Marx and Keynes

Posted: 12 October 2012 in Uncategorized
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Sir Robert Skidelsky, Keynes’s biographer, presents a useful criticism of Keynes:

The idea that economic outcomes could be impacted by class power was beyond his ken. Essentially, unmanaged capitalist systems failed to maintain full employment because classical economics gave the wrong message. It assumed away uncertainty, and thereby mandated a high degree of laissez-faire. Light-touch regulation of the financial system was all that was needed because banks were optimally self-regulating.

In short, the flaw was theoretical, not structural. What was needed was a more accurate theory, not a redistribution of power. As Keynes famously put it at the end of the GT, ‘ideas’ are more powerful than ‘vested interests’ (GT, 283). The almost contemptuous dismissal of the non-ideational elements of the economic system as ‘vested interests’ shows that he lacked proper cognizance of them.

Keynes’s re-definition of the economic problem of his day as a technical problem in economics was politically very convenient. Practical businessmen are quite receptive to new ideas providing they allow them to keep their profits and managerial prerogatives. In the interwar years deficient demand leading to mass unemployment was a threat to both, not least because it aroused social hostility to capitalism. Keynes was definitely preferable to Marx. So they were happy for the state to look after demand and protect them from the unions, even to acquiesce in modest measures of redistribution to keep the people happy.

However, the state proved unable to protect the Keynesian revolution itself from the consequences of the continuing full employment it guaranteed. Full employment strengthened union power; unions used their position to push wages ahead of productivity; wages started to encroach on profits. So the business class demanded an end to the full employment commitment, lower taxes, and freedom to export capitalism.

The same criticism would seem to apply to many economists who, in recent years, have rediscovered Keynes.

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  1. Bruce says:

    This is excellent — a fine passage (glad you found it). And surprising –just reading it, I would not have thought of Skidelsky as a likely speaker. Good for him!

  2. There is a big difference between science, by which we can best be guided to knowledge of ourselves and the world we inhabit, and the ideology that underpins the preternatural disciplines of politics, economics and demography.

    Ideologies need to be named and debunked. As things stand now, there is much confusion about what is and what is not science. Ideologues in politics, economics and demography are consciously and deliberately misrepresenting themselves as scientists. If demography is not a science; if Demographic Transition Theory is not scientfic, how can demographers gather themselves in an International Union of the Scientific Study of Population (IUSSP). If economics is not a science; if neoclassical economic theory is not scientific, how can the Nobel Prize (presumably an award for outstanding achievement in science) be given annually in Economics. At least the Nobel Peace Prize, often awarded to politicians for exceptional achievements, is not confused with the awards to scientists. Such willful misrepresentations of science need to be exposed for the ideologies they are.

    Are economists and demographers political hacks? They are not scientists. While many too many deniers of what is real shout out attractive falsehoods and are heard, those who tell the truth about the human population are ridiculed and marginalized. In large part the colossal global predicament facing the human community in our time is a result of widely shared preternatural demographic theories and consensually validated specious economic theories. Unscientific models have been dishonestly and deceitfully presented and defended as science on our watch. Demographic and economic theorists consciously and deliberately failed to acknowledge and incorporate into their theories well-established scientific knowledge regarding biological evolution, human population dynamics and well known physical ‘rules of the house’ of the planetary home we inhabit. They uniformly fail to recognize a difference between the way the natural world works and the way they think. For example, economists assume the resources of a finite and frangible Earth can supply infinite products. At the behest of corporate benefactors and political powerbrokers, demographers and economists bear primary responsibility for directing the human community down a ‘primrose path’ that is marked by skyrocketing overpopulation, rampant overproduction, outrageous overconsumption, unconscionable hoarding as well as extraordinary resource depletion and widespread environmental degradation. Most experts of demography and economics self-righteously hold onto outdated theories that serve to confuse the public and deny what could be real. A paradigm shift and drastic action to redo demographic and economic thought will be required so that experts in these fields of research embrace relevant science rather than conveniently overlook it.

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