Whither Policy in the Phase of Capitalist Disintegration?

Abstract

Capitalism in its phase of “disintegration” as opposed to that of “development” is no longer “self-regulating”, and that is the reason why a national economy in the age of “capitalism in disintegration” cannot hope to automatically achieve its highest attainable activity level, in the “sub-phase of average activity” through typical capitalist business cycles, characterized by decennial, Juglar-type periodicity. Even business cycles become irregular and fail to retain the typically decennial Juglar pattern. In order then to achieve the same (or a similar) goal, without depending on the automatic working of the self-regulatory mechanism of capitalism, the nation-state must now judiciously operate its macroeconomic policies, fiscal and monetary. These are the policies that the United States first introduced by virtue of the Employment Act of 1946 and so marked a turning-point. So far as mainstream bourgeois economics was concerned, it accepted these two macroeconomic policies “in practice”, fiscal policy to invigorate and monetary policy to restrain the economy of the private sector, as the case might be, but without due scientific reflection as to their necessity and rationale. It merely accepted the convention that the Treasury should be in charge of fiscal policy, while the Central Bank should likewise be entrusted to operate monetary policy, simply as some counter-cyclical measures to stabilize the otherwise uncertain private economy, without realizing that such an easy “division of labour” would only end in the sterile Hicksian analysis, based on the celebrated diagram in which the so-called IS and LM curves cross, as popularized by all bourgeois textbooks on macroeconomics. My view, however, is that, so long as we continue to be trapped by that type of superficial analysis, the present world economy will never be salvaged from its persistent and steadily aggravating deflation by means of any currently standardized macroeconomic policy.