WSJ: So you painted a bleak picture of sub-par economic growth going forward, with an increased risk of another recession in the near future. That sounds awful. What can government and what can businesses do to get the economy going again or is it just sit and wait and gut it out?

Roubini: Businesses are not doing anything. They're not actually helping. All this risk made them more nervous. There's a value in waiting. They claim they're doing cutbacks because there's excess capacity and not adding workers because there's not enough final demand, but there's a paradox, a Catch-22. If you're not hiring workers, there's not enough labor income, enough consumer confidence, enough consumption, not enough final demand. In the last two or three years, we've actually had a worsening because we've had a massive redistribution of income from labor to capital, from wages to profits, and the inequality of income has increased and the marginal propensity to spend of a household is greater than the marginal propensity of a firm because they have a greater propensity to save, that is firms compared to households. So the redistribution of income and wealth makes the problem of inadequate aggregate demand even worse.

Karl Marx had it right. At some point, Capitalism can destroy itself. You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand. That's what has happened. We thought that markets worked. They're not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else's income and consumption. That's why it's a self-destructive process.

now we have Bloomberg running an opinion piece: Give Karl Marx a Chance to Save the World Economy

Policy makers struggling to understand the barrage of financial panics, protests and other ills afflicting the world would do well to study the works of a long-dead economist: Karl Marx. The sooner they recognize we’re facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it.

The spirit of Marx, who is buried in a cemetery close to where I live in north London, has risen from the grave amid the financial crisis and subsequent economic slump. The wily philosopher’s analysis of capitalism had a lot of flaws, but today’s global economy bears some uncanny resemblances to the conditions he foresaw.

Consider, for example, Marx’s prediction of how the inherent conflict between capital and labor would manifest itself. As he wrote in “Das Kapital,” companies’ pursuit of profits and productivity would naturally lead them to need fewer and fewer workers, creating an “industrial reserve army” of the poor and unemployed: “Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery.”

The process he describes is visible throughout the developed world, particularly in the U.S. Companies’ efforts to cut costs and avoid hiring have boosted U.S. corporate profits as a share of total economic output to the highest level in more than six decades, while the unemployment rate stands at 9.1 percent and real wages are stagnant.

U.S. income inequality, meanwhile, is by some measures close to its highest level since the 1920s. Before 2008, the income disparity was obscured by factors such as easy credit, which allowed poor households to enjoy a more affluent lifestyle. Now the problem is coming home to roost.

Over-Production Paradox

Marx also pointed out the paradox of over-production and under-consumption: The more people are relegated to poverty, the less they will be able to consume all the goods and services companies produce. When one company cuts costs to boost earnings, it’s smart, but when they all do, they undermine the income formation and effective demand on which they rely for revenues and profits.

This problem, too, is evident in today’s developed world. We have a substantial capacity to produce, but in the middle- and lower-income cohorts, we find widespread financial insecurity and low consumption rates. The result is visible in the U.S., where new housing construction and automobile sales remain about 75% and 30% below their 2006 peaks, respectively.

As Marx put it in Kapital: “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses.”

this is a line that Keynesians fetishize and the narrow emphasis on consumption is also serious misdiagnosis -dm

Addressing the Crisis

So how do we address this crisis? To put Marx’s spirit back in the box, policy makers have to place jobs at the top of the economic agenda, and consider other unorthodox measures. The crisis isn’t temporary, and it certainly won’t be cured by the ideological passion for government austerity.

Here are five major planks of a strategy whose time, sadly, has not yet come.

First, we have to sustain aggregate demand and income growth, or else we could fall into a debt trap along with serious social consequences. Governments that don’t face an imminent debt crisis -- including the U.S., Germany and the U.K. -- must make employment creation the litmus test of policy. In the U.S., the employment-to-population ratio is now as low as in the 1980s. Measures of underemployment almost everywhere are at record highs. Cutting employer payroll taxes and creating fiscal incentives to encourage companies to hire people and invest would do for a start.

now this bourgeois scum is just making shit up -dm

it's pretty much downhill from there, but anyways,

Lenin posted:
What is now happening to Marx's theory has, in the course of history, happened repeatedly to the theories of revolutionary thinkers and leaders of oppressed classes fighting for emancipation. During the lifetime of great revolutionaries, the oppressing classes constantly hounded them, received their theories with the most savage malice, the most furious hatred and the most unscrupulous campaigns of lies and slander. After their death, attempts are made to convert them into harmless icons, to canonize them, so to say, and to hallow their names to a certain extent for the “consolation” of the oppressed classes and with the object of duping the latter, while at the same time robbing the revolutionary theory of its substance, blunting its revolutionary edge and vulgarizing it. Today, the bourgeoisie and the opportunists within the labor movement concur in this doctoring of Marxism. They omit, obscure, or distort the revolutionary side of this theory, its revolutionary soul. They push to the foreground and extol what is or seems acceptable to the bourgeoisie. All the social-chauvinists are now “Marxists” (don't laugh!). And more and more frequently German bourgeois scholars, only yesterday specialists in the annihilation of Marxism, are speaking of the “national-German” Marx, who, they claim, educated the labor unions which are so splendidly organized for the purpose of waging a predatory war!

tapespeed posted:
Foreign Policywas the surprising one for me

i love the eyebrows. anyways, the fallout from the crisis seems to have really hit them: http://www.foreignpolicy.com/articles/2011/08/09/three_cheers_for_decline

e: wrong article

Edited by dm (Sept. 6, 2011 15:06:49)

In case you've been on Mars (or even just on vacation), here's a surprising idea that's been making the rounds lately: there might have been something to Marx's critiques of capitalism after all.

Now, before you leap into the intertubes, seize me by the arm, perform a citizens' arrest, and frog-march me into the nearest FBI office, exclaiming "See this suspicious looking brown guy? He's a card-carrying communist!!" please note: I'm, well, not.

http://www.nytimes.com/2009/11/09/opinion/09zizek.html?pagewanted=all