knprodctie expenditreL lasts. ?f the proportion of

nprodctie expenditre on total expenditre grows6 it is probable that the rate of

growth of pblic expenditre will exceed the rate of growth of national prodct: and

thisC.cannot last indefinitely69 p.2556 8=ligopoly U'echnical %rogress96 1GY2


39/59

Bith the benefit of hindsight6 we can see that 8the *eynesian tate-%lan9 was neer

iable as a strategy for sstained capitalist growth. s $insky and ylos->abini scholars

of *eynes and chmpeter respectiely< hae shown6 the whole edifice of the tate-%lanwas bilt on a doomed 8pyramid of credit96 a 8%onIi-like scheme9 that was bond to

collapse. nd collapse it has done in dramatic fashion. ee links below.

Documents

S K M Technocracy ECB - by Joseph Belbruno