Keynesianism is not economic theory. Keynesianism is collective political theory.
The Commie Who Controls the Economy From the Grave
"Why do people still fail to get Keynes, after all these years?" carped an impatient and uppity Paul Krugman, columnist for the New York Times.
Krugman, an avowed Keynesian—and the recipient of the 2008 Nobel Prize in Economics—replied robotically: "For—though no one will believe it—economics is a technical and difficult subject." In other words, leave it to the experts.
Diminishing ordinary people, like demonizing private enterprise, is essential Keynesianism.
Written in impeccable prose, and sponsored (decades ago) by an organization of disaffected conservative Harvard alumni, Keynes At Harvard rightly points out that Keynes's theory is not economics, but a left-wing political theory. Duly, Keynes's political creed guaranteed a hand-in-glove relationship between the state and its stooge economists. Most of what Keynes advocated entails giving the state enormous confiscatory powers.
Clintonite Robert Reich couches Keynesian overreach as "optimism," crediting The Optimist Keynes for "saving capitalism from itself." Reich religiously believes, following Keynes, that "public investing on a grand scale" could accomplish almost anything—"from building the middle class to buying trading partners."
Republicans are as devout about Keynes as are Reich and Krugman. Nixon famously declared, "We are all Keynesians now." But my comment is redundant; Bush has bested the most committed Keynesian. "Nixon's Keynesian conversion … looks positively quaint compared with the fiscal and monetary stimulus" Bush has initiated, quipped Steven Pearlstein of the Washington Post.
How much to hand out; who to hand it to; which handout makes the best use of taxpayer money; do the Big Three submit a business plan with their bailout requisitions, or not—that's the depth of the "philosophical" to-be-or-not-to-be among Republikeynsians.
So who was this man who controls the economy from the grave?
John Maynard Keynes was a Fabian socialist strongly opposed to private enterprise. The Fabian society was formed in England in the late 1880s and spread throughout the British Empire. The Fabians aimed to replace the market with "an efficient administrative bureaucracy," as F. A. Hayek put it. Its emissaries also came to infect almost every nook and cranny of the American state and civil society.
Fabians departed from communists on the use of force. Whereas the communists believed in "attaining power by violence," Fabians perfected a form of Islamic takiya—lying to spread the faith, in their case, state-socialism. "Easing into absolute power by deceit" was to be achieved by infiltrating every societal institute under the guise of moderation (and by deploying impeccable manners, once terribly important among the British elites).
Among Keynes's closest friends were notorious Fabian radicals such as Bertrand Russell, George Bernard Shaw, and the Webbs—Sidney and Beatrice (née Potter). Sidney Webb and Keynes assumed control of the prestigious Royal Economic Society, using its good name to spread state-socialism. Similarly, Fabian Keynesians conquered the Liberal Party by peaceful coup—it was once the party of classical liberalism and laissez-faire capitalism.
"Socialism by stealth" has been spectacularly successful. The communists are politically extinct; the Fabians are everywhere apparent, palming off socialism on the world, while enjoying esteem and respect, and marginalizing those who call their bluff as right-wing extremists.
The Church of Keynes
The moment of the book was most fortunate. For the planned society they were talking about, the socialists were desperately in need of a scientific formula. Government at the same time was in need of a rationalization for deficit spending. The idea of welfare government that had been rising both here and in Great Britain — here under the sign of the New Deal — was in trouble. It had no answer for those who kept asking, "Where will the money come from?" It was true that government had got control of money as a social instrument and that the restraining tyranny of gold had been overthrown, but the fetish of solvency survived and threatened to frustrate great social intentions.
That word — insolvency — was to have no longer any meaning for a sovereign government. The balanced budget was a capitalist bogey. Deficit spending was not what it seemed. It was in fact investment; and the use of it was to fill an investment void — a void created by the chronic and incorrigible propensity of people to save too much. "There has been," he said, "a chronic tendency throughout history for the propensity to save to be stronger than the inducement to invest. The weakness of the inducement to invest has been at all times the key to the economic problem." By investment he was supposed to mean the use of capital in the spirit of adventure.
This idea was the very base of the theory. From oversaving and underinvestment came unemployment. And when from this cause unemployment appeared, as it was bound to do, first periodically and then as a permanent evil, the only cure was for government to spend the money. Among the algebraic tools was the famous multiplier by use of which the experts would be able to determine precisely how much the government would have to spend to create full employment.
Briefly therefore the theory was that when people were not investing enough in their own future to keep themselves all at work the government must do it for them. Where and how would the government get the money? Well, partly by taxing the rich, who notoriously saved too much; partly by borrowing from the rich; and, if necessary as a last resort, by printing it — and everything was bound to come out all right because, from full employment, society at large would grow always richer and richer. Ultimately the economic satisfactions of life would become dirt cheap, the interest rate would fall to zero, and the sequel would be the painless extinction of the rentier class, meaning those who live by interest and produce nothing.
Keynes and the Reds
if Keynes was such a model champion of the free society, how can we account for his peculiar comments, in 1933, endorsing, though with reservations, the social "experiments" that were going on at the time in Italy, Germany, and Russia? And what about his strange introduction to the 1936 German translation of the General Theory, where he writes that his approach to economic policy is much better suited to a totalitarian state such as that run by the Nazis than, for instance, to Britain?
Keynes proclaims Soviet Communism to be a book "which every serious citizen will do well to look into." "Until recently events in Russia were moving too fast and the gap between paper professions and actual achievements was too wide for a proper account to be possible. But the new system is now sufficiently crystallized to be reviewed. The result is impressive. The Russian innovators have passed, not only from the revolutionary stage, but also from the doctrinaire stage.
"There is little or nothing left which bears any special relation to Marx and Marxism as distinguished from other systems of socialism. They are engaged in the vast administrative task of making a completely new set of social and economic institutions work smoothly and successfully over a territory so extensive that it covers one-sixth of the land surface of the world. Methods are still changing rapidly in response to experience. The largest scale empiricism and experimentalism which has ever been attempted by disinterested administrators is in operation. Meanwhile the Webbs have enabled us to see the direction in which things appear to be moving and how far they have got."
There you have it ... Keynesianism is not economics. Keynesianism is left-wing political theory!
Wonderful commentary that you won't see elsewhere.