Orthodoxy of the Neoclassical Synthesis: Minsky’s Capitalism Without Capitalists, Capital Assets, and Financial Markets

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During the very years when orthodoxy turned Keynesianism on its head, extolling Reaganomics and Thatcherism as adequate for achieving stabilisation in the epoch of global capitalism, Minsky (Stabilizing an Unstable Economy) pointed to the destabilising consequences of this approach. The view that instability is the result of the internal processes of a capitalist economy, he wrote, stands in sharp contrast to neoclassical theory, whether Keynesian or monetarist, which holds that instability is due to events that are outside the working of the economy. The neoclassical synthesis and the Keynes theories are different because the focus of the neoclassical synthesis is on how a decentralized market economy achieves coherence and coordination in production and distribution, whereas the focus of the Keynes theory is upon the capital development of an economy. The neoclassical synthesis emphasizes equilibrium and equilibrating tendencies, whereas Keynes‘s theory revolves around bankers and businessmen making deals on Wall Street. The neoclassical synthesis ignores the capitalist nature of the economy, a fact that the Keynes theory is always aware of.

Minsky here identifies the main flaw of the neoclassical synthesis, which is that it ignores the capitalist nature of the economy, while authentic Keynesianism proceeds from precisely this nature. Minsky lays bare the preconceived approach of orthodoxy, which has mainstream economics concentrating all its focus on an equilibrium which is called upon to confirm the orthodox belief in the stability of capitalism. At the same time, orthodoxy fails to devote sufficient attention to the speculation in the area of finance and banking that is the precise cause of the instability of the capitalist economy.

Elsewhere, Minsky stresses still more firmly that from the theory of Keynes, the neoclassical standard included in its arsenal only those earlier-mentioned elements which could be interpreted as confirming its preconceived position that capitalism was so perfect that it could not have innate flaws. In this connection Minsky writes:

Whereas Keynes in The General Theory proposed that economists look at the economy in quite a different way from the way they had, only those parts of The General Theory that could be readily integrated into the old way of looking at things survive in today‘s standard theory. What was lost was a view of an economy always in transit because it accumulates in response to disequilibrating forces that are internal to the economy. As a result of the way accumulation takes place in a capitalist economy, Keynes‘s theory showed that success in operating the economy can only be transitory; instability is an inherent and inescapable flaw of capitalism. 

The view that survived is that a number of special things went wrong, which led the economy into the Great Depression. In this view, apt policy can assure that cannot happen again. The standard theory of the 1950s and 1960s seemed to assert that if policy were apt, then full employment at stable prices could be attained and sustained. The existence of internally disruptive forces was ignored; the neoclassical synthesis became the economics of capitalism without capitalists, capital assets, and financial markets. As a result, very little of Keynes has survived today in standard economics.

Here, resting on Keynes‘s analysis, one can find the central idea of Minsky‘s book: the innate instability of capitalism, which in time will lead the system to a new Great Depression. This forecast has now been brilliantly confirmed, but previously there were few who accepted it. Economic science was orchestrated by proponents of neoclassical orthodoxy under the direction of Nobel prizewinners, authors of popular economics textbooks, and other authorities recognized by the mainstream. These people argued that the main problems which capitalism had encountered in earlier times had already been overcome, and that before it lay a direct, sunny road to an even better future.

Robed in complex theoretical constructs, and underpinned by an abundance of mathematical formulae, these ideas of a cloudless future for capitalism interpreted the economic situation, it then seemed, in thoroughly convincing fashion. These analyses were balm for the souls of the people who had come to believe that capitalism had attained perfection. In this respect, capitalism has come to bear an uncanny resemblance to communism. There is, however, something beyond the preconceptions and prejudices innate to people in all social systems, and that is the reality of historical and economic development. This provides a filter for our ideas, and over time makes it easier to separate truth from error. The present financial and economic crisis is an example of such reality. While the mainstream was still euphoric about the future of capitalism, the post-Keynesians saw the approaching outlines of a new Great Depression. The fate of Post Keynesianism will depend very heavily on the future development of the world capitalist economy. If the business cycle has indeed been abolished (this time), so that stable, non-inflationary growth continues indefinitely under something approximating to the present neoclassical (or pseudo-monetarist) policy consensus, then there is unlikely to be a significant market for Post Keynesian ideas. Things would be very different in the event of a new Great Depression, to think one last time in terms of extreme possibilities. If it happened again, to quote Hyman Minsky, the appeal of both a radical interventionist programme and the analysis from which it was derived would be very greatly enhanced.

Neoclassical orthodoxy, that is, today‘s mainstream economic thinking proceeds from the position that capitalism is so good and perfect that an alternative to it does not and cannot exist. Post-Keynesianism takes a different standpoint. Unlike Marxism it is not so revolutionary a theory as to call for a complete rejection of capitalism. At the same time, it does not consider capitalism so perfect that there is nothing in it that needs to be changed. To the contrary, Post-Keynesianism maintains that capitalism has definite flaws, and requires changes of such scope as to allow alternative ways of running the economy to be fully effective. To the prejudices of the mainstream, post-Keynesianism counterposes an approach based on an objective analysis of the real situation. Its economic and philosophical approach – the methodology of critical realism – has been developed accordingly, the methodological import of which helps post-Keynesianism answer a broad range of questions, providing an alternative both to market fundamentalism, and to bureaucratic centralism within a planned economy. This is the source of its attraction for us….

Musings on Financialisation of Capital, Bureaucracy, Fascism and State PR

When one says Finance Capital is one expression of capital exerting its pressure socio-politically…I wouldn’t ever disagree on it. But, the way I am seeing this is missing the wood for the trees. Why? Because, socio-political affects are affects of the larger scheme of things we associate with finance. This is a trickle down effect (not in the strictly economic sense of the phrase). Finance Capital is becoming a controlling tool through increasing concentration and centralisation of capital in the hands of large corporations, cartels, trusts and banks. Not just that, these supranational entities are also diversifying into fields with intense financial intent thus bringing to effect financialisation of economy the world over. Once this is conceptualised, the socio-economic impacts follow. I am looking at a rigid top-down approach here.
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On to Bureaucracy. Why do I say it is impersonal? This is an idea imported from Max Weber, probably the father of Bureaucracy Theory. Bureaucracy differed from other types of organisations by its nonlegal forms of authority. Weberian take was inclined on its being technical proficiency specialised expertise, certainty and continuity. The genesis of it lay in money-based economy, the forerunner to capitalism in its variegated disguises and attendant need to ensure rational, impersonal and legal transactions. So, that is the combination spoken about that has got inverted from its traditional schemata. Also, there is an accompaniment of historical roots in the statement.

Fascism: it is absolutely necessary to insist on this essential aspect of the definition of fascism, for one can scarcely understand the emergence of the fundamental concepts of fascism and of the Fascist philosophy and mythology if one does not recognize, at the same time, that it arose from an originally Marxist revolt against materialism. It was the French and Italian Sorelians, the theoreticians of revolutionary syndicalism, who made this new and original revision of Marxism, and precisely this was their contribution to the birth of the Fascist ideology. Zeev Sternhell has amazingly outlined the history of Fascism in his “The birth of Fascist Ideology: From Cultural Rebellion to Political Revolution“. Sternhell further says, ‘From the standpoint of the temporal structure of the project, fascism is a particularly radical form of conservative revolution.

Some of the traits that will be offered by a populist leader who affirms fascism is a rebirth of a strong National Identity, making a nation strong again, reviving culture, industry, education, and the middle-class values that have sustained it. It is always a populist authoritarian movement that seeks to preserve and restore a former glory to the nation as well as military, social, and religious values based on strong patriarchal roots that center on community of nation, race, and faith. It will treat any opposition as it sees fit to the point of utter abandonment of the norms and laws of the land, seeing in them hindrances that must be circumvented under dire emergencies, etc.. It will seek to cleanse the nation of foreign and domestic threats it perceives as outside the mainstream socio-cultural order it seeks to revive and promote. It will seek to revive an organic wholeness and totality, and expunge and expel those it perceives as outsiders: immigrants, refugees, or aliens in its midst. It will begin by attacking the insiders or establishment who it perceives as decadent, corrupt, and a parasite upon the body of the Nation as a whole. It will also incarcerate and expunge the poor and poverty stricken, enforcing codes of distrust and victimization. It seeks only to bolster up the vast majority of the middle-class workers of all diverse forms. From this point of view, BJP’s rule is perfectly congruent with fascism.

On the Adanis and Guptas, why is it not a collusion of corporate and state power of the past? It is, but with a vectoral shift in axis. The Fascist revolution sought to change the nature of the relationships between the individual and the collective without destroying the impetus of economic activity-the profit motive, or its foundation-private property, or its necessary framework-the market economy. This was one aspect of the novelty of fascism; the Fascist revolution was supported by an economy determined by the laws of-the free-market ideology. The shift in the axis lies precisely in the prerogative the financial capital has over decisions political. The shift in the axis has inverted the priorities of politics and capital. So, the Adanis and Guptas decide the politics rather than the other way round. This is a journey back to some of the basic tenets of political economy, which were seemingly eroded in the first phase of neoliberal era, thanks in large part to Thatcherism and Reaganomics.

Police before the state: This is a complicated relationship and is best understood if one were to dissolve the colloquial use of the word police. Allow me another recourse here to the French Political Philosopher, Ranciere, who puts it most aptly, “I do  to identify the police with what is termed the state apparatus. The notion of state apparatus is in fact bound up with the presupposition of an opposition between state and society in which the state is portrayed as a machine, a cold ‘monster’ imposing rigid order on the life of society. This representation already presupposes a certain ‘political philosophy’, that is, a certain confusion of politics and the police. The distribution of places and roles that defines a police regime stems as much from the assumed spontaneity of social relations as from the rigidity of state functions. The police is essentially the law, generally implicit, that defines a party’s share or lack of it. The police is thus first an order of bodies that defines the allocation of ways of doing, ways of being, and ways of saying, and sees those bodies are assigned by the name to a particular place and task; it is an order of the visible and the sayable that sees that a particular activity is visible and another is not, that this speech is understood as discourse and another as noise. Policing is not so much the ‘disciplining’ of bodies as a rule governing their appearing, a configuration of occupations and the properties of the spaces where these occupations are distributed.” Therefore, by this logic the latency of police’s requisition for running the state is guaranteed. And, do we see any other way, if policing is extended to the notions of ‘moral policing’? I bet not.

Politics as the last resort of scoundrels will defeat the entire purpose of this response, and evidently, there is a strain of polity running throughout this response. Moreover, communication theories across generations have believed in media as the message and politicians of the present-day ruling regime are dramaturgists precisely in their compositions. We have had numerous examples to prove the point in the last one month or so.

Why do I call the Left academicians and practitioners idiots? Substantial segments of the left are in danger of allowing their movement to degenerate into a trite, self-indulgent counter-culture, in which an angry anti-establishment posturing conceals a lack of a positive political programme, and obviously nothing to say about the economic programme. Have we forgotten about the frittered opportunity during the 2008 crash? Globalise Resistance is one of the most visibly popular left-wing campaigns, defined by what they’re against, not what they’re for. Many people on the left are far too ready to draw an artificial moral equivalence between true tyrannies overseas and the very real but usually much milder moral failings of their own leaders and institutions. This is perpetrated by academicians and practitioners, and I am speaking of a very personal set of experience here. And still nothing seems to have changed.

Techno-politics isn’t really a slippery terrain, and for a change is one way the left can bounce back with. Humanity is being processed as mindless organisms (i.e., through processes of de-education, cultural amnesia, de-programming, etc.)  in a system of normative practices on a global scale that seek to install an ethos of domestication in a grand safety system to secure its own inhuman ends. This inhuman core is constructing secure, comfortable, and hedonistic bubbles of imprisonment that will allow it to design and further its own programmatic operations. Most of all through the pacification of the human species, and a controlled or modulated form of work and leisure; attenuated by the dictates of a global hierarchy of corporate capitalist institutions, no longer bound to ideological systems of a democracy, communism, or religious practice: the nexus of encoded cultural references that bind us to ethno-nationalists agendas, all the while seeking to envelope us in intelligent hypermedia reality machines and systems that will allay our fears and graft us into their own secret agendas of power and dominion. This is a scary proposition talked about.

There is no doubt in me when I oppose Industrial Corridors, and why Shouldn’t I? But, by electronic corridors, I mean are trading systems becoming the nerve centres of financial capitalism, say for instance, High Frequency Trading, HFTs in short. These are algorithmically powered and somehow dehumanistic by being capable of the pillars of the Fourth Industrial Revolution. One could look at the recently held World Economic Forum, where this topic was largely thrashed about. Yes, there are political ripples created against it, but as a personal friend of mine who was single handedly responsible for launching the #occupymovement told me, “such ripples are minute for they lack steam to bring on the alternative voices into a robust solidarity against corporatism.” For obvious reasons, I cannot reveal the name of this person. BTW, she is a hardcore neocon, right now. Strange, but true.

Electronic knowledge turning into digital ash is a reference given to surveillance technologies, the answer to which lies in sousveillance, but then do we have have enough resources. Sadly, in our country, the answer is a resounding no. During the cold war, East Germany was the most infamous surveillance society, but the shift is palpable to more advanced democracies including the upcoming economies. China is a bizarre case still.

The other two intervening points are largely agreed to, and thus I won’t venture there. On me being a socialist, the original writeup said, sciolist, a concert that talks of superficial pretender of knowledge. The words appear same through spellings, but are vastly different. On whether I am a socialist in the Marxian sense, I’d be short here: NO.

Socratic irony is a particular device often used in rhetoric in which one person pretends to be ignorant about an issue to lure the other person into explaining it. In a debate or argument, for example, two people may hold differing points of view about a particular subject. One of the two participants may then pretend that he or she does not understand an important aspect of the subject, and ask the other person to explain it. As the other person explains it, the first participant then comments on weaknesses inherent in the other person’s argument and has used Socratic irony to make him or her reveal them. The left needs it, as the right is weak in rhetoric, maybe, or not. But it is required.

State as a PR firm is necessarily a naive understanding of state, but fits the present-day context. Though, I must admit if it was made to look like a naive understanding. Public relations and state have been two firmly entwined concepts since the beginning of recorded history. For evidence from ancient times, take a look at Aristotle and his schools of rhetoric that taught the art of persuasive communication. In more recent times, the work of the man commonly thought of as the father of modern day public relations, Edward Bernays, and his belief that public relations is an art applied to a science provide a clear connection between the two.

To pay the piper is to pay for the dire consequences. It only highlights the despair I referred to. This does end it on a bleak note.