Lerner a Marxist View

7/28/2019 Lerner a Marxist View

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Comment on Professor Lerner's Paper: A Marxist ViewAuthor(s): JOSEPH HALEVIReviewed work(s):Source: Social Research, Vol. 46, No. 2 (SUMMER 1979), pp. 240-254Published by: The New SchoolStable URL: http://www.jstor.org/stable/40970774 .

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Comment n ProfessorLerner'sPaper: /A Marxist /View / BY JOSEPH HALEVIJ^erner's argumentan be divided ntotwoparts, ne deal-ingwith heasymmetrical orkingf thepricemechanismnthe Keynesian ystem nd one dealingwiththe measuresnecessaryokeepthewage/productivityelationonstant. helatter art s essentially ynamicncharacter nd it endswiththe proposalof issuing wage permits s a means to curbcost-pushnflation. shallnot discuss hepractical alidityfthe bovesuggestionutshall onfinemyselfo thetheoreticalcontent f Lerner's rgument.The eynesianmultipliern itssimplest orm sserts hat t is possible o movefrom givendegreeof unusedcapacity utputto fullcapacitywhenthelatter s supposedto coincidewithfullemployment) ithoutany major change n thecost-priceelations.When thefull-employmentevelofoutput sreached, nyfurtherncreasenmoney ncome will be reflectedn prices, incethe existinglevelofcapacity annot ccommodateheadditional emandin real terms.The abovemechanismuggests hatpricesdonotregulate upply nd demand,but the evelofprofitsndthe distributionf income nstead.This is possibleonlybe-cause sparecapacityxists; therwisenyadjustmentmustbebrought iamovementsnprices. n an economywherepriceshavelostthe roleofequilibratingupply nd demand, nfla-tion cannotbe curbedby curtailinghe level of monetaryexpenditure,incetoa reductionn spending herewillbe a

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A MARXISTVIEW 241correspondingall n output nd employment. ccording oProfessorerner,however,hefailure fthepricemechanismis to be seenin thedownward igidityn moneywagesunderstatic onditions,nd intheir apidupward djustmento therate of inflation nderdynamic nes. That is,wagesdo notfallbehind theexpectedrisein prices.The important oint n Lerner'sargumentwithwhichfullygree) ies nhaving tressedhefact hat cut nmone-tary spendingfirst nd foremost eneratesunemploymentrather han a decline n the rate of inflation. his is possibleonly because prices are (rightly)viewed as being cost-determined. nderthese ircumstanceshedynamiconditionforprice stabilitys givenbywage increasesproportional oproductivityains.The above is a widely cceptedresult ncontemporaryconomic nalysis.

GeneralRemarksI shallbeginbyarguing hatwageflexibilitys nota neces-sary rerequisiteor chievingull mployment.s a matterffact,his iew s notnew, nd ithas beenpresentedna varietyof ways. f, forinstance,we assumerecontractingo be anexception ather han rule1 nd westartwith n initial et of

wrong elative rices,we ought mmediatelyo considerfalsetrading, encedisequilibrium,s the norm.There is no needto ttach owages ny pecial ehavior. nother ay f ookingttheproblems totake nto ccount heformationfa concen-trated ector n whichmarkups re a function f a minimumtarget ateofprofit.2n this ase unitprices re up to a point1Cf. A. G. Hines, The (Neo)-Classical esurgencend theReappraisalfKeynes'Theory fEmployment,"n T. M. HavrileskyndJ.T. Boorman, ds.,CurrentssuesinMonetaryheoryndPolicyArlington eights, 11.: HM Publishing orporation,1976),pp. 29-39.Ct. Paolo Sylos-Labini,radeUnions,nflation,ndProductivityLexington, ass.:SaxonHouse/Lexingtonooks,1974), p.65-86; H. H. WachtelndP. D. Adelsheim,"HowRecessioneeds nflation:riceMarkupsna Concentratedconomy,"hallenge,September/October977.



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242 SOCIAL RESEARCHinverselyelated odemandand positivelyelated ochangesin costs.The aboveapproachhas inmyopinionthe merit freflectinghe historical evelopmentfmodern apitalismnwhich hanges n the market tructureookplace prior o (ifnot independentlyf) the makingof a strong rade-unionmovement,eingchiefly eterminedytheunevendiffusionoftechnical rogress. et, think,heseviewsdo notexplainwhy private-enterpriseystem ailsto achievefullemploy-ment of resources abstracting"rom"perversebehavior,"marketmperfections,nd all therest. shallthereforerguethat,even whenwages have to fall in order to attainfullemployment,he (capitalist) conomymaywell react in anoppositedirection.In order to pursue thistask, t is necessary o thinkofequilibrium ot n "abstracto" ut n relation o the structureof the economy.This is determined y outputand laborcoefficientsxisting t any one timeand by the fact thatproductions specific nd can be broadlydivided nto twononhomogeneous roducts: apitalgoods and consumptiongoods. Taken together, specificity"nd outputand laborcoefficientsiveus thedegreeof absorptiveapacity f thesystem. his line of thought,whiledatingbackto Marx andused byKaldor in 1938 to explaintherelationshipetweenemploymentnd fluctuations,as been only recently evel-oped in a fully ledged heory yProfessor dolphLowe inhisfundamental orkThePathofEconomic rowth,n whichtheargument elow s based.3

Effectiveemand n a StaticStructuralrameworkLet us assumean economy nderstationaryr steady-statefull-employmentquilibrium. upposean exogenous ncrease

3Cf. Nicholas Kaldor, "Stability nd Full Employment," n his Essayson EconomicStabilitynd GrowthLondon: Duckworth,1960), pp. 103-119; Adolph Lowe and Stan-ford Pulrang,The Path ofEconomicGrowthCambridge: Cambridge University ress,1976), pp. 95-100.



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A MARXISTVIEW 243intheannualrateofgrowthf the abor upply akesplace. norderfor headditionalworkerso be employed,apitalgoodsmustbe provided orthem oworkwith.But thismeansthatthe outputof the capital-goods ectorwill have to be in-creased.Since t s alreadyworkingt full apacity,herewillhave to be, initially, more hanproportionalncrease n thesavingratio, o thatthe capital-goodsndustries an be ex-panded relative o the consumption-goodsndustries. hustheeconomyxperiences decline nthesupply fconsump-tiongoods n relation o theprevious eriodand at thesametime an increasein employment; iven the moneywage,consumption-goodsricesmusttherefore ise.The resultingwindfall rofits, owever,houldnot be in-vested n theconsumption-goodsectoruntil the processofadjusting he composition f capitalstockto the expandedlabor force s completed.Hence monetary rofitabilitys anindicator f investmentemanddoes not here perform nyequilibratingole, and the shift n capitalfundshas to bebrought boutthrough ectorial apitaltaxation.Considernow thecase inwhich n increasenthesupply flabordoes lower themoneywage. Employmentan expandonly fter hechange nthecompositionfcapital quipmenthas made the nvestment-goodsector apableofgrowingt ahigher ate.4Meanwhile, ue to the reducedwages, surplusof consumption goods has been accumulating. Underconditions of perfect and simultaneous priceflexibility,onsumption-goodsriceswouldfall, herebyestor-ing theprevious ituation nd preventingheresource hiftfrom aking lace. Ifon the otherhandpriceswererigid, heinventory ccumulationmight appear undesired to thecapitalistsntheconsumption-goodsector o that he evelofactivity illbe sloweddown, riggering Keynesian ecession,in the absenceof an increase n investmentn the capital-goods industries. n increase n investment illbe possible

4Cf. Michael Kalecki,"Full Employmentby StimulatingPrivateInvestment?",Ox-fordEconomic apers 7 (March 1945): 83-92.



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244 SOCIAL RESEARCHonly f entrepreneursn the latter ectorwillinterprethereductionnsalesofconsumption oodsstemmingromowerwagerates s an indicatorf arger apitalrequirements.hisis doubtful ince t mplies hat apitalistsnvest s a classwiththe macroeconomicoal of providingmployment.It can be arguedthat n such a situationhegovernmentmight tep n through raditional eynesian eficit pendingpolicies.However, ustaining he level of effective emandmeans ssentiallyreventinghe atter rom alling,ut tdoesnot mply irectinghesectorialompositionf investmentnthe requiredproportion. hereforeunless the governmentintervenesn primapersona n the allocation f investmentgoods there s no assurance thatthe necessary hift n re-sourceswill materializen either ase.I havedwelt n this xample takenfrom owe'smodel)atsome lengthbecause it brings o the foretwo elements: 1)Evenwhenwagesfallneither erfect riceflexibilityortheaccumulationf inventoriesn theconsumption-goodsectorwillgenerate reaction uch thatthe additional upplyoflaborwillbe absorbed. n fact, s Lowecorrectlyoints ut, norderfor theeconomy o moveon a higherpathof capitalaccumulationntrepreneurshouldno longer cton thebasisof the "maximization"fpecuniary rofits.2) The manage-mentof effectiveemandbystimulatingrivate nvestmenthas a limitedvalidityn relation o full-employmentoals.Actually,when it is necessary o free resources,Keynesianpoliciesmayconstitute hindrance ather hana stimulus.The alternative,owever,s not a more aissez-faireconomybutstate nterventionn thesphereof privatenvestment.5A possible riticismo theabovereasonings that heunder-lyingmodel s bothunduly omplicatednd toosimplistic.tscomplexityrisesfrom herigidityf aborand output oeffi-5This is becauseunderstationaryr steady-stateonditionshe change n thestructurefcapital quipments initiallychieved hroughn unchangedevel rate)ofcapital-goodsutput. he differenceies n the fact hat ess nvestmentspouredinto heconsumption-goodsectorndprotantomore nvestmentsallocatednthecapital ector.



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A MARXISTVIEW 245cientswhich do not allow a fall in wages to be ipso factomatched y higher mploymentevels. nstead, slow nd byno means smooth and automatic ransitionalmechanismsrequired. ts simplicity aybe seen in the factthata two-sectormodel s in no wayrepresentativefthe realeconomy.In the nextsection, oweverdevoted o therelationshipe-tweenwage increases nd productivity),t willappear thatthesevery actorsonstitutehestrong oints fa Marx-Lowetypemodel as soon as we compareit withpost-Keynesiandynamic nes on which urrent olicy ecommendations,n-cludingLerner's, re explicitlyr implicitly ade.

The WageProductivityelation n a StructuralrameworkThe main oncern fpost-Keynesianrowthmodels sto be

seen nthedefinitionfthe etof conditionsnderwhich ullemploymentan be maintained vertimegiventhe rate ofgrowth f population nd productivity.Startingwithgiven capital nputcoefficientsthat s, theamountof capitalequipmentnecessaryo producea unitofoutput), thas been foundthatthe shareof investmentvernational ncomecannot exceed a certainproportion eter-minedbytheabove threeparameters.t follows henthat, tfull employment,wages should increase along with pro-ductivity,therwise ither he problem f effectiveemandwillmake tsappearanceor priceswilldecrease.Since,how-ever,the shareof investments,ence the savingratio,mayexceed or fall short f therequiredproportion,djustmentswillhave to be made through hanges n thedistributionfincome nthebasisofupward nddownward riceflexibility.In thiswaya curiousand paradoxical ituationrose in theWesterniterature.twasassumed hatgovernmentpendingwould olvetheproblem feffectiveemand n the short unwhileprice flexibilityould maintain he balance betweendemand and capacityn the ongrun.



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246 SOCIAL RESEARCHThere is a fallacy n this,however.The argumenthas beenconstructedon the basis of a "one commodity utput,"whichis both investibleand consumable. Thus any increase in thesavingratio is ipso factotransformednto higherreal invest-ment,likewiseany fall in the saving ratio takes the formofhigherconsumption.The general case, however, s thatof asystemwhose output is divided into a set of nonsubstitutablegoods. As a result,the decision to change the compositionofcapital equipmentwill be takenex ante whereasprices shouldadjust after hefact, nd only bya flukewillthiscorrespondtofull-employment equirements. n thiscontext would like tostressonce again that governmentactivities n the West, farfromcoordinatingthe structure nd the level of investment,mayeven add further rigidities" o the already existingones,by stimulating nvestment n a wrong direction (as alreadypointedout byLowe).6 To quote Michael Kalecki (which eads

us directlyo therelationship etweenwagesand productivity):NowherenWesternmodels ppearstheproblem f"longrundevelopment ottlenecks."When national ncomegrows t ahighratetheexpansion f certainndustriesagsbehind hat fdemandfor heir roducts ecauseof certain rganizationalrtechnologicalactors. . . The resulting apshave to be madegoodbyforeignrade nd to maintainhe balanceofthe attereither omeexportshaveto be increased r someimports e-placed byhome production. hese operationswill be usuallyaccompanied yhigher utlays fcapital nd labour nd inthiswayaffect rofoundlyheproblems feconomicgrowth.The contradictionetween onsumptionn the shortperiodand inthe ongrun andthe ongrun bottlenecks. . are infactthecentral roblemsfa realisticheoryfgrowthn a socialisteconomy.7

Leavingaside for the timebeingthequestion ofthe balance oftrade, Kalecki's remarksfitparticularlywell in a framework6For an empiricalanalysis, ee J. C. R. Dow, TheManagementftheBritish conomy1945-60 (Cambridge: Cambridge University ress, 1964), particularlyPart IV.7Cf. Michael Kalecki, "Theory ot Growth in Ditterentbocial Systems, cientia,May/June 970.



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A MARXISTVIEW 247suchas Lowe's.That is,sincethecapitalistconomy oes notdisplay nyequilibrating echanismis--visull mployment,to increasewagerates xactlywith roductivitys validonly nthe special case whereproductivityhanges re uniformnd theshareof investmentorrespondso therequirementsffull employ-ment,iven hecompositionfcapital quipment.n short, oavoid nflationarytrainst snecessaryorwagesto be tiedtoconsumption-goodsutput ndnotto theweightedverageofproductivitynboth ectors.f,for nstance,aborproductivityincreases more in the capital-goodsrather than in theconsumption-goodsector, aisingwagesbytheweighted v-erageof productivityhanges n bothwill, n theone hand,generate xcess-demandnflationn consumption-goodsar-ketswhile, n theotherhand,profitmarginswill ncrease nthecapital-goodsector.Productivityncreases n capital-goodsndustrieshave acompletely ifferent ffect n the economythan those inconsumption-goodsndustries.heychieflyhangethesavingratiofor nygivengrowth ate. n thisway hey o influencethe evel ofrealwages,butonly ndirectlynd after certaintime. t isnecessary irst o havea shiftn thecompositionfcapitalequipmentwithwagesremaining nchanged n thetransitionaleriod. It is quite possible,however, hatto ahigheraborproductivitynthecapital-goodsectorwill orre-spond a lower evel of investment ithhigherunitprofits,giving ise ostagnationendencies.he samephenomenonanoccur n theconsumption-goodsector fproductivityn thelatterweretorise morethantheaverage.Pricesmaynot fallinthesameproportion, hich,n a closedeconomy,will eadto a slowdown in theaggregatenvestmentate. t mustbenotedthat nmy cheme borrowed rom owe)the nflation-arypressureon consumption oods can be mitigated y achange n thestructure f capitalequipmentn favor f thelatter, rovided hesavingratiodoes not fallbelowthefull-employmentevel.This leadsto theproblem f theformationandutilizationf the urplusa topicdealtwith yPaulBaran



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248 SOCIAL RESEARCHinhisfamousThePolitical conomyfGrowth8),hich aises nimportant ointabouttherelationshipetweennflation nddeficit-spendingolicieswhenthe atter eavethe determina-tion ofwhat nd whereto invest o capitalists' ecisions.Ba-ran's arguments all the more remarkable ince it was ex-poundedin a periodof relative ricestability.He begins ycriticizingheview ccordingowhichny ypeofspending s to be welcomed, n thegrounds hat t main-tainsor increases he level of demandand employment. ecorrectlyotices hat nyexpansion f nvestmentnducedbygovernmentxpenditurewilleventuallyncreaseproductivecapacity,which n turn will outpace the level of effectivedemand.Thus furthernd largerdeficitmanagement ouldbe necessary.Now, fpublicspending s directed owardnonproductiveactivitiesinBaran'sview, rmaments)heexpansionnmoneyincomeswillnotbe matched ya proportionallow foutput,in particular onsumption oods,hence an inflationaryitua-tionwill rise.The importantoint s that nflations seenasdependentmainly n wherenvestmentsdirected nd only oa lesser xtent n thewage/productivityelation.n fact,fthewagebill were to expandalongwith heaverage ncrease nproductivitylusthe net ugmentationfemployedabor,butconsumption oodswereto expandless, nflationwouldtakeplace anyhow.Thus thewage billshouldincreaseonly paripassuwith heexpansion fconsumption-goodsutput inclu-siveofhousing). n our case,then,unitwagerates must x-pand lessthantheaverageproductivity.et theinflationarystrainswillnotdisappear ltogether,incetheywillbe felt nall thosebranches f the industry oughly peratingundercompetitiveonditions here upplysinelasticndwhere henotion f nonimmediateubstitutionlso holds.It is easyto see how Baran'sanalysis lendswith heargu-mentdeveloped n thispaper and withKalecki's bservationon long-run ottlenecks. eynes, oo,wasawareoftheprob-8Paul Baran, ThePolitical conomyfGrowthNew York: MonthlyReview, 1957).



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A MARXISTVIEW 249lemof the structure f investmentn relation o the evel ofeffectiveemand,but he took somewhatmbiguous ositiontoward t. On one hand he acknowledgedhat"there s noclear evidence fromexperiencethatthe investment olicywhich s socially dvantageous oincideswith thatwhich smostprofitable."9n the otherhand,however, e maintainedthatthere s no reasonto assumethat thesystem eriouslymisemployshe factorsof productionwhichare in use";hence:"It is in determininghe volumenotthe direction factual employment hat the existingsystemhas brokendown,"10husdismissingny necessityo socializeeconomicactivity.ince the astpropositionsre cast n muchstrongerterms han the first ne, I wouldassume thattheyreflectedKeynes's houghtmoreclosely.Todaywith he use of a pure reproductionmodelformedby nonhomogeneous oods and nonshiftableapitalequip-ment, t is possibleto provethatat anyone timea definiterelationshipxists etween hevolume foutput nd its truc-turalcomposition,f fullemploymentas to be maintained.Furthermore,s I triedto show n thefirst ection, head-justmentprocess s byno meanscontinuous nd automatic.Yet the sources f thefactorsmpeding he structuraldjust-ments aveto be found nthe socioeconomicharacteristicsfthe advanced apitalistconomies. hus Kalecki, yassumingthedistributionf ncomegiven ndexogenouslyetermined,pointed t thedegreeofmonoplys the barrier ochanges nthecompositionfinvestment.he constancyfthemarkupon wagesbecomesthe cause of theproblem f effectivee-mand.Moreexactly,tis becauseof theoligopolisticeaturesof theeconomyhat heshiftn nvestmentrom apitalgoodsto theconsumption-goodsectormayfailto takeplaceto therequired xtent. n thiscontext he evelof income nd em-ployments tiedto changes n the evel of investmentather

9J. M. Keynes,The GeneralTheoryf Employment,nterestnd Money London: Mac-millan,1936), p. 157.10Ibid., p. 379.



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250 SOCIAL RESEARCHthan o those nproductiveapacity. he latter ype fchangeis indeed a characteristic f centrallyplanned socialisteconomieswhere fall n investmentan be accompanied yan increase n outputand employment.his phenomenonwouldhappen (in fact,has happened) if more investmentweredevoted oconsumption-goodsather hancapital-goodsindustries.here is an importantorollaryo the abovestate-ment,namely, hatconsumption-goodsriceswillbe lowerand thewage/productivityatiohigherdue to thechange nthecompositionf output.

ClosingRemarksThe argument uggests, ontrary o Lerner'shypothesis,thatthere s no unique relationshipetweenwagesand pro-

ductivitynrelation oprices s longas we do not definehowand where nvestmentoodsare allocated.fprices re indeedpositivelyelatedto increases n thewage/productivityatio,this s because in an oligopolisticconomy nvestmenteci-sions re madewith urposes ther hanthoseofprovidingrateof accumulation ecessaryokeepfull mploymentlongwith the satisfactionf social needs. Kaleckiprovidedthetheoretical asis for understandinghe process describedabove. Baransought oexplain hesocioeconomicoundationsunderlyingt,pointing utamongother hings he contradic-tion betweendeficit-spendingoliciesand fullemploymentand theroleplayedby rmaments.here snoneed,however,to resort o armament xpenditure s thechiefexplanation(althoughtpoints o a basicfeature f American apitalism).Exportsplaythesamerole; as Kaleckiput it,"Without uchmarkets export) profits re conditionedby the ability fcapitalistso consumeor to undertake apital nvestment."11

11Cf. Michael Kalecki,Selected ssayson theDynamics f theCapital EconomyCam-bridge: Cambridge University ress, 1971), p. 86.



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A MARXISTVIEW 251This is particularlyrue in the lightof capitalist ountries'tendencyoexportquite ndependentlyromwhat s needed(in relation o imports) o achievefullemployment.n thiscase thenonuniquenessfthewage/productivityelation lsoholdsbut in reverse:whenever oreign emandfalls ignifi-cantly wagepolicy s advocated o foster ricecompetition;since,however,nmany ases thisdoesnoteliminate hefall nexports,wage curbs are nonethelessccompaniedbycuts noutput nd employmentt home.This is nottodenythat ometimesas I believe s the casenowfor taly) he evelofwages s toohigh nrelation o thefull-employmentateof investment.et as longas the atterdoes notflowback to thecommunityn the formof socialaccumulationtis impossibleo implementny type fwage/incomepolicy. n WesternEurope the labor movementsdirectlyr indirectlywarethat apitalistnvestment,chiefsourceof obs, is neverthelessased on considerations hichhavenothing o do with ong-run tability.his is why ocialcontractsnd wage policies re boundto fail as theyhave) nthe absenceof someform f socialist lanning.12

A Political ootnoteI ended mycomment n Professor erner'sessaywithstatementbout thepolitical wareness mongtheworking-classforcesnWestern uropethat ncome rwagepolicies swellas "socialcontracts"re not tiedto investmentrogramsaimed at the satisfactionf bothfull-employmentnd socialneedsat large.Quite thecontrarys true:the level of homeinvestments increasinglyeenas a passive dependent)vari-able,whereas xports re lookedupon as thetruly ndepen-dentone. This is bestexemplifiedn the so-calledNew Eco-

12Cf. D. M. Nuti,"On Incomes Policy," cience nd Society3 (Fall 1969): 415-425;R. Heidner, LontagarfonderStockholm,1975).



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252 SOCIAL RESEARCHnomics fCambridge,nwhich he evel ofdomestic emandacts as a constraintn exports, husbecoming hindrance o(profit) xpansion.The vicious irclegenerated yexport-ledpolicies swellknown: ncethe evel ofdomestic emandhasbeencompressed r limited,he chancesthat mportswillbereducedand exports ncreasedby the desired amountareweaker, hemore the samepolicies re adoptedbyall coun-trieswith he avowedgoal of exportingo the same reas. Inthecaseof failure hewage/productivityelation an nolongerbe taken s parametricutwillhave to be revised ownwardfthepolicy s to be maintained.All the same, n the case ofsuccess herelativempoverishmentt home slikelyo hit heexport industries in the competing countries, causingstagnationistendencieswithnegative ffects n the level oron therateof increase n employment.he maincontradic-tion nvolved ecomes lear.Exports epresenthetrulynde-pendentvariableof the system, he indicator f its prof-itability.et to the extent o which hispolicys carried utbyall the countries t can be achievedonly through top-gopolicies t home.13 rom theviewpointf theworking-classmovementhe bove hows nonehand that he evelofsocialwell-beingouldhavebeenhigher adexports een consideredas a dependentariable. n the otherhand, tshows hat tableprosperityt home depends on stable prosperitybroadprovidedhe vicious ircleofstop-gopolicies s altogether e-feated.It isagainst his ocioeconomicackgroundhat hecrisis fwhat think asbeen thebasicpolitical illar fpostwar uropehas tobe evaluated, amely,hebreakdown f social reform-ism,which an be summarized s follows:Fromthe ate fiftieso theearlyseventiestwas takenforgrantedthat social welfare nd full employment ere notincompatible ith heworkingf a capitalistconomic etup,

13J. Robinson nd F. Wilkinson,What Has Becomeof Employmentolicy?",Cambridgeournal fEconomics,March 1977, pp. 5-14.



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A MARXISTVIEW 253especiallywith he drive forexports.The general argumentwas that he tate ectorwould upply dvanced ocial ervicesata level uperior othose nEastern uropewithoutenerat-inga conflict ith heprivate ector.Ofcourse t did notpassunnoticed hat he economic evelopment astaking laceina structurallynevenway,entailing he industrial ecayofWales,Scotland, nd northern rancealongwith he mainte-nance of a large gulfbetween outherntalyand the north.However, heexceptionalhighrateof growth f per capitaincome longwith n effectiveocial-welfareystemomewhatmitigatedheabove chronicmbalances t thepoliticalevel.The picturecompletely hanged in the early seventies.The recessionargely ue to thesimultaneousffect fexportpoliciesproduceda situationn whichthe system f socialservices ame under attackand began to be progressivelydismantled. he avowedgoal,as clearly tatedbytwoOxfordeconomistsn a recent ook,14s tofreehomeresourcesi.e.,reduce thepurchasing oweroftheworking opulation ndstateexpenditure n these services) n order to boost theeconomy n itsexportcomponent nce again without venmentioninghe chronic mbalancesgeneratedby thatverypolicy.It is interestingo see that the crisisof socialreformismmanifeststselfs a politicalrisis fthesocialdemocracyndnot oftheconservativearties. his isbecause while hesocialdemocracies rovided hemasssupport orwelfare rograms,their mplementationook place largelyunder conservativegovernments;oday hesocialdemocraciesre largelynvolvedin curtailinghem.The crisis fthesocialdemocracies lso stems rom hefactthatthey ccepted n mostcaseswageor incomepolicies s-suming hat no contradictionxistedbetween helatter ndthesocial-welfareystem.

14Cf. Robert Bacon and WalterEltis,Britain's conomic roblem:Too FewProducers(London:Macmillan,976),pp. 117-158.



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254 SOCIAL RESEARCHThis has proved to be wrong, nd in the meantime hereneweddrive forexports s no longermitigatedyan everincreasingevel of employmentnd income.Quite the con-trary. his sharpens he uneven featuresn whichdevelop-ment s takingplace,sinceno solution o the chronic mbal-ances s in sight venforthe ongrun.There is thereforenmany European countries strong nd healthyressuretodiscuss heproblem ftheallocation f nvestmentnits ecto-rialand regionaldimensions.15nly n this ontext an someform f wagerestraintse devisedwhennecessary. et thistype fwagepolicy tands ncomplete pposition o the onesfollowed o far.In fact, o implementheformer he latterhave to be unambiguouslyefeated.

15Cf. B. Rowthorn nd D. M. Nuti,"Politicacommercialeattiva non sinonimodiautarchia,"Rinascita Rome), no. 30 (July1977): 20-22.

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Lerner a Marxist View