Posts Tagged ‘economic stagnation’

Capitalist Economists Debate ‘Secular Stagnation’ (Pt 2)

June 21, 2015

Recently, I have been looking at Thomas Piketty’s book “Capital in the Twenty-First Century.” Piketty, a French bourgeois economist, created a sensation by pointing out that over the last 45 years a growing proportion of national income—wages plus surplus value in Marxist terms—has been going to profit at the expense of wages. Piketty is alarmed that if this trend isn’t reversed capitalism will be seriously destabilized.

The title of his book is, of course, inspired by Marx’s great work “Capital,” though it predictably rejects Marx’s anti-capitalist revolutionary conclusions. Naturally, I was interested in what Piketty had to say about Marx.

What I found striking was that Piketty did not understand Marx at all. The reason is that he views Marx through marginalist lenses. Essentially, Piketty treats Marx as a fellow marginalist. Marx’s theory of value and surplus value, so completely at odds with the marginalist theory of value and surplus value, is literally beyond Piketty’s comprehension.

In examining the current debate about “secular stagnation” among economists like Larry Summers and Ben Bernanke, we must never forget how deep the gulf between their economic theories and Marxism really is. This is true even when their terminology is similar. This month, I will contrast the theories of two economists of the 20th century, Joseph Schumpeter and John Maynard Keynes, regarding capitalist growth and stagnation. Both men were marginalists, even if not the most “orthodox” ones, and therefore had much more in common with each other than with Marx.

Next month, I will begin to contrast their views with Marx and the views I have been developing in this blog. (1) But before we reach the “Marxist mountains” we will have to slog through the plains of modern bourgeois economics. Only when we begin to ascend into the Marxist mountains will we be able to explore whether any of the ideas of Schumpeter can be integrated into Marxism. I have already dealt with Keynes quite extensively in this blog. (See, for example, six-part series beginning here.)

Joseph Schumpeter (1883-1950) was the most famous marginalist economist to deal with the question of technological changes, or “innovation,” under capitalism. Schumpeter was an Austrian economist in the sense he came from Austria, though he spent his last years in the United States as a professor at Harvard University. He was certainly influenced by the “Austrian economists” as well as other schools of post-classical bourgeois economics current in his day. Like the Austrian economists proper, Schumpeter preferred to communicate his ideas in natural language as opposed to mathematics.

Also like the Austrians, he was a hardcore supporter of capitalism, disliked “socialism”—proposals to reform capitalism in the interest of the workers—and was an opponent of the “Keynesian revolution” in bourgeois economic theory of the 1930s. He was what would be called today a “neo-liberal.” Like the Austrian economists proper, Schumpeter took a dim view of democracy, which he was convinced would inevitably lead to socialism. Yet he was a friend of Paul Sweezy and therefore had a certain influence on the Monthly Review school.

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Capitalist Economists Debate ‘Secular Stagnation’

May 24, 2015

A debate has broken out between economist Larry Summers (1954- ), who fears that the U.S. and world capitalist economies are stuck in an era of “secular stagnation” with no end in sight, and blogger Ben Bernanke (1953- ). Blogger Bernanke is, no less, the Ben Bernanke who headed the U.S. Federal Reserve Board between 2006 and 2014. Bernanke claims that the U.S. and world economies are simply dealing with lingering aftereffects of the 2007-2009 “Great Recession,” which broke out while he was head of the Federal Reserve System.

In effect, Bernanke is saying that there is nothing fundamentally wrong with capitalism and that healthy growth and “low unemployment and inflation” will return once the lingering aftereffects of the crisis are fully shaken off. Bernanke is, however, alarmed by the rapid growth of German exports and the growing share of the world market going to German industry.

Last year, we “celebrated” the 100th anniversary of the outbreak of World War I. Bernanke’s concerns show that the economic fault lines that led to both World War I and II have not disappeared. Instead, they have been joined by new ones as more countries have become industrialized. And the prolonged period of slow growth—and in some countries virtually no growth—that has followed the Great Recession is once again sharpening them. Competition both among individual capitalists and between capitalist countries is much sharper when world markets are growing slowly. World War I itself broke out when the early 20th-century “boom” was running out of steam, while World War II broke out after a decade of the Depression.

The debate between Summers and Bernanke on secular stagnation has been joined by other eminent U.S. economists such as Joseph Stiglitz (1943- ) and Brad DeLong (1960- ). Summers, Stiglitz and DeLong are Keynesian-leaning economists, while Bernanke, a Republican, leans more in the direction of “neoliberalism,” though like most U.S. policymakers, he is thoroughly pragmatic.

The debate began with Summers’ speech to the IMF’s Fourteenth Annual Research Conference in Honor of Stanley Fisher. Summers noted that the panic of 2008 was “an event that in the fall of 2008 and winter of 2009 … appeared, by most of the statistics—GDP, industrial production, employment, world trade, the stock market—worse than the fall of 1929 and the winter of 1930. …”

At the very least, this was a major defeat for “stabilization policies” that were supposed to iron out the capitalist industrial cycle and abolish panics. But the problem extends far beyond the 2008 panic itself.

“… in the four years since financial normalization,” Summers observed, “the share of adults who are working has not increased at all and GDP has fallen further and further behind potential, as we would have defined it in the fall of 2009.”

The highly misleading unemployment rate calculated by the U.S. Department of Labor notwithstanding, there has been a massive growth in long-term unemployment in the U.S. in the wake of the crisis, as shown by the declining percentage of the U.S. population actually working.

In the days before the “Keynesian revolution” in the 1930s, the “classical” neoclassical marginalist economists, whose theories still form the bedrock of the economics taught in U.S. universities, were willing to concede that some “outside shock” to the economic system (for example, a major policy blunder by the central bank or a major harvest failure) might occasionally create a severe recession and considerable amount of “involuntary unemployment.” But these learned economists insisted that since a “free market economy” naturally tends toward an equilibrium with full employment of both workers and machines, the capitalist system should quickly return to “full employment” if a severe recession occurs.

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Che Guevara and Marx’s Law of Labor Value (Pt 2)

March 29, 2015

Bourgeois value theory after Ricardo

As I explained last month, the rising tide of struggle of the British working class obliged Ricardo’s bourgeois successors to abandon the concept of value based on the quantity of labor necessary on average to produce a commodity of a given use value and quality. They were forced to do this because any concept of labor value implies that profits and rents—surplus value—are produced by the unpaid labor performed by the working class. The challenge confronting Ricardo’s bourgeois successors was to come up with a coherent economic theory that was not based on labor value. Let’s look at some of the options open to them.

Malthus, borrowing from certain passages in Adam Smith, held that the capitalists simply added profit onto their wage costs. Like Smith and Ricardo, Malthus assumed that what Marx was to call constant capital could be reduced to wages if you went back far enough. Therefore, constant capital really consisted of wages with a prolonged turnover period—what the 20th-century “neo-Ricardian” Pierro Sraffa (1898-1983) was to call in his “Commodities Produced by Means of Commodities” “dated labor.”

Malthus held that since capitalists are in business to make a profit, they simply added the profit onto their costs—ultimately reducible to the price of “dated labor,” to use Sraffa’s terminology.

The idea that profits are simply added onto the cost price of a commodity is known as “profit upon alienation.” This notion was first put forward by the mercantilists in the earliest days of political economy. In this period, preceding the industrial revolution, merchant capital still dominated industrial capital. After all, don’t merchants make their profits by buying cheap and selling dear?

But what determined the magnitude of the charge above and beyond the cost of the commodity to the capitalist? And even more devastating for Malthus, since every capitalist was overcharging every other capitalist—as well as working-class consumers who bought the means of subsistence from the capitalists—how could the capitalists as a class make a profit? If Malthus was right, the average rate of profit would be zero!

But perhaps we don’t need the concept of “value” at all? Why not simply say that the natural prices of commodities are determined by the cost of production that includes a profit? But then what determines the prices of the commodities that entered into the production costs of a given commodity? Following this logic to its end, the natural prices of commodities are determined by the natural prices of commodities. This is called circular reasoning.

We haven’t moved an inch forward from our starting point. To avoid a circle, we have to determine the prices of commodities by something other than price. There is no escaping some concept of value after all.

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David Harvey, Michael Roberts, Michael Heinrich and the Crisis Theory Debate

February 1, 2015

Recently David Harvey, the well-known writer on Marxist economics, criticized Marxist economics blogger Michael Roberts’ views on crisis theory. According to Harvey, Roberts has a “monocausal” crisis theory. What Harvey objects to is Roberts’ emphasis on Marx’s theory of the tendency of the rate of profit to fall (FRP for short) as the underlying cause of capitalist crises.

Harvey goes further than simply criticizing Roberts’ FRP-centered crisis theory. He says that he is skeptical that a tendency of the rate of profit to fall even exists. He indicates that he agrees with the views of the German Marxist economist Michael Heinrich on the invalidity of Marx’s theory of the falling rate of profit. Heinrich’s views are developed in “An Introduction of the Three Volumes of Karl Marx’s Capital” (Monthly Review Press, 2004). He elaborated them in this article.

In this work, Heinrich tries to demonstrate that Marx himself in the final years of his life moved away from his own theory of the tendency of the rate of profit to fall. Heinrich holds that an examination of Marx’s manuscripts that form the basis of Volume III of “Capital” show that Marx had moved toward a theory of crises centered on credit. Heinrich accuses Frederick Engels of editing the manuscripts in such a way as to hide Marx’s alleged movement away from an FRP-centered theory of crises to a credit-centered theory of crises.

In his defense of the falling rate of profit school from the criticism leveled by Harvey, Roberts makes an indirect reference to this blog: “… recently, one Marxist economist from the overproduction school called me a monomaniac in my attachment to Marx’s law of profitability as the main/underlying cause of capitalist crises (see Mike Treen, national director of the New Zealand Unite Union, at the annual conference of the socialist organization Fightback, held in Wellington, May 31-June 1, 2014, and a seminar hosted by Socialist Aotearoa in Auckland in November 10, 2014 http://links.org.au/node/4156).”

Mike Treen, a New Zealand Marxist, is indeed an organizer of the New Zealand trade union Unite (not to be confused with the U.S. trade union of a similar name, UNITE HERE, which also organizes fast food and other low-wage workers). The “overproduction school” Roberts refers to is actually the position of this blog, of which Mike is an editor.

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Russia, Oil, the ‘Strong Dollar’ and the Economic Conjuncture

January 11, 2015

A major feature of the current global economic conjuncture is the financial-economic crisis that has hit Russia.

On Dec. 16, 2014, the central bank of the Russian Federation raised its benchmark interest rate to 17 percent from 10.5 percent. This is a far cry from the zero to .25 percent the U.S. Federal Reserve System maintains for its key interest rate, the federal funds rate. During 2014, the Russian ruble fell 45 percent against the U.S. dollar, while the Russian central bank sold some $80 billion of its foreign reserves in an attempt to halt the fall.

By raising its benchmark interest rate to 17 percent, the Russian central bank hopes to stem the bleeding of its reserves while checking the ruble’s decline. The catch is that such a dramatic and sudden rise in interest rates is almost certain to plunge the Russian economy into recession in 2015, with rising unemployment. As demand contracts within the home market, Russian businesses will be forced to sell more of their national production on the world market and import less of the production of other countries, causing a decline in Russia’s standard of living. Eventually, the balance of trade will swing back in Russia’s favor but on the backs of the Russian working class and other Russian working people.

The current financial-economic crisis in Russia is made worse by the sanctions the U.S. and its West European satellites have imposed on Russia. These sanctions are in response to Russia’s defensive move in the Crimean Peninsula. Responding to widespread demands within Crimea in the wake of the seizure of power by far-right anti-Russian forces in Kiev in February 2014, Russia agreed to allow Crimea to rejoin the Russia Federation. The crisis in Ukraine, which at times reached the level of civil war during 2014, resulted from the U.S.-supported neo-liberal/fascist coup after months of right-wing demonstrations in Kiev.

The coup government has severely restricted civil liberties in Ukraine, forcing Ukrainian working-class parties underground while re-orienting the Ukrainian economy towards Western Europe. In addition, Ukraine has all but in name joined NATO, the main military wing of the U.S. imperialist world empire. Kiev hopes to make its NATO membership official at the earliest possible date.

Rising tension between the U.S. empire and Russia

The move by the U.S. empire to draw Ukraine into its military and economic domain has increased tension between Russia and the U.S. to its highest level since the restoration of capitalism in Russia a quarter of a century ago.

The imperialist media and certain people on the left have pictured present-day Russia as a virtual “second coming” of Nazi Germany. Russia, it is claimed, attacked Ukraine without provocation. As a result, a resurgent Russia is now threatening virtually all the countries of eastern and central Europe and ultimately “the West” itself. Unless something is done to check Putin’s “aggression,” it is claimed by imperialist propagandists, there is a danger of all of Europe falling under the Kremlin’s domination.

Other people on the left have drawn a quite different conclusion. They argue that far from a resurgent Russian imperialism, the U.S. and its European satellites have launched a new “cold war” against Russia.

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World War I—Its Causes and Consequences (pt 2)

August 24, 2014

Wars rarely turn out the way their initiators expect. In our own time, we can point to many examples. George W. Bush and Tony Blair, when they ordered the invasion of Iraq on March 19, 2003, believed that the U.S.-British forces would defeat Iraq’s armed forces—weakened by years of sanctions, continued military attacks, and forced unilateral disarmament—within weeks with hardly any casualties on the side of the invaders. It would then be “mission accomplished.”

But now in August 2014—100 years to the month since the outbreak of the “Great War”—the U.S. has resumed bombing Iraq as the government it created crumbles. The reason this government is failing is that virtually no Iraqi wants to fight and die for it. Why should an Iraqi fight for a foreign-imposed government?

Nor should we forget the war against Afghanistan launched by the Washington war-makers in October 2001 against the Taliban government, which had no modern armed forces, only a militia. Within weeks, U.S. media were writing about that most unequal war in the past tense. But now, 13 years later, the U.S. is still struggling to find a way to exit that war without the return of the Taliban to power. That war didn’t turn out as the Washington war-makers expected either.

Nor has the air war fought by U.S-NATO against Libya in 2011 turned out the way the Obama administration, which launched that war, expected. And the same will probably be true of the most recent war—if it can even be called a war—launched by Israel, with at least the tacit support of the U.S., against the people of tiny Gaza, which has no army, air force or navy.

This August marks not only the 100th anniversary of the beginning of World War I but also the 50th anniversary of the infamous Gulf of Tonkin Incident. If we were to believe the U.S. propaganda of the time, (North) Vietnam’s tiny navy attacked without any provocation the mightiest navy the world had ever seen! This “incident” occurred—or rather didn’t occur—on August 2, 1964, just two days short of the 50th anniversary of the start of the “Great War.”

The U.S. Congress used this faked incident to grant the Johnson administration cart blanche to wage war against Vietnam, which the administration took full advantage of by launching a series of bombing raids on the Democratic Republic of Vietnam that August. This gave way to a steady air bombardment of (North) Vietnam—the South had been subject to steady U.S. bombardment for the preceding five years—the following year after Johnson won re-election as the “peace candidate.”

While the Washington war-makers succeeded in killing millions of Vietnamese people and doing incalculable damage to the environment with Agent Orange and other forms of environmental warfare, in the end the war against Vietnam did not turn out the way the war-makers in the White House, the Pentagon and Congress expected. For example, the renaming of Saigon Ho Chi Minh City was probably not part of Washington’s war plans.

Nor did the war against Korea, which is usually seen as beginning in June 1950 but really began when Washington occupied the southern part of Korea in 1945, turn out exactly as the Washington war-makers intended, though they succeeded in killing millions of Korean people and left no multistory building standing in the northern part of the country.

The rule that wars seldom turn out the way those who start them expect was certainly true of the general European war that began exactly a century ago. To the generation that actually fought, it was known as the “Great War” or “the World War,” ”the war to make the world safe for democracy,” or, most ironic of all, “the war to end all wars.” But as a result of unintended consequences of the war, it had to undergo a name change. It was renamed World War I, a mere prelude to the even greater bloodbath of World War II.

‘Before the leaves fall’

When the general European war commenced on August 4, 1914, each warring imperialist power was convinced that it would be a short war and that it would emerge victorious. Or as was said, the war would be over “before the leaves fall.”

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Low-Wage Workers of the World, Unite!

June 29, 2014

On May 15, 2014, a worldwide strike of McDonald’s workers involved workers in at least 33 countries, both imperialist and oppressed.

While participation in the strike varied, and most workers who participated were out for only an hour or so, this was a historic event all the same. It points the way forward to a far more internationalist future for the workers’ movement. To understand why this is so, we have to examine long-term underlying economic changes making the low-wage movement both possible and necessary.

This post is part of a series that explores the evolution of imperialism and the world capitalist economy in the century that began with the events of August 1914—the start of World War I. Let’s go back, not a full century but rather half a century, to the year 1964. This is the mid-way point between 1914 and the present day.

In 1964, the postwar, post-Depression “Long Boom” (strictly speaking, a series of industrial cycles with strong booms and relatively mild recessions) was underway. Indeed, to all appearances the “boom” was gaining momentum. In 1964, the U.S. and world capitalist economy entered a cyclical boom following a period of stagnation—a pause in the long postwar expansion—that occurred in the wake of the global economic recession of 1957-58.

Over the next couple of years, the Long Boom picked up steam as it was fueled—in addition to purely cyclical forces—by U.S. federal government deficits created by the escalation of the Vietnam War (called the American war by our good friends in Vietnam), further increased by a huge regressive tax cut signed by President Lyndon Johnson in 1964, backed up by the Federal Reserve Board’s then expansionary policies.

This was the heyday of Keynesian economics, and even many Marxists were inclined to see the Long Boom as the new norm of capitalism thanks to the increasing intervention in the economy of the capitalist state. The Johnson administration boasted that the U.S. economy was so strong that the government could follow policies that would provide both “guns and butter.”

Despite these “good times,” it was becoming obvious, even to bourgeois economists, that due to the growth of automation in industrial production, the rate of growth of traditional factory jobs, though still rising in absolute terms in both the imperialist and oppressed capitalist countries, would absorb only a small part of the coming generations of young workers. This was especially true in the United States and Britain, where long-term economic growth was much lower than in Western Europe and Japan. Many social scientists and other observers expressed fears that a permanent crisis of mass unemployment was inevitable.

With few exceptions, however, professional economists insisted there was no danger of a crisis of permanent mass unemployment caused by automation. What was really happening, they claimed, and had been claiming since concerns about the long-term effects of automation on employment first arose in the 1950s, was a shift from an industrial economy where most jobs were “blue collar” jobs in factories, mining, construction, and agriculture to a “post-industrial” economy where most jobs would be white-collar salaried office jobs.

Computerization and the automation linked to it, the economists insisted, was actually creating more jobs than it was destroying. As the role of computers grew dramatically in coming years, economists assured us, huge numbers of highly skilled white-collar workers would be needed to write the software programs that would run on all those computers.

As a result, the traditional blue-collar working class would fade away over the next few decades to be replaced by the highly paid “middle-class” white-collar workforce. Since salaried white-collar workers have little interest in unions, unions were becoming obsolete and had little future. These unfolding developments—along with the “boom” that many viewed as permanent due to government policies inspired by the work of British economist John Maynard Keynes—represented the final refutation of Marx, the economists explained to their university students.

Instead of Marx’s predictions of a society increasingly polarized between a relatively few, extremely rich capitalists, on one hand, and a great mass of low-wage blue-collar workers, on the other, the “free enterprise system” was allegedly evolving toward a society that would be made up overwhelmingly of a high-salaried “middle class” without the extremes of wealth and poverty that had marked the early days of capitalism.

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Capitalist Anarchy, Climatic Anarchy, Ukraine and New Threats of War and Fascism

March 23, 2014

The Keystone XL pipeline

President Obama appears to be nearing a decision on approving what is called the Keystone XL pipeline. This proposal by the TransCanada Corporation calls for a pipeline to be built that will, if Obama gives the green light, transport “heavy oil” produced from tar sands in the Canadian province of Alberta to refineries in the U.S. Midwest and along the Gulf Coast.

The U.S. president had indicated that his approval would depend on a State Department report on the proposed pipeline’s effects on the Earth’s climate. Opponents of the pipeline pointed out that the refining of heavy oil releases more carbon dioxide into the atmosphere than the refining of “sweet oil” does.

In late January, the State Department released its report, which claimed that the pipeline would have little if any adverse effect on the climate. The State Department reasoned that even if the pipeline was not built, the Alberta tar sands would be used for oil production anyway. The resulting heavy oil, according to the State Department, would in the absence of the XL pipeline be transported by rail. So, the State Department concluded, there would be little adverse effect from the proposed pipeline project. These conclusions put heavy pressure on Obama to approve the construction.

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Big Challenges Facing Janet Yellen

February 23, 2014

Yellen testifies

Janet Yellen gave her first report to the House Financial Services Committee since she became chairperson of the Federal Reserve Board in January. In the wake of the 2008 panic, her predecessor Ben Bernanke had indicated that “the Fed” would keep the federal funds rate—the interest rate commercial banks in the U.S. charge one another for overnight loans—at near zero until the unemployment rate, as calculated by the U.S. Labor Department, fell to 6.5 percent from over 10 percent near the bottom of the crisis in 2009.

However, the Labor Department’s unemployment rate has fallen much faster than most economists expected and is now at “only” 6.6 percent. With the U.S. Labor Department reporting almost monthly declines, it is quite possible that the official unemployment rate will fall to or below 6.5 percent as early as next month’s report.

But there is a catch that the Fed is well aware of. The unexpectedly rapid fall in the official unemployment rate reflects the fact that millions of workers have given up looking for jobs. In effect, what began as a cyclical crisis of short-term mass unemployment has grown into a much more serious crisis of long-term unemployment. As far as the U.S. Labor Department is concerned, when it comes to calculating the unemployment rate these millions might just as well have vanished from the face of the earth.

In reality, the economic recovery from the 2007-09 “Great Recession” has been far weaker than the vast majority of economists had expected. Indeed, a strong case can be made that both in the U.S. and on a world scale—including imperialist countries, developing countries and the ex-socialist countries of the former Soviet Union and Eastern Europe, as well as oppressed countries still bearing the marks of their pre-capitalist past—the current recovery is the weakest in the history of capitalist industrial cycles.

The continued stagnation of the U.S. economy six and a half years since the outbreak of the last crisis has just been underlined by a series of weak reports on employment growth and industrial production. For example, according to the U.S. Federal Reserve Board, U.S. industrial production as a whole declined 0.3 percent in January, while manufacturing, the heart of industrial production, declined by 0.8 percent.

Yellen, as the serious-minded policymaker she undoubtedly is, is well aware of these facts. She told the House committee:”The unemployment rate is still well above levels that Federal Open Market Committee participants estimate is consistent with maximum sustainable employment. Those out of a job for more than six months continue to make up an unusually large fraction of the unemployed, and the number of people who are working part time but would prefer a full-time job remains very high.”

Over the last several months, the growth of employment, which serious economists consider far more meaningful than the the U.S. Labor Department’s “unemployment rate,” has been far below expectations.

Bad weather

Most Wall Street economists are sticking to the line that the recent string of weak figures on employment growth and industrial production reflect bad weather. The eastern U.S. has experienced extreme cold and frequent storms this winter, though the U.S. West has enjoyed unseasonable warmth and a lack of the usual Pacific storms, resulting in a serious drought in California. So it is possible that bad weather has put a kink in employment growth and industrial production.

But there is also concern—clearly shared by the new U.S. Fed chairperson, notwithstanding rosy capitalist optimism maintained by the cheerleaders that pass for economic writers of the Associated Press and Reuters—that the current global upswing in the industrial cycle has failed to gain anything like the momentum to be expected six years after the outbreak of the preceding crisis.

Two ruling-class approaches

This growing “secular stagnation”–lingering mass unemployment between recessions—has produced a growing split among capitalist economists and writers for the financial press. One school of thought is alarmed by continued high unemployment and underemployment. This school thinks that the government and Federal Reserve System—which, remember, functions not only as the central bank of the U.S. but also of the world under the current dollar-centered international monetary system—should continue to search for ways to improve the situation. Another school of thought, however, believes that all that has to be done is to declare the arrival of “full employment” and prosperity.

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Change of Guard at the Fed, the Specter of ‘Secular Stagnation,’ and Some Questions of Monetary Theory

December 22, 2013

Ben Bernanke will not seek a third term as chairperson of the Federal Reserve Board of Governors – “the Fed.” President Obama has nominated, and the U.S. Senate is expected to formally approve, economist Janet Yellen as his successor. The Federal Reserve Board is a government body that controls the operation of the U.S Federal Reserve System.

“The Fed” lies at the heart of the U.S. central banking system, which under the dollar standard is in effect the central bank of the entire world.

A professional central banker

Janet Yellen is currently vice-chairperson of the Federal Reserve Board. She has also served as an economics professor at the University of California at Berkeley and chaired President Bill Clinton’s Council of Economic advisers. She headed the Federal Reserve Bank of San Francisco from 2004 to 2010, one of the 12 Federal Reserve Banks within the Federal Reserve System. If there is such a thing as a professional central banker, Yellen is it.

Yellen will be the first woman to serve as head of the Federal Reserve Board and will hold the most powerful position within the U.S. government ever held by a woman. Yellen’s appointment therefore reflects gains for women’s equality that have been made since the modern women’s liberation movement began around 1969.

Like other social movements that emerged out of the 1960s radicalization, the modern women’s liberation movement began on the radical left. The very name of the movement was inspired by the name of the main resistance organization fighting U.S. imperialism in Vietnam – the National Liberation Front. However, as a veteran bourgeois economist and a long-time major policymaker in the U.S. government, Yellen would not be expected to have much sympathy for the 20th-century revolutions and movements that made her appointment even a remote possibility.

Significantly, Yellen was appointed only after Lawrence Summers, considered like Yellen a major (bourgeois) economist and said to be the favorite of the Obama administration to succeed Bernanke, announced his withdrawal from contention. Summers became notorious when as president of Harvard University he expressed the opinion that women are not well represented in engineering and the sciences because of mental limitations rooted in biology.

Summers was obliged to resign as president of Harvard, and his anti-woman remarks undoubtedly played a role in his failure to win enough support to be appointed Fed chairman. In addition, Summers attacked the African American Professor Cornell West for his work on Black culture and his alleged “grade inflation,” causing West to leave Harvard. This hardly made Summers popular in the African American community. His nomination would therefore have produced serious strains in the Democratic Coalition, so Summers was obliged to withdraw.

Ben Bernanke like Yellen is considered a distinguished (bourgeois) economist. He had devoted his professional life to exploring the causes of the Great Depression, much like Yellen has. Essentially, Bernanke attempted to prove that the Depression was caused by faulty policies of the Federal Reserve System and the government, and not by contradictions inherent in capitalist production – such as, for example, periodic crises of overproduction. Bernanke denied that overproduction was the cause of the Depression.

Like Milton Friedman, Bernanke blamed the Depression on the failure of the Federal Reserve System to prevent a contraction of money and credit. Bernanke put the emphasis on credit, while Friedman put the emphasis on the money supply. Blaming crises on currency and credit, according to Marx, is the most shallow and superficial crisis theory of all.

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