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Michael Roberts — Ending the pandemic slump – a return to Keynes?

Summary:
The latest Trade and Development report by the United Nations Conference on Trade and Development (UNCTAD), the economic research agency to help ‘developing countries’, is a must read. Not only is it packed with data and statistics about trends and developments in global production, trade and investment, but this 2020 issue takes a very radical position on how to get the world economy out of what the IMF calls the ‘lockdown’ slump. From the Marxian perspective, the problem is falling profit rate. Michael Roberts observes that Keynes called this "the marginal efficiency of capital." Indeed, on occasion even Keynes recognised that profitability (which he called the ‘marginal efficiency of capital’) was an important factor in causing slumps. As he said: “Unemployment, I must repeat,

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The latest Trade and Development report by the United Nations Conference on Trade and Development (UNCTAD), the economic research agency to help ‘developing countries’, is a must read. Not only is it packed with data and statistics about trends and developments in global production, trade and investment, but this 2020 issue takes a very radical position on how to get the world economy out of what the IMF calls the ‘lockdown’ slump.
From the Marxian perspective, the problem is falling profit rate. Michael Roberts observes that Keynes called this "the marginal efficiency of capital."
Indeed, on occasion even Keynes recognised that profitability (which he called the ‘marginal efficiency of capital’) was an important factor in causing slumps. As he said: “Unemployment, I must repeat, exists because employers have been deprived of profit. The loss of profit may be due to all sorts of causes. But, short of going over to Communism, there is no possible means of curing unemployment except by restoring to employers a proper margin of profit.” If the marginal efficiency of capital fell below the interest cost of borrowing capital, then capitalists would have a loss of ‘animal spirits’ and stop investing and instead hoard money. But this aspect of Keynesian theory is ignored by modern Keynesians (as it was by Keynes himself).
The problem is the structure of capitalism based on the relationship of profit and firm investment and and the profit rate depends on the capital/labor share. This and the following posts explore this relationship.

Michael Roberts Blog
Ending the pandemic slump – a return to Keynes?

Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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