As I’ve pointed out before, Barack Obama is piling paper onto the stinking pile of economic crap he inherited and promoted. Along with other government leaders, he is taking a Keynesian approach to the ongoing, terminal depression of the industrial economy.
What does that mean? Who was John Maynard Keynes, and what did he have to say about people, society, and economics?
Keynes was a British economist, journalist, and financier who proposed tremendous government intervention into the financial markets. Specifically, he suggested governments spend money they did not have to prop up capitalism (i.e., to further enrich the financially wealthy). He was born in 1883 and died in 1946, and his ideas about macroeconomics were widely hailed before of World War II. In particular, he developed a dump-money-on-it solution to deal with economic recessions (all of which were called depressions until the Big One, 1929-1933, inspired us to change the name). But Keynes’ policies were largely disregarded between the early 1960s and 1980, when Ronald Reagan brought them back into style. Perhaps the biggest contemporary fans of Keynes are Ben “Helicopter” Bernanke and his new best friend Barack Obomber, the current Liar-in-Chief of the most bankrupt country in the history of the world.
Oddly, Keynes believed capitalistic economic policy could contribute to social justice and individual liberty: “The political problem of mankind is to combine three things: economic efficiency, social justice and individual liberty.” Shortly after World War II, Keynes dreamed of a day when economics would fade in importance, and we would spend time dealing with our humanity: “The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems — the problems of life and of human relations, of creation and behavior and religion.” It’s difficult to imagine such sentiments emanating from an economist, much less one whose policies are designed specifically to transfer money from those who have little to those who have much.
Although Keynes thought government intervention was necessary to maintain financial markets, he had little good to say about the British government: “I work for a Government I despise for ends I think criminal.” Contrary to his reputation, he even expressed doubts about the role of government in macroeconomics: “Government machinery has been described as a marvelous labor saving device which enables ten men to do the work of one.”
In addition to questioning his government employer, Keynes had his doubts about capitalism: “For my part I think that capitalism, wisely managed, can probably be made more efficient for attaining economic ends than any alternative system yet in sight, but that in itself it is in many ways extremely objectionable.” His doubts extended to his entire professional field: “Economics is a very dangerous science.” And this, too: “The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.” I would hardly call the distribution of wealth arbitrary, especially when Keynes’ policies are employed, but it certainly is inequitable.
Keynes saw the dark underbelly of capitalism in a way few contemporary economists acknowledge: “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” And more: “The decadent international but individualistic capitalism in the hands of which we found ourselves after the war is not a success. It is not intelligent. It is not beautiful. It is not just. It is not virtuous. And it doesn’t deliver the goods.” Sing on, John, sing on. Had he stopped right there, I would be his biggest fan.
During the Great Depression, Keynes clearly understood the dark side of humans, as well as the ability of humans to manipulate financial markets for ill-gotten gains. In 1931, he wrote: “When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession — as distinguished from the love of money as a means to the enjoyments and realities of life — will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease … But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.” I don’t think it’ll take until 2031 to rid ourselves of the concept that money matters. Then again, I’m an optimist.
Keynes was quick to criticize other economists as well as the government and the entire system of capitalism: “If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.” Further, he didn’t think the field of economics required an exceptional intellect: “The study of economics does not seem to require any specialised gifts of an unusually high order.”
The Weimar Republic was going up in economic flames during the middle of Keynes’ career, yet he never abandoned the inflationary approach as a solution to virtually all economic woes. Paradoxically, he credited Lenin with developing a means for destroying capitalism, then promoted the idea himself: “Lenin is said to have declared that the best way to destroy the Capitalistic System was to debauch the currency … Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose.” Stunningly, there’s more to his damning critique of ramping up the printing presses: “If, however, a government refrains from regulations and allows matters to take their course, essential commodities soon attain a level of price out of the reach of all but the rich, the worthlessness of the money becomes apparent, and the fraud upon the public can be concealed no longer.”
In thinking the public would notice they were getting screwed, and then do something about it, Keynes clearly overestimated the public intellect.
Keynes’ macroeconomic policies have held up remarkably well, especially in light of his own occasional critiques of governments, capitalism, and the notion of printing money. Further, his own fallibility at prediction was cemented in 1927 when he said, “We will not have any more crashes in our time.” Later, he concluded, “There is no harm in being sometimes wrong — especially if one is promptly found out.” The fact that he was “promptly found out” in the last 1920s slowed neither his predictions nor the widespread acceptance of his policies.
Keynes was reportedly a genius, and yet he failed to foresee the dire economic straits that would result from the policies he proposed. Consider, for example, the huge debt faced by American taxpayers. Never mind that, at this point, the FDIC is too broke to take over failed banks. The matter is trivial relative to the magnitude of the debt we all face. It is clear that, as with the former Soviet Union, default is the only option.
As you can imagine, I’m a big fan of Keynes’ best-known and most accurate quote: “In the long run we’re all dead.”
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