Date:         Mon, 03 Jun 96 11:34:39 EDT
From: Walter Daum <WGDCC-AT-CUNYVM.CUNY.EDU>
Subject:      Re: Rosa Luxemburg


On Mon, 3 Jun 96 14:42:12 GMT Adam Rose said:
>
>> > The stuff about the permanent arms economy is, I'm proud to say, quite
>> > distinctive to the International Socialist tendency ! :-).
>>
>> Didn't Seymour Melman, a left Keynesian professor at Columbia University,
>> first coin the term?
>>
>
>Quite probably. I meant among Marxists. Even then, it was around as a theory
>before Cliff picked up on it. Mike Kidron was in our tendency ( but quite
>probably wasn't when he first thought about it ? ). Apparently they drew
>on someone whose pseudonym at least was T.E.Vance ? Never heard of him
>appart from that - I believe he was American.
>
T.N. Vance wrote a series of articles titled The Permanent War Economy
for The New Internationl, theoretical journal of Shachtman's ISL, in
the 50's. He had earlier written, under a different pseudonym, on the
same subject -- as early as 1941. I suspect that predates Melman, although
there's no reason to believe they had the same theory.

I'm pretty sure Cliff acknowledged his debt to Vance. The theory is
bascically underconsumptionist: arms spending sops up surplus value
and raises wages through state-induced production, thereby dampening
the crisis cycle. In the early versions of Vance and Cliff, as I recall,
the underconsumptionism was open.

>What distinguished Luxembourg's theory from Kautsky's, and the IS version
>of the permanent arms economy from any left Keynesian one, was that the
>marxist theory explains the expansion, and why crisis may have been postponed,
>but also shows why the boom contains within itself a return to crisis at a
>higher level.

Well, whether (or rather how) the permanent arms economy theory foresaw
the return to crisis is a matter of interpretation at least. Cliff at
one point argued that the competing powers would be forced to reduce their
arms spending because it is a drain on accumulation and productivity. So
arms would be less of a stabilizer and therefore crisis would return.

In retrospect, arms spending did not decline, and its continuation
contributed to the end of the postwar boom. So it could be argued that
Cliff got it just about backward.

Walter Daum


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