There is no solution to the crisis as Krugman-Keynes
–By Servio Escudrojo–
Because of the prestige acquired by Paul Krugman as a critic of neoliberal economic policy, and particularly of the restrictive policy of public spending; his recipes to emerge from the economic crisis facing the developed world, enjoyed large audience and consideration.
However, from the perspective that has been developed on the origins of the crisis, basing it on the huge inequalities in the distribution of income accumulated during the neoliberal reforms, economic policy proposals formulated by the laureate economist does not have a theoretical basis.
And it is not so by the criticism that over his proposals has begun making some academic institutions -such as the recent comment by Michael Hudson (http://bit.ly/KyIoEo), criticizing the neglect of the effect of growing debt on the real economy containing such proposals, but rather, and above all, the lack of recognition of the disproportionate impact on the structures of production and distribution that the increased public and private expenditure has; while it is not properly corrected the distribution of capital and wealth. Or, in plane silver, while it is not reformed the structure of capital ownership.
Hudson is right when he says that the increase in public spending –and through it, the private– by the easy way of debt growth, limited economic growth when the debt’s service places an intuitive restriction in consumer spending. How can to spend American workers –he asks– when more than 75% of their salary goes on its debt’s payments? Amen that, when this debt is in foreign currency –as happens in peripherics countries– the inflation caused by the debt-financed spending determines a devaluation of the domestic currency that hiperboliza the cost of international debt in national terms. The increase in exports that triggered the devaluation hardly cover the exponential increase of international debt (remember the Latin America between 1980 and 2000).
But Hudson is left owing to economic theory, as Krugman also, when they fail to warn other fundamental economic effect that resulted in bailouts á la carte; and since then, any economic policy that under current conditions, put printed money in private hands. It is true that those bailouts, in their own way, have prevented the collapse of the financial system; today the basis for the process of capital accumulation, and therefore economic activity. But those also have prevented that the imbalances in the distribution of the capital accumulated by several decades, were reduced by creating more favourable conditions for a more proportional distribution of the national income, to the needs and contributions of different social strata and productive sectors. Only the collapse of those firms would have been able to restore proportionality in a structure with atrophy and sectorial hypertrofy; but these firms already were too large and fundamental to
This is the tail of the Devil. How to make a structure with a high concentration of capital, with imperfect markets, monopolized, cartelized, as the current, fully distribute the collective product so this distribución activate the production? Keynes descried spending boosting aggregate demand, but when those spendings is fundamentally in the hands of a few, public resources are sterilized in the form of corporate profits; with small effect on the overall productive and economic activity.
Thus, the bankruptcy (the positive destruction of Schumpeter) as a fundamental mechanism of primitive capitalism, it is not more a solution; the current capitalist State sees in it a threat to the entire system…, and make no mistake. The collapse of the big American banks bailed out with billions of dollars between 2009 and 2010 would have been catastrophic for the entire American economic system; as today, it would be the collapse of Spanish banks for the entire eurozone.
The increase in public spending through public bailouts to broken companies, within the framework of a highly concentrated structure of the ownership of means of production and labour, cannot act stimulating the economy as in the classic Keynesian model. The channels where flowing fresh resources towards the real economy, towards effective demand, to the entrepeneurship’s activetion, to the innovation and effort to offer the goods demanded by the society, have been clogged by the obstacles placed by large corporations-banks to make a growing rate of profit.
Moreover, the mere public infrastructure, or the spending on education or public health –a recipe some economists are repeating such as solution to the current crisis– only limited can help to stimulate economic activity. High concentration and centralizacion of ownership of capital in our societies, acts as a swirl in the market, sucking these resources; avoiding their dispersion in proportion to the contribution of the real productive factors.
The solution must be sought then by the side of the restructuring of collective, cooperative ownership of capital, the encouragement of small and medium ownership, the break-up of large corporations, the State participation in the ownership of big business, by the side of the establishment of State-owned enterprises in strategic sectors for a socially sustainable development, and by the side of the improvement of the distribution of income between capital and labour.
It is an economic and political solution.