Prabhat Patnaik
IN the United States there are still four million persons who remain unemployed compared to before the pandemic; and yet the Biden administration’s attempt to stimulate the economy has already run into a crisis with the re-emergence of inflation not just in that country but elsewhere in the capitalist world as well. The Federal Reserve Board (the equivalent of the US central bank) is planning soon to raise interest rates (that are currently close to zero), and even the fiscal expansion will be difficult to sustain in the face of inflation. All this will truncate the recovery that has been taking place. In other words, the ability of the State even in the leading capitalist country of the world, whose currency is “as good as gold” and which should therefore have no fears of any debilitating capital flight, to stimulate activity within its own borders, has become seriously constrained.
This is a new basic contradiction that has emerged in world capitalism and deserves serious attention. The prognostication of John Maynard Keynes, the most important bourgeois economist of the twentieth century, that even though capitalism in its spontaneity was a flawed system that kept large masses of workers unemployed, State intervention could fix this flaw, had already been negated by the globalisation of finance. Facing a nation-State, globalised finance had enfeebled that State sufficiently to prevent its intervention for overcoming the deficiency of aggregate demand. But the one State that still appeared to have the capacity to intervene was the US State because its currency was considered even by globalised finance to be “as good as gold” and hence intervention by it would not trigger any serious exodus of finance. But now, it seems, even that prospect has vanished. Let us see why.
Read More »