After writing the post about Michael Spence and his proposal for the advanced countries to pursue an export-led growth strategy as way out of the crisis, I became intrigued with looking at how mainstream economics thinks exit will happen. So I have been spending time trying to find the answer to this question.
Lump of labour fallacy: In economics, the lump of labour fallacy … is the contention that the amount of work available to labourers is fixed. It is considered a fallacy by most economists, who hold that the amount of work is not static.
–Wikipedia
In part 2 of this series, I showed why fascist state management of the mode of production is indirect, rather than direct, i.e., why the state seeks to manage the process through its control over money, rather than directly imposing its control over the process of production. This method of management perfectly expresses the way in which crises actually unfold empirically within the mode of production. The first obvious symptoms of crisis are in exchange: unsold commodities, rising unemployment, credit contraction and a fall in GDP. It follows that any attempt to end a crisis will begin with these symptoms, rather than the underlying overaccumulation of capital.
Moreover, this method of approach reflects the problem from the standpoint of capital itself, where the problem, empirically, is not overproduction, but the ‘absence of demand’ for what has already been produced. For capital, the mode of exchange operates as an impediment to the realization of the surplus value already created. By necessity, therefore, the effort of management of the mode of production is directed at overcoming what capital sees as the ‘defects’ of the mode of exchange.
However much we can ridicule the simpletons for taking the result of the process of production for its cause, this much is clear: Between 1933 and 2008, nominal GDP experienced no year over year contraction — that is 75 years of unbroken nominal growth. To give this fact a historical perspective, in the 75 years prior to 1933, the US experienced at least 20 economic dislocations of various types, including depressions and panics. There is no question that fascist state economic management, for all of its silly assumptions, has been an unparalleled success so far as bourgeois economists are concerned. For most of that period, the only contraction in nominal GDP the US experienced were engineered by Washington deliberately to slow nominal growth of money in circulation, of employment and of GDP.
By way of comparison, consider that the Soviet Union experienced about 70 years of unbroken growth employing direct management of production. 
For all of the success of the Soviet mode of production in this regards, however, year 71 was a motherfucker — the Soviet centralized production system collapsed and the Union quickly broke up. Success along these lines clearly does not in any way guarantee against collapse. In the Soviet Union in 1991 and in the United States in 2008, it was as though 70 years of development was suddenly expressed in a single massive movement of society.
Business cycle stabilization: Stabilization can refer to correcting the normal behavior of the business cycle. In this case the term generally refers to demand management by monetary and fiscal policy to reduce normal fluctuations and output, sometimes referred to as “keeping the economy on an even keel.”
– Wikipedia
2. The bourgeois simpleton’s view of crisis
In the first part of my series on how economists see the mode of production they are attempting to manage, I explained how the method of management focuses not on capital, i.e., the production of surplus value, but on the reflexive expressions found in exchange relations. This is sort of like attributing to a sheet of paper the words that are printed on it, rather than the pen in the hand of the writer.
From the viewpoint of labor theory, however, this approach is not surprising. A commodity producer only finds validation for the social character of his labor when trying to sell his commodity. His activity, the production of the commodity, is carried on in isolation, but only becomes a social product through exchange. This cannot be emphasized enough: The commodity producer intends to sell his commodity, but he doesn’t even know if there is a market for it.
“‘Pushing on a string’ is particularly used to illustrate limitations of monetary policy, particularly that the money multiplier is an inequality, a limit on money creation, not an equality.” –Wikipedia
So here are the questions I have been contemplating for the past week or so: When simpleton economists suggest policies to manage “the economy”, what in their view do they think is being managed? How do they 
conceptualize both the “economy” itself and the tools they employ to manage it? What, if any, are the vulnerabilities (defects) of this form of management that is being expressed in the current debate among mainstream (neoclassical) economists? In particular, what are the choices being expressed in the debate over who should replace Bernanke as chair of the Federal Reserve Bank?
To be sure, I am not trying to offer a polemic against mainstream economics in this essay but to understand this policy in its own right, as well as to restate it in a form that is comprehensible within a labor theory framework as i understand that framework.
File this under, “Marx Proven Wrong By Progressives and Liberals Once Again”.
The question this time is the relation between industrial capital and finance capital. According to DSWright (whoever the fuck she/he is) Michael Hudson, a heterodox economist,
“has long claimed that Marx’s contention that ultimately industrial capitalism would triumph over finance capitalism was wrong.”
In fact, according to DSWright, bankers now dominate the economy and subject productive employment to the “rent-seeking” priorities of finance capital. Says Hudson, in 1998,
“Whereas the old industrial capitalism sought profits, the new finance capitalism seeks capital gains mainly in the form of higher land prices and prices for other rent-yielding assets.”
Industrial capital, in other words, only engages in healthy, wholesome profit-making, while finance capital seeks debt slavery and constantly rising physical and financial asset prices.
DSWright is happy to report Hudson’s correction of Marx has now been adopted into the arguments both of Joseph Stiglitz and of Paul Krugman. According to Stiglitz much of what goes on in the financial sector is unhealthy, vile rent seeking, not healthy, wholesome profit-making. Paul Krugman has recently declared America in the 21st century is now seeing “the growing importance of monopoly rents: profits that don’t represent returns on investment”. Krugman argues these monopoly rentiers with their market dominance actually may be prolonging the depression. The unprecedented duration of this depression is, “no puzzle here if rising profits reflect rents, not returns on investment.”
