Roubini : KARL Marx was right
Nouriel Roubini : "Karl Marx had it right. At some point capitalism can self-destroy itself because you cannot keep on shifting income from labour to capital without not having excess capacity and a lack of aggregate demand, and that's what's happening." - in an interview with The Wall Street Journal this week
Smiling Dave breaks it down. I'll make explicit the silly notions, then show why they are ridiculous:
- Capitalism can self-destroy itself because it creates excess capacity.
Nu, so what's so terrible about that? Nothing. To be fair, I think Roubini is using excess capacity here in a different sense than Wikipedia, as a synonym for lack of aggregate demand. So we move on to that ole chestnut.
- Capitalism can self-destroy itself because it creates a lack of aggregate demand.
Let us note here that this is not the same as Keynes' reason for lack of aggregate demand. In fact it's exactly the opposite. Keynes argued that what happens with capitalism is the following: So much stuff is out there [=excess capacity] nobody wants to buy it all [=lack of aggregate demand] because they are so incredibly wealthy, workers included, that they have everything they could possibly want already, and so just hoard their money under the mattress [=you peasants are making too much money for your own good].
We already have shown in an earlier article how ridiculous Keynes' theory is when applied to the world we live in. Nobody is hoarding anything; we are all broke. So maybe Roubini and Karl Marx are right. Maybe there is a lack of aggregate demand because the workers have been ripped off by capitalists by an inherent flaw in capitalism that is hidden in its very nature somewhere.
Let me begin by definitely agreeing that people have been, and are being, ripped off. And yes, a lot of the poverty now is from constant rip offs by the govt and its friends. But the question is, are rip offs an inherent part of a free market? Of course not. Quite the opposite.
In fact, in a free market, the whole idea of there being a lack of aggregate demand is absurd, but that will have to wait for next blog.