Marx and Keynes: The Limits of the Mixed Economy by Paul Mattick

Author:Paul Mattick [Mattick, Paul]
Language: eng
Format: epub, pdf

1. The General Theory, p. 349.

2. P. K. Crosser, State Capitalism in the Economy of the United States, p. 104.

TECHNOLOGY AND THE MIXED ECONOMY

Apart from its irrational aspects, the mixed economy can exist a long as an increasing productivity yields a sufficient social product. Production must be large enough to maintain the necessary profit ability for the stagnating or relatively declining private capital, to secure existing living standards, and to allow for a growing quantity of non-profit production. Since the national debt can be refunded, it is actually only the interest on it which need be covered by either taxes or new borrowings. And since the rate of private investment decreases, more funds become available for government borrowings. In the long run, however, and with the continuous, faster growth of the “public” as against the “private” sector of the economy, profit-production must contract. To prevent this development, government-induced production must remain a limited part of total social production. If definite limits cannot be kept, the market system will eventually be superceded by a politically-controlled system of production as far removed from the mixed economy as the latter is from laissez-faire capitalism.

Once non-profit production becomes an institutionalized part of the economy, a vicious circle begins to operate. Government-induced production is begun because private capital accumulation is diminishing. Using this method diminishes private capital accumulation even more; so non-profit production is increased. The addition, in its turn, diminishes private capital expansion further; and so on. So long as the private sector dominates, there is no way of indulging in non-profit production except at the expense of private capital’s profit production. The limits of private capital production are thus, finally, the limits of government-induced production. To change this situation through farther going state interventions requires the existence of governments able and willing to destroy the social dominance of private capital and to proceed from government control to government ownership.

How much can a government tax and borrow? Obviously not the whole of the national product. Perhaps fifty per cent? This would come close to war-time conditions: for instance, during World War II the American government purchased roughly half of the national product. Under these conditions, however, the rate of investment was 2.9 per cent of gross national product – a rate below that of the depression years, with the sole exception of 1932, when the rate was 1.5 per cent. Moreover, to indefinitely continue a war economy will destroy the capitalist system. However, until the end of 1965, actual waste-production in the United States, i.e., the military budget, comprised roughly 10 per cent of gross national product, while total government expenses accounted for about one-fourth of gross national product. There was, and at this writing still is, considerable leeway before the conditions of the peacetime economy approach those of the wartime economy.

Although private capital can exist and even flourish when government spending is high relative to national product, there is, of course, an absolute ceiling to government spending, past which point the taxation which finances it will reduce rather than in crease social production.

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