Posts Tagged ‘crises’

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” This, like the previous four posts (hereherehere, and here), is written to serve as the basis for chapter 1, Marxian Economics Today. The text of this post should pretty much finish up the draft of the first chapter.

Is Marxian Economics Still Relevant?

It’s an obvious question for those of us living now, in the twenty-first century. Is Marxian economics still relevant?

After all, Marx wrote Capital in the middle of the nineteenth century, when both capitalism and mainstream economics were quite different from what they are today.

Back in the mid-1800s, capitalism was a relatively new way of organizing economic and social life; having emerged first in Great Britain, it still encompassed a small part of the world. As Marx looked around him, he saw both the tremendous progress and the horrendous conditions of the Industrial Revolution. The introduction of steam power, gigantic factories, growing cities, and increased production. And thus great wealth, at least on the part of the small group of successful merchants and industrial capitalists at the top of the economic pyramid. But also squalor, malnutrition, low wages, and long working hours for factory workers—men, women, and children.

Radically new ideas both prepared the ground for, and emerged as a result of, the emergence and spread of capitalism. New freedoms, such as the possibility of buying and selling people’s ability to work, and the consequent abolition of slavery, the ownership of human chattel. New forms of political representation, like democracy, which entailed the abolition (or at least the curtailing) of monarchies. And new sciences, including evolutionary biology, first elaborated in Charles Darwin’s On the Origin of Species (or, more completely, On the Origin of Species by Means of Natural Selection, or the Preservation of Favoured Races in the Struggle for Life).

The world today is, of course, quite different. We take for granted many of the ideas that were once considered radically new. While other ideas, which were barely even imagined at the time, are today considered novel: demands for a guaranteed income, the extension of democracy beyond politics to workplaces, and synthetic biology.

As for capitalism, in some parts of the world, it would be immediately recognizable by nineteenth-century observers. Giant steel mills, workers denied the right to form labor unions, polluted living environments, minds and bodies damaged by demanding and dangerous jobs. Elsewhere, capitalism has changed in many ways, both large and small. Cutting-edge technologies in the twenty-first century include robotics, extended reality, and artificial intelligence. Production of many goods and services is dispersed around the world instead of being concentrated in single factories. And a much larger share of production and of the world’s population—although certainly not all—has become part of capitalism.

And yet. . .The gap between a small group at the top and everyone else is increasing. Workers still labor much longer, even utilizing much more productive technologies, than many had predicted. Squalor, hunger, and poverty are still the condition of many in the world today—to which we need to add the dangers created by the looming climate crisis.

Throughout this book, we will therefore have to ask, is the kind of critique of capitalism that Marx pioneered more than 150 years ago relevant, at least in broad outlines, to contemporary economies? And, following on that, in what ways have Marxian economists changed and extended their theory to account for the many changes the world has undergone since the mid-1800s?

Much the same question holds for the Marxian critique of mainstream economics. In what ways might Marx’s original critique of classical political economy be relevant to contemporary mainstream—neoclassical and Keynesian—economics?

As will see in the next chapter, Smith and the other classical political economists made five major claims about capitalism, which Marx in his own writings then criticized. They are, in no particular order, the following:

  1. Capitalism produces more wealth, and thus higher levels of economic development.
  2. Capitalism is characterized by stable growth.
  3. Everybody gets what they deserve within capitalism.
  4. Capitalists are heroes.
  5. Capitalism represents the end of history.

We’ve already touched on the first three in previous sections of this chapter, and we will return to them in some detail in the remainder of the book. For example, capitalism produces more wealth but, Marx argues, it only does so on the basis of class exploitation. Capitalism is inherently unstable because of the private appropriation and distribution of the surplus. And, even if commodities are bought and sold at their values, capitalism is based on a fundamental class injustice, whereby the producers of the surplus are excluded from participating in decisions about that surplus.

What about the other two claims? Capitalists are celebrated but only if they accumulate more capital and thus create the conditions for more wealth and more employment. If they don’t, and that is often the case, then there’s nothing heroic about their activities. As for capitalism representing the end of history—the problem is, it still rests on class exploitation, not unlike feudalism, slavery, and other societies in which workers produce, but do not participate in appropriating, the surplus. That still leaves the possibility of creating an economy without that class injustice.

Those, in short, are Marx’s main criticisms of classical political economy.

Contemporary mainstream economists, as is turns out, make all five of those claims. They don’t do so in exactly the same manner as the classicals but they make them nonetheless.

  1. Capitalism produces more wealth, and thus higher levels of economic development—and it’s now measured in terms of Gross Domestic Product and GDP per capita.
  2. Capitalism is characterized by stable growth—and the possibility of crises is not even included in contemporary mainstream models.
  3. Everybody gets what they deserve within capitalism—especially when, in the modern view, all “factors of production” receive their marginal contributions to production.
  4. Capitalists are heroes—to which modern mainstream economists add that everyone is a capitalist, since they have to decide how to rationally utilize their human capital.
  5. Capitalism is fundamentally different from previous ways of organizing economic and social life, such as feudalism and slavery—although in one crucial dimension it’s exactly the same: capitalists are just like feudal lords and slaveowners in appropriating the surplus produced by others.

So, while the language and methods of mainstream economics have changed since Marx’s time, many of Marx’s criticisms do seem to carry over to contemporary mainstream economics.

We will see, in the remainder of the book, just exactly how that works.

This Book

The other eight chapters of this book are designed to flesh out and explore in much more detail the issues raised in previous sections of this chapter.

Chapter 2, Marxian Economics Versus Mainstream Economics

The aim of this chapter is to explain how the Marxian critique of political economy has, from the very beginning, been a two-fold critique: a critique of mainstream economic theory and of capitalism, the economic system celebrated by mainstream economists. We will discuss the key differences between Marxian and mainstream approaches to economic analysis, both then and now.

Chapter 3, Toward a Critique of Political Economy

I do not presume that readers will have any background in Marxian economic and social theory. In this chapter, we discover where Marx’s critique of political economy came from—in British political economy, French socialism, and German philosophy—and how his ideas changed and developed in some of the key texts of the “early” Marxian tradition prior to writing Capital.

Chapter 4, Commodities and Money

In this chapter, I will present the material contained in the first three chapters of volume 1 of Capital, perhaps the most difficult and misinterpreted section of that book. Marx begins with the commodity, proceeds to discuss such topics as use-value, exchange-value, and value, presents the problem of “commodity fetishism,” and then introduces money.

Chapter 5, Surplus-Value and Exploitation

The goal of this chapter is to explain how Marx, starting with the presumption of equal exchange, ends up showing how capitalism is based on surplus-value and class exploitation.

Chapter 6, Distributions of Surplus-Value

According to Marx, once surplus-value is extracted from workers, it is then distributed to others for various uses: the “accumulation of capital,” the salaries of corporate executives, the financial sector, and so on. Herein are the origins of the theory of economic growth and the treatment of the role of instability and crises within capitalist economies, as well as the Marxian understanding of the distribution of income.

Chapter 7, Applications of Marxian Economics

How have Marxist concepts been applied to major trends, debates, and events in recent decades? In this chapter, we examine the ways Marxist thinkers, especially younger scholars and activists, have opened up and applied Marxian economics to the theory of the firm, imperialism and globalization, development in the Global South, the role of finance, systemic racism, gendered hierarchies, and the relationship between capitalist and noncapitalist economies in contemporary societies.

Chapter 8, Debates in and around Marxian Economics

Marxian economic theory has, of course, been discussed and debated from the very beginning—by both Marxian and mainstream economists. In this chapter, I present some of the key criticisms of Marxian economics by mainstream economists, focusing in particular on their rejection of the labor theory of value. I also explain some of the key debates among different schools of thought within the Marxian tradition and present their contributions to contemporary Marxian economics.

Chapter 9, Transitions to and from Capitalism

Much to the surprise of many students, Marx (and his frequent collaborator Engels) never presented a blueprint of socialism or communism, either in Capital or anywhere else. However, Marxian economics is based on a clear understanding that capitalism has both a historical beginning and a possible end. In this concluding chapter, I discuss how Marx and later generations of Marxian economists have analyzed both the transition to capitalism (e.g., from feudalism in Western Europe) and the transition to noncapitalism (in the contemporary world).

Before We Dive In

As I wrote above, this book is not written with a presumption that readers have any kind of background in Marxian economic and social theory. Much the same holds for mainstream economic theory. Perhaps some readers will have learned some Marx or mainstream economics in the course of their studies but, if not, everything they need to understand Marxian economics is presented in this book.

Here are some other issues I’d like readers to keep in mind as you work your way through this book.

As is often the case in theoretical debates, the same words often have different meanings. So, for example, the way Marx defines and uses such concepts as markets, value, labor, capital are quite different from what they mean in mainstream economics. To help you make sense of those differences, I have included a brief glossary of terms at the beginning of the book. You should feel free to turn back to it on a regular basis as you work your way through the remaining chapters. In Part 2 of the book (Chapters 4, 5, and 6), all concepts will be carefully defined, while using as little technical jargon as possible. I have also added a couple of technical appendices for readers who want to follow up on the discussion in the main text.

Since we’re dealing with economics, some technical language and illustrations are indispensable. I have kept them to a minimum but readers should be prepared for some statistical charts, a few equations, and a bit of algebra. I’ll pass on the best piece of advice I received as a student: when something doesn’t make sense immediately, be prepared to work it out with paper and pencil.

The context for Marx’s critique of political economy, written in the middle of the nineteenth century, is unfamiliar to many of us in the twenty-first century. How many of us today have read Hegel, after all? The necessary background will be covered later, in Chapters 2 and 3.

While Marx’s name has long been linked with socialism and communism, readers won’t find any kind of blueprint or detailed plan for either idea in Marx’s writings. Nor does any general—valid for all times and places—economic policy or political program follow from his work. That’s a topic we will return to in Chapter 9.

This book is prepared as a stand-alone introduction to Marxian economics. No other texts are necessary to understand the material in this book. However, I have added references (to specific works and chapters) in the event readers want to use this book as a companion text, as they read Capital and other writings by Marx.

Finally, while the book is aimed at students in economics (both undergraduate and post-graduate), it will also be relevant for and accessible to students in other disciplines—such as sociology, geography, history, and cultural studies. My fervent hope is it will also be useful to interested individuals who are not currently college and university students, because a clear and concise introduction to Marxian economics is relevant to their work and lives.


Much has been made of the rise of populism in recent years and the threat it poses to liberal democracy.

My view is that liberal critics of populism, standing on their heads, get it wrong. If made to stand on their feet, they’d have to admit that populism actually represents the failure of liberal democracy.

Populism has experienced a resurgence of late—in Hungary, Britain, France, Turkey, the United States, and elsewhere—especially the form of populism variously characterized as right-wing, nationalist, or authoritarian. It has attracted increasing support and achieved notable political victories within the institutions and procedures of liberal democracy.

The problem is that liberal democracy has failed to confront, much less solve, the problems that have led to the rise of populism in the first place.



Consider, for example, the history of populism in the United States. The three notable periods—in the late nineteenth century (with the rise of the People’s Party, which was also known as the Populist Party), the first Great Depression (around such figures as Father Charles Coughlin and Huey P. Long), and then during the second Great Depression (starting with the Tea Party and culminating in the election of Donald Trump)—all coincided with obscene levels of inequality and severe economic crises that decimated American workers and other classes (including farmers and small businesses) across the country.

Populism has been one of the principal responses to the complex and shifting layers of discontent and resentment that the ideas and policies of the leading political parties, economic elites, and mainstream intellectuals within American democracy first created and then failed to respond to. As I explained last November,

The paradox of the 2016 presidential race is that both major party candidates claim (or at least are identified by those in the media with) support of portions of the U.S. working-class and yet neither campaign offers anything in the way of concrete policies or strategies that actually respond to the real issues and problems faced by the members of the working-class. . .

It’s no wonder, then, that over the course of the past year and a half American workers have rejected establishment politics—as offered by both Democrats and Republicans—and voted in large numbers for Bernie Sanders and Donald Trump. They’re simply fed up with an economic system that has been rigged to benefit only a small group at the top and frustrated by a set of political candidates (not to mention economists and economic pundits) who pronounce fundamental change to be undesirable and unrealistic. Better to stay the course, so the elites preach, and eventually trickledown economics will work.

A different response was, of course, possible in all three circumstances. Instead of populism, marginalized classes in the United States might have been persuaded by and coalesced into a movement with utopian impulses—an association, organization, or political party that combines a critique of the existing order, including the elites that defend it, with an agenda that seeks to radically transform economic and social institutions in a progressive direction.**

As I see it, both right-wing populism and left-wing utopian movements see the existing system as “rigged” against the vast majority of people and level an indictment against “elites” that both benefit from and defend the existing system. Both responses therefore represent a failure of liberal democracy.

But the two reactions are not at all similar, even when both attempt to represent the grievances of workers and other classes that have been left behind.

There are, it seems to me, two key differences between right-wing populist and left-wing utopian movements. First, they approach the matter of alliance and opposition quite differently. Utopian movements identify a basic conflict between the people and an elite or establishment, and then challenge the claims to universality of those on top in order to form a different universality, a set of changes that will create a new humanity and realm of freedom for everyone, including the existing elites. As John Judis explains, right-wing populists exhibit a radically different approach. They

champion the people against an elite that they accuse of favouring a third group, which can consist, for instance, of immigrants, Islamists, or African American militants. Rightwing populism is triadic: it looks upward, but also down upon an out group.

The second major difference is that right-wing populists look backward, conjuring up and then offering a return to a time that is conceived to be better. For Trump, that time is the 1950s, when a much larger share of workers was employed in manufacturing, American industry successfully competed against businesses in other countries, and Wall Street played a much smaller role in the U.S. economy.***

That time was, of course, exceptional—in terms of both U.S. and world history. And it’s a vision that conveniently forgets about many other aspects of that lost time, such as worker exploitation, Jim Crow racism, and widespread patriarchy inside and outside households.

Instead of looking backward, left-wing utopian movements look forward—criticizing the existing order but also understanding that it creates some of the economic and social conditions for a better, more just society.

Liberal critics of populism understand neither their own role in producing the circumstances within which populism emerged nor the senses of injustice—especially class injustice—that fuel populism’s gathering strength.

The Left should be able to do better, both in analyzing the rise of populism as a failure of liberal democracy and in offering a utopian alternative to the status quo. But for that, it will have to look beyond the idea that populism alone represents a threat to liberal democracy.

If liberal democracy is under threat it is because of its own failures.


*The chart illustrating the wealth shares of the top ten percent and top one percent is from Richard Sutch, “The One Percent across Two Centuries: A Replication of Thomas Piketty’s Data on the Concentration of Wealth in the United States,” Social Science History 41 (Winter 2017): 587-613.

**Such a movement did in fact gather strength during the first Great Depression, the Thunder from the Left, which is precisely what led to the second New Deal in 1935 (after the 1934 midterm elections and before Franklin Delano Roosevelt’s 1936 reelection campaign).

***Joshua Zeitz argues that the Populists of the late nineteenth century also looked backward and that the parallels between then and now are striking:

Ordinary citizens chafed at growing economic inequality and identified powerful interests—railroads, banks, financial speculators—that seemed to control the levers of power. Many came to believe that the two major political parties, despite certain differences, were fundamentally in the pockets of the same interests and equally unresponsive to popular concerns.


Narayana Kocherlakota, professor of economics at the University of Rochester and past president of the Federal Reserve Bank of Minneapolis, is right: in some ways, the 2007-08 was worse than the Great Depression.

It certainly has been worse for average households in the United States. Real median household income (the red line in the chart above) is still below what it was in 2007—and lower still from what it was even earlier, in 1999.

But it hasn’t been a lost decade for the members of the top 1 percent. Their share of income (the blue line in the chart above), which was already an obscene 19 percent in 2007, is today even higher, at 19.6 percent.*

Still, Kocherlakota’s warning is appropriate:

financial crises and the responses to them can have highly persistent adverse effects on economic potential. The risk of such large costs means that policy makers must have better safeguards in place, and be willing to respond vigorously through monetary and fiscal stimulus when crises nonetheless happen.

So what’s happening along these lines? The Trump administration’s nominee to be vice chair of supervision and regulation at the Federal Reserve wants to make the big banks’ stress tests less stringent — and that’ll make a financial crisis more, not less, likely. . .

In short, I see little evidence that policymakers have learned the lessons of the last decade. I hope that situation will change before another crisis occurs.


*Both of the data series represented in the chart above end in 2014. That’s because the series on the share of income captured by the top 1 percent ends in that year. Median household income in 2015, the last year for which those data are available, was still below what it was in 2007.

We don’t have comparable data series for the first Great Depression.


What we do know is that the share of income of the bottom 90 percent, which was 52.4 percent in 1928, hovered at roughly the same level throughout the 1930s, ending the decade at 52.5 percent, and then rose dramatically beginning in 1940. Meanwhile, the share of income captured by the top 1 percent, which stood at 21.2 percent in 1928, never managed to rise to that level during the 1930s and, by 1948, it had fallen to 15.6 percent.


Mainstream economists have been taking quite a beating in recent years. They failed, in the first instance, with respect to the spectacular crash of 2007-08. Not only did they not predict the crash, they didn’t even include the possibility of such an event in their models. Nor, of course, did they have much to offer in terms of explanations of why it occurred or appropriate policies once it did happen.

More recently, the advice of mainstream economists has been questioned and subsequently ignored—for example, in the Brexit vote and the support for Donald Trump’s attacks on free trade during the U.S. presidential campaign. And, of course, mainstream economists’ commitment to free markets has been held responsible for delaying effective solutions to a wide variety of other economic and social problems, from climate change and healthcare to minimum wages and inequality.

All of those criticisms—and more—are richly deserved.

So, I am generally sympathetic to John Rapley’s attack on the “economic priesthood.”

Although Britain has an established church, few of us today pay it much mind. We follow an even more powerful religion, around which we have oriented our lives: economics. Think about it. Economics offers a comprehensive doctrine with a moral code promising adherents salvation in this world; an ideology so compelling that the faithful remake whole societies to conform to its demands. It has its gnostics, mystics and magicians who conjure money out of thin air, using spells such as “derivative” or “structured investment vehicle”. And, like the old religions it has displaced, it has its prophets, reformists, moralists and above all, its high priests who uphold orthodoxy in the face of heresy.

Over time, successive economists slid into the role we had removed from the churchmen: giving us guidance on how to reach a promised land of material abundance and endless contentment.

However, in my view, there are three problems in Rapley’s discussion of contemporary economics.

First, Rapley refers to economics as if there were only one approach. Much of what he writes does in fact pertain to mainstream economics. But there are many other approaches and theories within economics that cannot be accused of the same problems and mistakes.

Rapley’s not alone in this. Many commentators, both inside and outside the discipline of economics, refer to economics in the singular—as if it comprised only one set of approaches and theories. What they overlook or forget it about are all the ways of doing and thinking about economics—Marxian, radical, feminist, post Keynesian, ecological, institutionalist, and so on—that represent significant criticisms of and departures from mainstream economics.

In Rapley’s language, mainstream neoclassical and Keynesian economists have long served as the high priests of economists but there are many others—heretics of one sort or another—who have degrees in economics and work as economists but whose views, methods, and policies diverge substantially from the teachings of mainstream economics.

Second, Rapley counterposes the religion of mainstream economics from what he considers to be “real” science—of the sort practiced in physics, chemistry, biology, and so on. But here we encounter a second problem: a fantasy of how those other sciences work.

The progress of science is generally linear. As new research confirms or replaces existing theories, one generation builds upon the next.

That’s certainly the positivist view of science, perhaps best represented in Paul Samuelson’s declaration that “Funeral by funeral, economics does make progress.” But in recent decades, the history and philosophy of science have moved on—both challenging the linear view of science and providing alternative narratives. I’m thinking, for example, of Thomas Kuhn’s “scientific revolutions,” Paul Feyerabend’s critique of falsificationism, Michel Foucault’s “epistemes,” and Richard Rorty’s antifoundationalism. All of them, in different ways, disrupt the idea that the natural sciences develop in a smooth, linear manner.

So, it’s not that science is science and economics falls short. It’s that science itself does not fit the mold that traditionally had been cast for it.

My third and final point is that Rapley, with a powerful metaphor of a priesthood, doesn’t do enough with it. Yes, he correctly understands that mainstream economists often behave like priests, by “deducing laws from premises deemed eternal and beyond question” and so on. But historically priests served another role—by celebrating and sanctifying the existing social order.

Religious priests occupied exactly that role under feudalism: they developed and disseminated a discourse according to which the natural order consisted of lords at the top and serfs at the bottom, each of whom received their just deserts. Much the same was true under slavery, which was deemed acceptable within church teachings and perhaps even an opportunity to liberate slaves from their savage-like ways. (And, in both cases, if those at the bottom were dissatisfied with their lot in life, they would have to exercise patience and await the afterlife.)

Economic priests operate in which the same way today, celebrating an economic system based on private property and free markets as the natural order, in which everyone benefits when the masses of people are forced to have the freedom to sell their ability to work to a small group of employers at the top. And there simply is no alternative, at least in this world.

So, on that score, contemporary mainstream economists do operate like a priesthood, producing and disseminating a narrative—in the classroom, research journals, and the public sphere—according to which the existing economic system is the only effective way of solving the problem of scarcity. The continued existence of that economic system then serves to justify the priesthood and its teachings.

However, just as with other priesthoods and economic systems, today there are plenty of economic heretics, who hold beliefs that run counter to established dogma. Their goal is not to take over the existing religion, or even set up an alternative religion, but to create the economic and social conditions within which their own preferred theories no longer have any relevance.

Today’s economic heretics are thus the ultimate grave-diggers.


Special mention

195813_600  PettJ20170519_low


David Wojnarowicz, Untitled from Ant Series (time/money), 1988

Tom Chatfield [ht: ja] makes a compelling case that, in the era of “big data,” we often suffer from what is called a recency bias, the “tendency to assume that future events will closely resemble recent experience.”

It’s a version of what is also known as the availability heuristic: the tendency to base your thinking disproportionately on whatever comes most easily to mind. It’s also a universal psychological attribute. If the last few years have seen exceptionally cold summers where you live, for example, you might be tempted to state that summers are getting colder – or that your local climate may be cooling. In fact, you shouldn’t read anything whatsoever into the data. You would need to take a far, far longer view to learn anything meaningful about climate trends. In the short term, you’d be best not speculating at all – but who among us can manage that?

The same tends to be true of most complex phenomena in real life: stock markets, economies, the success or failure of companies, war and peace, relationships, the rise and fall of empires. Short-term analyses aren’t only invalid – they’re actively unhelpful and misleading. Just look at the legions of economists who lined up to pronounce events like the 2009 financial crisis unthinkable right until it happened. The very notion that valid predictions could be made on that kind of scale was itself part of the problem.

And the solution?

What’s needed is something that I like to think of as “intelligent forgetting”: teaching our tools to become better at letting go of the immediate past in order to keep its larger continuities in view.

Now, if only we could intelligently forget mainstream economics—and spend more time studying history, including of course the history of capitalism. Then, we’d be in better shape to understand the recurring boom-and-bust-cycles that regularly throw millions of people out of work and subject them to the kinds of crises they’ve been forced to endure for the past nine years, while those at the top once again benefit from the way the game is rigged.

I haven’t seen “Boom Bust Boom,” the recently released Monty Pythonesque documentary about capitalism’s periodic crises and the failures of mainstream economics.

However, I have read Andrew O’Heir’s [ht: ja] piece in which he argues the film “finds itself a little behind reality.”

It’s a curious development, and an index of how fast public perception and imagination have shifted. To most regular people in most parts of the world, the thesis that unfettered capitalism is unstable, empowers predatory behavior and worsens inequality is not merely uncontroversial but empirically obvious. We appear to be entering an era of political history when socialist or social-democratic reforms are once again in play. . .

it took more than 20 years after the Clinton-Blair rebranding of the electoral left (as, in effect, the squishier, friendlier right) for large swaths of the public to realize how thoroughly they’d been conned. Now Hillary and payday-lender BFF Debbie Wasserman Schultz and the rest of the compromised Democratic Party apparatus find themselves in a tough spot. . .

Of course Clinton is now walking back her decades-long support for heartless neoliberal policies of austerity, privatization and free trade. At least in the Democratic campaign, she has slid right past the friendly, center-left Keynesianism of “Boom Bust Boom” to position herself as the decaf Bernie, with more hardheaded practicality but only 20 percent less passion. I understand why she thinks that’s the right strategy; I don’t know whether she expects anyone to believe it.

O’Heir also notes the curious omissions in Terry Jones and Theo Kocken’s whimsical documentary:

I honestly can’t tell you why John Maynard Keynes, the father of interventionist macroeconomics and the intellectual avatar of the entire tradition embodied in “Boom Bust Boom,” is never mentioned by name. Have the right-wing attacks on Keynesianism since the Reagan-Thatcher years really rendered him untouchable? I do understand, more or less, why Karl Marx is not mentioned — although it’s time to get over that, for God’s sake.


Brad DeLong is quite complimentary in his discussion of the heterodox papers presented in the joint Union for Radical Political Economics/American Economic Association session, “Causes of the Great Recession and the Prospects for Recovery,” at the most recent economics meetings in San Francisco.

He then concludes:

What is disappointing to me is the extent to which both the mainstream and URPE are in the same box. They see the same world. They develop very similar analytical perspectives. They evaluate and phrase them differently, true. But there is no magic key in URPE to the lock of the riddle of history that the mainstream has overlooked. And—if you include Hobsonians within the URPE ekumene—there is no magic key in the mainstream that URPE has overlooked.

There’s certainly something wrong with heterodox economics these days if a leading mainstream economist such as DeLong, whose views on the current economic crises are by his own admission closely aligned with those of Larry Summers, finds that both the mainstream and URPE views “are in the same box.”

It’s a case, it seems to me, of damning with fervent praise.


Here, for the record, is the lineup of the session in which DeLong participated:

Causes of the Great Recession and the Prospects for Recovery
Presiding: FRED MOSELEY (Mount Holyoke College)

Stagnation and Institutional Structures

DAVID M. KOTZ (University of Massachusetts-Amherst)
DEEPANKAR BASU (University of Massachusetts-Amherst)

Abstract: The recovery from the financial crisis and Great Recession of 2008-09 has been sluggish in the United States, and more so in a number of other developed economies. This has given rise to a literature about possible secular stagnation (Eichengreen 2015; Gordon 2014a, 2014b; Krugman 2014; Summers 2013, 2014). This paper argues that the cause of the sluggish recovery in the U.S. is the transformation of the prevailing “free-market,” or “neoliberal,” institutional structure from a structure that had promoted capital accumulation for some 25 years into an obstacle to further normal expansion following the crisis of 2008-09. The paper cites historical evidence of previous periods in which stagnation gave way to normal long-run expansion only after a new institutional structure had emerged. Drawing on the “social structure of accumulation” theory of accumulation and crisis, the paper argues that the observed pattern of crisis, stagnation, institutional restructuring, and long-lasting normal growth is not an accident but is rooted in the central role in the promotion of normal capital accumulation that is played by a coherent, mutually reinforcing set of economic and political institutions which, however, cannot play that role indefinitely.

Recessions, Depressions, and the Rate of Profit

ROBERT MCKEE (Independent Scholar)

Abstract: Recessions are common; depressions are rare. This paper argues that there is a distinction between economic recessions and depressions and this distinction helps to explain why economic recovery can be weaker and take longer. The paper will argue that the ultimate cause of recessions and depressions is a decline in profitability in the business sector of an economy. The Keynesians (supporters of fiscal expansion) and Austerians (supporters of fiscal contraction) deny the role of profitability in recessions and depressions. So their prescriptions for recovery do not work. The paper will offer empirical evidence from the US economy to support this thesis. But not every depression is the same: each has its own characteristics. The distinctive feature of the current depression is the role of excessive credit or debt. Evidence will be presented to argue that the Federal Reserve quantitative easing programme had little positive effect on US real GDP or investment growth and merely fuelled a new stock and bond market boom.

Understanding the Great Recession: Keynesian and Post-Keynesian Insights

MARIO SECCARECCIA (University of Ottawa)
MARC LAVOIE (University of Ottawa)

Abstract: Basing themselves on the actual experience of the 1930s, a fundamental insight offered by Keynes, Kalecki and subsequent advocates of what became Post-Keynesian economics is that, when responding to a major crisis, the economic system is not self-adjusting. In a modern monetary capitalist economy, private sector stabilizing forces do exist; but, at best, they can be considered very weak, while the destabilizing elements tend to dominate. This underlying asymmetry would suggest that, in the absence of public sector policies to counteract such instabilities, the inexorable outcome of a deep crisis is long-term stagnation. In contrast to other heterodox economists, especially from the Marxian tradition, Post-Keynesians believe that it is possible even within a capitalist economy to counteract effectively these destabilizing tendencies through appropriate macroeconomic policy actions of the state, as it happened to some extent during the post-World War II “Golden Age”. The object of the paper will be to explore both theoretically and empirically the properties of these destabilizing factors so as to shed some light on the nature of the present crisis. A significant insight offered by Keynes in the General Theory and explored by some Post-Keynesians historically has to do with the importance of the fundamental interaction between the rentier and non-rentier sectors of the modern capitalist economy, which can both trigger the crisis and abort the recovery. In particular, once a financial crisis occurs, which usually results from the destabilizing actions of the rentier sector, macroeconomic policy often works in such a way as to maintain the economy in a state of high long-term unemployment. Such a scenario of long-term stagnation, characteristic of the 1930s, is being played out again today and we shall explore possible long-term measures to pull economies out of what has clearly become a macroeconomic austerity trap.


ROBERT J. GORDON (Northwestern University)
BRAD DELONG (University of California-Berkeley)
DAVID COLANDER (Middlebury College)


David Leonhardt’s headlines reads “Inequality Has Actually Not Risen Since the Financial Crisis” and his chart, provocatively titled “The Rich Have Gotten Poorer Since 2007,” shows that the incomes of the highest-earning households (top 1, top .01, and top 10 percent) have fallen even more than the income of others.


Well, yes and no. Yes, incomes at the top have fallen more than the incomes of everyone else since 2007—but those at the top are certainly not “poorer.” And, even more important, no one has claimed top incomes didn’t fall off during the Great Recession. Of course they did, since those at the top receive most of the capital gains generated in the economy and the crash in equities wiped away a good portion of their wealth.

chart-1979-2012 chart-2009-2012

But the real questions are, what happened before the crash? And what’s happened since the recovery began? And there the charts don’t lie: those at the very top have made out like bandits while everyone else is forced to continue to subsist on their meager, unchanging incomes.

In fact, Leonhardt’s own text challenges both his headline and key chart:

None of these facts, to be clear, changes the larger story: Inequality is far higher than for most of the last century. The Great Depression and the New Deal helped reverse the high inequality of the 1920s. The last several years haven’t reversed more than a small fraction of the post-1980 rise in inequality.

It’s even possible that inequality will soon surpass its 2007 peak, because the affluent often fare better than any other group in the second half of an economic expansion. On the other hand, the current data doesn’t reflect several of Mr. Obama’s efforts to fight inequality, such as the expansion of health insurance or top-end tax increases. Whatever happens in the next few years, top incomes will almost certainly remain vastly higher than they were in previous decades, while incomes for the middle class and poor will remain only marginally higher. This stagnation has damaged living standards and caused widespread frustration.

That’s the real problem, which headlines and charts about the very rich not having yet recovered all their losses simply can’t hide.


Most mainstream economists are not on the Left. Most wouldn’t know heterodox economics if it bit them on the proverbial nose. And most heterodox economists do identify with some kind of left-wing politics.

Yet, Chris Dillow (with whom I have found myself in agreement on many occasions) just can’t seem to disentangle the relationship among mainstream economics, heterodox economics, and the Left.

Let’s see if I can’t offer a bit of assistance. First, most mainstream economists with whom I’m familiar (at least the sort one finds in the U.S. academy) tend to locate themselves somewhere in the center of the political spectrum—some more to the liberal side (like Arrow, Solow, Tobin, and Samuelson, the economists named by Dillow), others to the more conservative side (like Mankiw, Cochrane, Taylor, and so on). But they’re certainly not on the Left, if by that we mean critical of the capitalist system and supportive of one or another kind of socialism (a pretty traditional definition of the Left for much of the past century, it seems to me).

Mainstream economists also don’t know much, if anything, about heterodox economics. Perhaps a previous generation did (if only for having studied the history of economic thought) but not the current generation. A friend of mine reported the following story from the most recent meetings of the American Economic Association/Allied Social Science Association meetings:

On Monday morning I was hanging out in the exhibition hall at ASSA, at a table shared by Dollars and Sense and the Heterodox Economics Network. About once an hour, some professional economist looked perplexedly at the banner saying “Heterodox Economics” and asked what that meant. They genuinely, honestly did not know.

The current generation of mainstream economists don’t know because they weren’t exposed to heterodox economics as undergraduate or graduate students, it doesn’t appear in the journals they read, and they simply aren’t forced to learn about it. Ever.

Heterodox economists are in a very different situation. They may reject mainstream economics but, as I’ve written before, they have to know it—and know it even better than mainstream economists themselves. Why? Because they have to teach it (often alongside their own, quite different approaches) and they have to engage it in public debate (precisely because mainstream economics dominates the debate within the academy, the media and policymaking circles).

Finally, most heterodox economists do, in my experience, identify with some kind of left-wing politics. Not the Austrians, of course—although it’s not clear they’re not part of mainstream economics these days. But all the other heterodox economists—of the sort one will find on the Heterodox Economics Directory—are located somewhere on the Left (in the way I define it above). The names may have changed over time—when I was young, we were called “radicals,” now it seems “heterodox” is the more accepted term—but the support for left-wing politics doesn’t seem to have changed.

So, what distinguishes liberal mainstream economists from left-wing heterodox economists? To my mind, it comes down to focusing on market imperfections (which can, at least in principle, be fixed within capitalism) versus focusing on the problems with capitalism as a system (which require, for a solution, the creation of noncapitalist practices and institutions).

Here’s the definition of heterodox economics I gave back in 2010:

Heterodox economics comprises all those theories that academic economists and others use to criticize and develop alternatives to mainstream (neoclassical and Keynesian) approaches. Heterodox and mainstream theories differ in terms of their starting points, methodologies, and conclusions. Thus, for example, Marxian economists start with class and use Marxian value theory to criticize capitalism, whereas neoclassical economists start with a set of given preferences, technology, and resource endowments and use a framework of supply and demand to celebrate capitalism. The problems of capitalism and mainstream economic theories, now as throughout their history, create the space for and interest in heterodox approaches.

To practice that kind of left-wing heterodox economics means one does have to know something about Marx, Kalecki, Sraffa, and Minsky—because their work (and that of many others) constitutes the foundations (or at least some of the foundations) of nonmainstream, heterodox analysis.

Heterodox economists reject economic orthodoxy not, as Dillow believes, because they’re ignorant of what the orthodoxy is or because of some kind of halo effect, but because, when they look at the world through the lens of Marx, Kalecki, Sraffa, and Minsky, they see an economic and social system that continues to discipline and punish the vast majority of people in order to benefit a tiny minority at the top. They see, in other words, an economy that is inherently unstable, fundamentally unequal, and profoundly unjust.

Hence, heterodox economists see that another economics—another economic theory as well as another economic system—is both necessary and possible. Mainstream economists, for their part, don’t.