Why GOP Administrations are Economic Failures that Prove Marx Correct

by Len Hart, The Existentialist Cowboy

When Bush Sr fought against, perhaps vanquished 'supply-side economics', it was hoped that the horrible Reagan years could be, would be consigned to the 'dust bin of history'! But no! It was left to 'Shrub', George W. Bush, to unleash unholy forces in order to breathe life into "trickle down theory" otherwise called 'supply side economics!

As it was taken off life support, it was surely Dick 'cyborg' Cheney who may well have yelled: It's ALIVE!

Cheney, of course, professed the Reagan doctrine: "Deficits don't matter". This is a bona fide case of terminal denial and accounts for supply-sider control of the Republican party. But what about Obama? He inherited a run-away train in search of its wreck. As Obama prepared to occupy the White House, the debt grew. Meanwhile, the caped villain (Cheney) and his budding monster(Bush) were still at work licking their chops and dreaming of fight night!

It's ALIVE! It's ALIVE!

Debt had accelerated during Bush's last two budget years. Although Obama had not been directly responsible for that acceleration, the train wreck had been left to him.

As the GOP are wont to do, Bush set records, in fact, the all-time record by increasing the debt by $1.1 trillion in a mere 100 days between July 30 and Nov 9, 2008.

Then there was the not-so-small matter of recession. To be expected, recessions cut tax revenues significantly and this fact may account for the GOP's sorry record of running up the highest debts and deficits! This has been the case since prior to the Great Depression. It is the pattern that is repeated in every GOP administration since H. Hoover's "Great Depression".

In this case, however, GOP mismanagement accounts for almost half of the deficit. We can be sure that the GOP were prepared to blame Obama for the deficit though his only crime was that timing. Machiavelli might have advised him to sit it out, let the GOP take the rap! Let the GOP face the music and dance quickly out to the door to oblivion. Blaming Obama for the full deficit was said to have been akin to "blaming him for not raising the tax rate to keep tax revenues up".

In times when the class struggle nears the decisive hour, the progress of dissolution going on within the ruling class, in fact within the whole range of old society, assumes such a violent, glaring character, that a small section of the ruling class cuts itself adrift or joins the revolutionary class, the class that holds the future in its hands.

Of all the classes that stand face to face with the bourgeoisie today, the proletariat alone is a genuinely revolutionary class. The other classes decay and finally disappear in the face of Modern Industry; the proletariat is its special and essential product. The lower middle class, the small manufacturer, the shopkeeper, the artisan, the peasant, all these fight against the bourgeoisie, to save from extinction their existence as fractions of the middle class. They are therefore not revolutionary, but conservative. Nay, more, they are reactionary, for they try to roll back the wheel of history.

If, by chance, they are revolutionary, they are only so in view of their impending transfer into the proletariat; they thus defend not their present, but their future interests; they desert their own standpoint to place themselves at that of the proletariat. The "dangerous class", the social scum, that passively rotting mass thrown off by the lowest layers of the old society, may, here and there, be swept into the movement by a proletarian revolution; its conditions of life, however, prepare it far more for the part of a bribed tool of reactionary intrigue. In the condition of the proletariat, those of old society at large are already virtually swamped.

The proletarian is without property; his relation to his wife and children has no longer anything in common with the bourgeois family relations; modern industry labor, modern subjection to capital, the same in England as in France, in America as in Germany, has stripped him of every trace of national character. Law, morality, religion, are to him so many bourgeois prejudices, behind which lurk in ambush just as many bourgeois interests.

All the preceding classes that got the upper hand sought to fortify their already acquired status by subjecting society at large to their conditions of appropriation. The proletarians cannot become masters of the productive forces of society, except by abolishing their own previous mode of appropriation, and thereby also every other previous mode of appropriation. They have nothing of their own to secure and to fortify; their mission is to destroy all previous securities for, and insurances of, individual property.

-- Karl Marx, Manifesto of the Communist Party

In the U.S. it is the GOP which consistently advocates, perhaps fronts, the interests of its primary sponsor: the ruling elite of just 1 percent of the total population. In effect, every real person but those among the top 1 percent are without representation in what is said to be the world's largest "Democracy". Is it really a 'democracy'? It is ironic that while Marx is most demonized by this unholy alliance, it is the existence of the unholy alliance itself which proves Marx to have been correct about almost everything.

---

---

How the Great Depression Inspired a New View of 'Economics'

by Len Hart, The Existentialist Cowboy

Irving Fisher (February 27, 1867 – April 29, 1947) was an American economist, inventor, and health campaigner, and one of the earliest American neoclassical economists, though his later work on debt deflation is often regarded as belonging instead to the Post-Keynesian school.

Fisher made important contributions to utility theory and general equilibrium. His work on the quantity theory of money inaugurated the school of economic thought known as "monetarism." Both Milton Friedman and James Tobin called Fisher "the greatest economist the United States has ever produced." Some concepts named after Fisher include the Fisher equation, the Fisher hypothesis, the international Fisher effect, and the Fisher separation theorem.

Fisher was perhaps the first celebrity economist, but his reputation during his lifetime was irreparably harmed by his public statements, just prior to the Wall Street Crash of 1929, claiming that the stock market had reached "a permanently high plateau." His subsequent theory of debt deflation as an explanation of the Great Depression was largely ignored in favor of the work of John Maynard Keynes. His reputation has since recovered in neoclassical economics, particularly after his work was revived in the late 1950s and more widely due to an increased interest in debt deflation in the Late-2000s recession.

Fisher produced various inventions during his lifetime, the most notable of which was an "index visible filing system" which he patented in 1913 and sold to Kardex Rand (later Remington Rand) in 1925. This, and his subsequent stock investments, made him a wealthy man until his personal finances were badly hit by the Crash of 1929. He was also an active social and health campaigner, as well as an advocate of vegetarianism, Prohibition, and eugenics.

Then we may deduce the following chain of consequences in nine links:

(1) Debt liquidation leads to distress setting and to (2) Contraction of deposit currency, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of deposits and of their velocity, precipitated by distress selling, causes (3) A fall in the level of prices, in other words, a swelling of the dollar. Assuming, as above stated, that this fall of prices is not interfered with by reflation or otherwise, there must be (4) A still greater fall in the net worths of business, precipitating bankruptcies and (5) A like fall in profits, which in a " capitalistic," that is, a private-profit society, leads the concerns which are running at a loss to make (6) A reduction in output, in trade and in employment of labor. These losses, bankruptcies, and unemployment, lead to (7) Pessimism and loss of confidence, which in turn lead to (8) Hoarding and slowing down still more the velocity of circulation. The above eight changes cause (9) complicated disturbances in the rates of interest, in particular, a fall in the nominal, or money, rates and a rise in the real, or commodity, rates of interest. Evidently debt and deflation go far toward explaining a great mass of phenomena in a very simple logical way.

I have been both a central banker and a market regulator. I now find myself questioning whether my early career, largely devoted to liberalising and deregulating banking and financial markets, was misguided. In short, I wonder whether I contributed - along with a countless others in regulation, banking, academia and politics - to a great misallocation of capital, distortion of markets and the impairment of the real economy. We permitted the banks to betray capital into “hopelessly unproductive works”, promoting their efforts with monetary laxity, regulatory forbearance and government tax incentives that marginalised investment in “productive works”. We permitted markets to become so fragmented by off-exchange trading and derivatives that they no longer perform the economically critical functions of capital/resource allocation and price discovery efficiently or transparently. The results have been serial bubbles - debt-financed speculative frenzy in real estate, investments and commodities.

--London Banker,Fisher's Debt-Deflation Theory of Great Depressions and a possible revision

James Tobin argues that the intellectual breakthroughs that mark the neoclassical revolution in economic analysis occurred in Europe around 1870. The next two decades witnessed lively debates in which the new theory more or less absorbed or was absorbed in the classical tradition that preceded it.[13] In the 1890s, according to Joseph A. Schumpeter[14] there emerged A large expanse of common ground and ... a feeling of repose, both of which created, in the superficial observer, an impression of finality -- the finality of a Greek temple that spreads its perfect lines against a cloudless sky. Of course, Tobin argues, the temple was by no means complete. Its building and decoration continue to this day, even while its faithful throngs worship within. American economists were not present at the creation. To a considerable extent they built their own edifice independently, designing some new architecture in the process. They participated actively in the international controversies and syntheses of the period 1870-1914. At least two Americans were prominent builders of the "temple," John Bates Clark and Irving Fisher. They and others brought neoclassical theory into American journals, classrooms, and textbooks, and its analytical tools into the kits of researchers and practitioners. Eventually, for better or worse, their paradigm would dominate economic science in this country.  

Fisher's research into basic theory did not touch the great social issues of the day. Monetary economics did and this became the main focus of Fisher’s work. Fisher's Appreciation and interest was an abstract analysis of the behavior of interest rates when the price level is changing. It emphasized the distinction between real and monetary rates of interest which is fundamental to the modern analysis of inflation. However Fisher believed that investors and savers —people in general— were afflicted in varying degrees by "money illusion"; they could not see past the money to the goods the money could buy. In an ideal world, changes in the price level would have no effect on production or employment. In the actual world with money illusion, inflation (and deflation) did serious harm.

Also see: The Top 10 Most Influential Economists of All-Time

---

---