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.
-Conclusion to The General Theory
With these two assertions--the first dubious, the second simply wrong--John
Maynard Keynes unleashed the most terrifying period of government expansion
and social experimentation in the history of Western Man. Keynes
basic argument was that the boom/bust cycle of the economy was inevitable
and that government should intervene to dampen both the peaks (via confiscatory
taxation) and the valleys (via deficit spending). The goal being
to guarantee full employment and to redistribute wealth. Now, it's
understandable that the generation of men who faced the Depression were
driven to propose some aggressive solutions, but if we have to choose one,
this is the moment when Western Man blinked. Keynes basically abandoned
a two century old faith in the efficacy of capitalism and proposed that
laissez-faire be replaced by the firm hand of government.
The ensuing fifty years saw virtually every nation of the West surrender
increasing control of the economy to the government, accept extortionate
tax rates, pile up staggering deficits, and, all the while, spiral farther
and farther into the abyss. The Keynesian Revolution brought the
West to its knees before Margaret Thatcher and Ronald Reagan seized back
control and began the long, and as we speak uncertain, process of returning
power to the marketplace.
Interestingly enough, while the Left remains in thrall to his thoroughly
discredited theories, it seems that Keynes himself might have been one
of the first to abandon his own handiwork (this after all was a man who
ditched the Bloomsbury Group and homosexuality when he fell in love with
a ballerina), had he lived to see the disaster it was producing.
In the conclusion to his book he states:
...the ideas of economists and political philosophers,
both when they are right and when they are
wrong, are more powerful than is commonly understood.
Indeed the world is ruled by little else.
Practical men, who believe themselves to be quite
exempt from any intellectual influences, are
usually the slaves of some defunct economist.
Madmen in authority, whom hear voices in the air,
are distilling their frenzy from some academic scribbler
of a few years back. I am sure that the
power of vested interests is vastly exaggerated
compared with the gradual encroachment of ideas.
Not, indeed, immediately, but after a certain interval;
for in the field of economic and political
philosophy there are not many who are influenced
by new theories after they are twenty-five or
thirty years of age, so that the ideas which civil
servants and politicians and even agitators apply to
current events are not likely to be the newest.
But, soon or late, it is ideas, not vested interests,
which are dangerous for good or evil.
While his theories proved to be catastrophic, this paragraph is not
only accurate, it proved to be prophetic. The real nadir, the West's
point of greatest danger, came about twenty five or thirty years into the
Revolution, when Richard Nixon abandoned the fight against Keynes and embraced
the welfare state. With the last line of defense nearly routed, Goldwater,
Reagan and the like were lonely voices crying in the wilderness, the final
crack up came & by the late 70's people were talking about malaise
and the failure of democracy and all kinds of defeatist twaddle.
We were fortunate that folks were desperate enough to finally take a chance
on the Iron Lady and the Gipper. Likewise, we are living through
the first generation of the return to markets. Clinton could have
been a significant historical figure had he had the courage of his supposed
convictions and dragged the New Democrats over to the side of individual
freedom and limited government. As it is, the idea is still being
fought by the Left and we will see if the eventual result is a return to
big government, or the kind of stasis we've achieved now, with government
growing, but slowly, or whether there is a Democrat on the horizon who
has the stature and vision to lead the party back to the future.
Hopefully, Keynes was right and the power of the idea of freedom ensures
its eventual victory. But, it must be acknowledged, Keynes General
Theory was one of the greatest threats to our freedom that we have
ever weathered. This book was a source of great evil in this century
and Keynes must shoulder a significant portion of the blame for the sorry
state of the West circa 1978-79.
No matter what economic theory was followed the years following the end of the Great Depression were destined to seem exceptional. Dig the trough deep enough and the climb out seems like reaching the mountaintop. Rather the period from 1983 to today is the most remarkable in economic history--twenty plus years without a recession, no inflation, low interest rates, etc..
It's too bad Orrin didn't read the General Theory of Employment, Interest, and Money. If he had actually read the book, he would know that the General Theory has very little to do with redistribution of wealth (mostly to the extent of which the marginal propensity to consume of the poor is greater than the rich) and is not hostile to markets or entrepreneurship.
In fact, the main points of GT deal with how a capitalist economy can settle into a long-run equilibrium at less-than-full employment, the ineffectiveness of price flexibility to cure unemployment, a theory of money based on "liquidity preference", uncertainty and expectations, the marginal efficiency of investment schedule, etc. The policy implications are only discussed in the last chapter of the GT, and even there the discussion is is in very general terms.
Orrin may not like the policies advocated by the Keynesian Revolution, but the fact is that the period between 1945 to 1973, when the Keynesian Revolution was at is peak, is known as the "Golden Age" of Economic Development, an era of unprecedented sustained economic growth in both developed and developing countries. A "terrifying period" indeed! Moreover, meither the experiences of Ronald Reagan (who ran up massive deficits) nor of Margaret Thatcher (who was forced to abandon Monetarism in the mid-1980's after record unemployment) demonstrates that the ideas of Keynes have been discredited.
The GT is not an easy book to read or understand (in fact, many of Keynes' contempoaries, like Joan Robinson and Nicholas Kaldor, claim that what is popularly known as "Keynesianism" is very different from what Keynes actually wrote), but that is no excuse to write a nasty review of a book without reading it.
