By In a recent BBC News
article, philosopher John Gray asks the quaint but otherwise vain
question of what would John Maynard Keynes do in today’s economic
slump. I call the question vain because practically every Western
government has followed Keynes’ prescribed remedy for the so-called
Great Recession. Following the financial crisis of 2008, governments
around the world engaged in deficit spending while central banks pushed
interest rates to unprecedented lows. Nearly four years later,
unemployment remains stubbornly high in most major countries.
Even now in the face of the come-down that inevitably follows any stimulus-induced feelings of euphoria, certain central banks have taken to further monetary easing.
The Bank of England recently announced an extension of its quantitative
easing program by £50bn. Not to be outdone, both the People’s Bank of
China and the European Central Bank cut interest rates in an effort to
boost consumer borrowing. Still, these new rounds of monetary stimulus
don’t appear to be doing the trick. The Keynesian miracle cure has been
a spectacular dud thus far. All that modern day disciples of Keynes
can do is scratch their heads and say “more should have been done.”
They never allude to how many more trillions of paper dollars should
have been created or spent; just call it the excuse that keeps on
giving.
Perhaps for these reasons Gray doesn’t make a full blown
recommendation of Keynes’ famed countercyclical policy to combat the
ongoing downturn. Instead he asks if Keynes would propose a policy that
contrasts heavily with the influential theories presented in The General Theory of Employment, Interest, and Money.
To Gray, Keynes was an intellectual heavyweight who possessed a “deep
understanding of the complex, unpredictable and at times insolubly
difficult nature of human events.” According to Gray, policymakers
worldwide should see to it to welcome Keynes’ vision of achieving an
“intelligent variety of capitalism.”
Gray’s simple query of “what would Keynes do” really begs another
question: who was Keynes and why is he looked to by as a brilliant
mind? Does this man truly deserve the praise he receives by the
intellectual establishment closely aligned with government?
To answer these questions, it helps to first observe the early years of the 20th
century’s most famous economist. For starters, Keynes was not born
into a family with little means. In fact he was incredibly privileged
while growing up as his father, John Neville Keynes, was an important
figure within Cambridge University. With the help of his father and his
father’s good friend and economist Alfred Marshall, the young Keynes
was introduced to the aristocratic life of Britain’s intellectual
upper-class. This included his joining of the Apostles
as a student at Cambridge University. The Apostles was a secret
society reserved for those connected to or within the country’s ruling
class. Keynes’ membership would ultimately shape his view on life and
humanity in general. It would lead to his adopting a self-serving
elitist bent for much of his career.
And it all began at Cambridge with the Apostles. He and other
members would frequently refer to those not within the highly secretive
clique as “phenomena” and not “real.” As an undergraduate, Keynes wrote
in a letter to his friend Giles Lytton Strachey,
Is it monomania — this colossal moral
superiority that we feel? I get the feeling that most of the rest [of
the world outside the Apostles] never see anything at all — too stupid
or too wicked.
Keynes’ feeling of superiority was also accompanied by the Apostles’
disdain toward notions of morality and values held by the middle class
such as thrift. After graduation, he would help form the Bloomsbury
Group which became an intellectual force in early 20th
century England. The Bloomsbury Group, like the Apostles, embraced
avant-garde views toward aesthetics and morality and detested
traditional values. Much of Keynes’ hatred toward sensible views of
good and evil was influenced by a philosophy professor at Trinity
College named G.E. Moore. To Keynes, Moore’s magnum opus Principia Ethica was “exciting, exhilarating, the beginning of a new renaissance, the opening of a new heaven on earth.” In his memoir “My Early Beliefs,”
Keynes insisted that Moore’s personal ethics, “made morals
unnecessary….We entirely repudiated a personal liability on us to obey
general rules.” Towards the end of the paper, he also ensures his
readers that “I remain and always will remain an immoralist.”
Keynes’ rationalization for government intervention and horribly
inflated ego lead him to be one of the most sought after economists
during the initial throws of the Great Depression. To the politician
who fancies himself as a molder of the perfect society, the theories
Keynes presented which divorced themselves from all semblance of reality
were a Godsend. The General Theory would go on to
provide the intellectual cover needed by the political class to convince
the man on the street that only the state could deliver him to the land
of the plenty.
Most controversial of Keynes’ theories was that investment should be
socialized to, in a sense, “euthanize” the rentier class that had no
justifiable income. He went as far as to write “Interest today rewards
no genuine sacrifice…[T]here are no intrinsic reasons for the scarcity
of capital.” The ultimate solution would then be to engineer “an
increase in the volume of capital until it ceases to be scarce.” To do
so meant lowering the interest rate for borrowers by expanding the money
supply. To the delight of public officials, increased government
expenditures would then follow in tandem.
Of course this strategy would be successful if it weren’t for one
critical detail: capital doesn’t consist of pieces of fiat currency.
Capital is real savings represented by things such as industrial
machines, assembly lines, factory equipment, optical cables, and raw
materials. In other words, capital can never be rendered scarce since
it can’t be printed on command. However, this truth has yet to stop
politicians from promising “free” goodies for life to susceptible
voters.
And that’s why The General Theory wasn’t just a book on
economic theory; it was a “how to” guide on winning elections. Should
it be any wonder then why so many apologists for the state saw it
containing some great, hidden-until-then wisdom?
Indeed, what politician doesn’t love to hear that prosperity is just a
few laws away? The world of homogenous aggregates Keynes presented to
the Establishment played into their lustful desire for societal
control. In a world of lifeless statistics, the people are nothing more
than pawns on a chessboard to be moved to and fro with the faintest of
ease. Objections matter naught; the path to virtue is only seen by
those central planners who, like Keynes, regard themselves as the chosen
few not constrained by the primal instincts of the common people.
In short, John Maynard Keynes didn’t just provide a roadmap for a centrally managed economy, he did so by wrapping his intellectual dishonesty in incomprehensible jargon and charisma. As Murray Rothbard pointed out in his short biography “Keynes, The Man,”
Keynes displayed a positive taste for
lying in politics. He habitually made up statistics to suit his
political proposals, and he would agitate for world monetary inflation
with exaggerated hyperbole while maintaining that “words ought to be a
little wild – the assault of thoughts upon the unthinking.” But,
revealingly enough, once he achieved power, Keynes admitted that such
hyperbole would have to be dropped: “When the seats of power and
authority have been attained, there should be no more poetic license”
Keynes’ ego was so grand that when pressed by friend and Austrian
economist Friedrich Hayek on the kind of totalitarianism his theories
were inspiring, he assured a worried Hayek that he could swing public
opinion easily; as if by the quick twisting of his hand.
The question of interest shouldn’t be “what would Keynes do” but
rather “why even listen to someone so pompous and nihilistic to begin
with?” Just as Keynes missed the Great Depression,
modern day Keynesians missed the housing bubble and financial crash.
From his contempt for moral principles to his enthusiastic support for eugenics,
Keynes saw the world as something separate from the bubble of his
fellow elitists. He was a charlatan who convinced a generation of
economists that the pool of real savings for any given country could be
made infinite if only the state fully embraced the printing press like a
dictator embraces the gulag.
The “intelligent variety of capitalism” that Gray terms is just a
clever way of saying central planning. To Keynes and his followers,
capitalism is inherently ignorant because it is consumer based; which
means the common man determines what is produced and how much of it.
For someone who pictured himself as floating seamlessly above the fray
of fools, the growth of the market economy must have worried someone as
power-thirsty and narcissistic as Keynes.
Perhaps the best summary of Keynes comes from Rothbard who once remarked:
To Robbins (Lionel) he is the Godlike
figure with a golden light…around a halo. I’ve got a slight different
assessment. Sum up Keynes: arrogant; sadistic; power-besotted bully;
deliberate and systemic liar; intellectually irresponsible; an opponent
of principle; in favor of short term hedonism and nihilistic opponent of
bourgeoisie morality…; hater of thrift and savings; somebody who wanted
to liquidate the creditor class…exterminate the creditor class; an
imperialist and anti-Semite; and a fascist.
Outside of that I guess he was a great guy!
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