By David M. Fields
From a Classical-Keynesian perspective (Bortis, 1997, 2003), rates of interest regulate rates of profits (Panico, 1980, 1985), and, thus, real wages are endogenously determined. The presence of financial instruments, which represent titles to future flows of income, makes it so that the actual center of distributive conflict in capitalism lies not in the technical conditions of production, but is rather governed by the real rate of interest, which is a conventionally-determined exogenous variable that reflects the relative powers of finance capitalists vis-à-vis industrial capitalists & labour (Pivetti, 1985, 1991, 2001).
The rate of profit, as a ratio, has a significance, which is independent of any prices, and can well be ‘given’ before the prices are fixed. It is accordingly susceptible of being determined from outside the system of production, in particular by the level of money rates of interest (Sraffa, 1960: 33)
In this sense, high real rates of interests induce industrial capitalists to prefer short-term speculative financial investment, instead of long-term productive real investment, since access to credit is expensive. Consequentially, industrial capitalists center attention on the pursuit of immediate surplus value realization, via speculation, in order to handle the burden of costly interest payments—the social cost being nominal wage suppression, which, by implication, exhibits an enlargement of the reserve army of labour.
[…] the credit system, which has its focus in the so-called national banks and the big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner— and this gang knows nothing about production and has nothing to do with it. (Marx 1894: 544-45).
Along these lines, heterodox growth and distribution models have been put forward (cf. Hein, 2008), highlighting the need for a redistribution of income from finance/industrial capitalists to labour (Lavoie and Seccareccia, 1999) and making unemployment the primary policy target (Smithin, 2004). Underpinning these models are works that incorporate Keynes’ principle of effective demand and Sraffian price theory in a long-period analysis of capital accumulation (Park, n.d.; Cesaratto et al. 2003). These studies pay considerable attention to the extent to which the Hicksian supermultiplier concept effectively explicates the degree to which induced consumption and investment, via the accelerator, determine average levels of total output (Serrano, 1995) and, thus, normal capacity utilization (Amadeo, 1986; Trezzini, 1998), with the richness of a framework inspired by Kaldor and Pasinetti (Docherty, 2012) that meticulously constitutes the palpability of Kalecki’s famous aphorism that ‘capitalists get what they spend…workers spend what they get’.
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