Haberler and Loveday on Proleterianization and the Business Cycle

By -
Mr. LOVEDAY then points out that for various reasons these financial rigidities have increased. "In recent years, the joint- stock system, under names varying with the law in different countries, has replaced to a constantly increasing extent the more personal enterprise. . . . Gradually with the growth of the big industrial concern, with the extension of the multiple shop . . . a greater and greater proportion of the population has been thrust out of positions of direct, independent control into the mass of wage-earning and salaried classes. Such persons can no longer invest in themselves; to the extent that they play for safety or apparent safety, and give preference to fixed-interest-bearing obligations over profit-sharing equities, they inevitably add to the rigidity of the financial system. Many forces have induced them to prefer safety to profit..." -- Prosperity and Depression, p. 117
Wilhelm Röpke referred to the treatment for this as the "de-proletarianization" of society:
And herewith we glimpse the outlines of a policy—going beyond cyclical policy—which seeks to mitigate the sensitivity and instability of our proletarianized, centralized, mass-type society through decentralization, de-proletarianization, the anchoring of men in their own resources, encouragement to small farmers and small business, increased property ownership, and the strengthening of the middle classes. In this way, it would be possible to equip society, internally, with a set of springs with whose help it could withstand even the strongest economic shocks without panic, pauperization, and demoralization. -- Economics of the Free Society, p. 232
I am growing convinced that this is correct: the fact that we need things like NGDP targeting and aggregate demand stimulus to treat recessions (and I think we do) is a symptom of a more general malaise: that we live in a "proletarianized, centralized, mass-type society."

Stimulus does, as some Austrians have noted, resemble another dose of a drug for an addict. But Keynesians and monetarists are also correct: so long as the patient is in the shape he is in, he needs these additional doses. The patient could die of an "Austerian" cure unless his overall health is restored. Simply pulling him off the drug that is keeping him going is not a good treatment plan.*

* And I will note that this position appears to resemble the one at which Minsky arrived.

Comments

Post a Comment

Popular posts from this blog

Libertarians, My Libertarians!

By -
Cruel to be kind means that I love you . Because, while I think you are mistaken, your hearts are in the right place -- yes, even you, Silas --  unlike some people . This Breitbart fellow (discussed in the link above), by all appearances, deliberately doctored a video of Shirley Sherrod to make her remarks appear virulently racist, when they had, in fact, the opposite import. I heard that at a recent Austrian conference, some folks were talking about "Callahan's conservative turn." While that description is not entirely inaccurate, I must say that a lot of these people who today call themselves conservative give me the heebie-jeebies.
Read more

"Pre-Galilean" Foolishness

By -
 I am currently reading The Master and His Emissary , which appears to be an excellent book. ("Appears" because I don't know the neuroscience literature well enough to say for sure, yet.) But then on page 186 I find: "Asking cognition, however, to give a perspective on the relationship between cognition and affect is like asking astronomer in the pre-Galilean geocentric world, whether, in his opinion, the sun moves round the earth of the earth around the sun. To ask a question alone would be enough to label one as mad." OK, this is garbage. First of all, it should be pre-Copernican, not pre-Galilean. But much worse is that people have seriously been considering heliocentrism for many centuries before Copernicus. Aristarchus had proposed a heliocentric model in the 4th-century BC. It had generally been considered wrong, but not "mad." (And wrong for scientific reasons: Why, for instance, did we not observe stellar parallax?) And when Copernicus propose
Read more