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Reviving Keynesianism: A Critique

The global crisis has undermined the neo-liberalist phase of capitalism that dominated the last 30 years of the world economy.  It has likewise challenged the hegemony of neo-classical economics as the theoretical rationale of neo-liberalism’s celebration of private enterprise and markets.  The form this challenge takes is a revival of Keynesian economics.  As the crisis requires states everywhere again to intervene in the “private” economy — and massively this time — Keynesian economics provides much of the rationale and many of the prescriptions of what the state should do.

Of course, different interpretations of Keynes (as of Marx) have always contested with one another.  Multiple interpretations emerged because of pressures upon Keynesians from both the left (those who criticized them for “saving” capitalism) and the right (those who attacked them for “threatening” capitalism).  What matters are the stakes among contesting Keynesianisms, the social consequences that flow from the hegemony of one versus another of them.  How are we to understand differences and overlaps between Keynesianisms and Marxisms?  What political alliances might be crafted between some Keynesians and some Marxists?

The socially dominant Keynesianism that stretches across most economics textbooks to the recently converted among Obama’s advisors rationalizes state interventions (regulations, monetary and fiscal policies, even temporary enterprise ownership positions) in an otherwise private capitalism.  Its goals range from perfecting to improving the efficiency to merely saving capitalism.  Green Keynesians want monetary and fiscal policies to stress ecological goals.  Leftist Keynesians typically want more intrusive state intervention, e.g. controls over investment.  Most of them share the dominant and Green Keynesians’ goals.  However, a few left Keynesians advocate major state intervention as part of a transition to what they call socialism.  Allied with certain kinds of Marxists, such left Keynesians seek to expand state intervention to include officials permanently replacing share-holder elected boards of directors and state planners permanently replacing markets.  For them, those two permanent replacements define socialism.  For a systematic critique of definitions of socialism in terms of state ownership and state planning, see S. Resnick and R. Wolff, Class Theory and History: Capitalism and Communism in the USSR (Routledge, 2002). We show there why and how capitalism has oscillated between private and state forms that are both as old as capitalism itself.

It is urgent in the current capitalist crisis to recognize the contributions of other interpretations of Marxism that do not ally with Keynesianism in their exclusive focus on the macro-level of the economy.  Such Marxists go well beyond state regulation, controls, and ownership of capitalist enterprises, beyond planning (versus markets).  They add an explicit micro-focus drawn from Marx’s critique of the class structure of production.  Such Marxists advocate ending the wage system, the fundamental split between capitalist employer and employee.  Workers are to become, collectively, their enterprise’s own board of directors — Marx’s “associated workers” — instead of having boards selected by private shareholders or by political leaders.  Such a micro-based level of socialism becomes the necessary complement to the macro-level socialisms of the classic left (Keynesian and/or Marxian).  The micro- and macro-levels of such a socialism would support and constrain one another.  At the same time, the micro-level socialism not only installs genuine democracy inside each enterprise; it also creates the economic partner for democratic political institutions in residential communities.  That partnership grounds an altogether new basis for enterprises and residential communities to share in reaching their interdependent decisions.

Today’s reviving Keynesianism once again largely ignores the micro-level issues raised in and by the Marxist approach sketched above.  Most Keynesian state interventionist programs now aimed to end the economic crisis, if they actually re-stabilized contemporary capitalism, would thereby initiate their own demise.  That is, they would eventually oscillate back to a private capitalism.  That is, after all, what happened to the US New Deal, to much of western European social democracy, and to eastern European state capitalism/socialism.  In each of those cases, the employers (whether private corporate boards of directors and major shareholders or state officials) used the surpluses (profits) produced by the employees to move the society back to a private capitalism as soon as it was politically feasible for them to do so.  The lesson is plain (and very old): the workers cannot rely on others to utilize the surpluses, to run the enterprises, in the ways workers need.

A Marxism that included the micro-level transformation of production sketched above would break, finally, from the repeated oscillations between private and state-interventionist capitalisms.  Marxist alliances with Left Keynesians should be evaluated and pursued to the extent that they could facilitate that break.

We are now living through the second great crisis of capitalism in 75 years.  Once again, its global social costs are immense.  Between the end of the Great Depression and the onset of today’s, there were an additional dozen “business cycle downturns” that also generated large social costs.  So many large and small crises are more than enough reasons to ask and publicly debate the following questions.  Can modern society do better than capitalism?  In whose interests is capitalism retained, and at whose expense?  What kind of alternative society could institutionalize workers’ democratic controls over production as an indispensable basis for social democracy?

Richard D. Wolff is a Professor Emeritus at the University of Massachusetts in Amherst and also a Visiting Professor at the Graduate Program in International Affairs of the New School University in New York.   He is the author of New Departures in Marxian Theory (Routledge, 2006) among many other publications.  Check out Richard D. Wolff’s documentary film on the current economic crisis, Capitalism Hits the Fan, at  Visit Wolff’s Web site at, and order a copy of his new book Capitalism Hits the Fan: The Global Economic Meltdown and What to Do about It.

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