Keynes: socialist, liberal or conservative?

James Crotty is emeritus professor of economics at the University of Massachusetts Amherst.  Along with his colleague Sam Bowles, he is one of the few radical heterodox economists to gain tenure at a leading American university.

Crotty’s main contribution to economics has been to try and synthesise Marx and Keynes.  This ended up with Crotty arguing in his 1985 article “The Centrality of Money, Credit, and Financial Intermediation in Marx’s Crisis Theory”, “that Marx’s vision of capitalist crises cannot be understood except in terms of the development of the credit and the financial system, and that his discussion of these ideas anticipated the ideas on financial fragility later developed by Minsky and other Post Keynesians.” (quoted in an interview with JW Mason)  In other words, Marx was really a post-Keynesian Minskyite.

I won’t discuss the validity of that view here because Crotty has a new book out, entitled Keynes Against Capitalism: His Economic Case for Social Liberalism, in which he claims that, far from being a conservative Keynes was in fact a socialist, if not a revolutionary one like Marx.  “Keynes did not set out to save capitalism from itself as many think, but instead reckoned it needed to be replaced by a liberal form of socialism.”

Crotty argues that Keynes’s Liberal Socialism began to take shape in his mind in the mid-1920s, evolved into a more concrete institutional form over the next decade or so, and was laid out in detail in his work on postwar economic planning at Britain’s Treasury during WWII.

In Crotty’s reconstruction, the analysis goes something like this: “Keynes writes in many places that he’s a socialist. He gives speeches to the Labour Party saying ‘I’m a socialist.’ What does he mean? He thinks we need to organize capital investment decisions, bring them all under a board of national investment. And we have to bring together all the sources of savings that are in our economy in one place. And, he goes through all of these incredible, important things you can do with this capital if you can control it. In 1942 or 43, he says if the state can control two-thirds to three-quarters of large-scale capital investment through this national board of investment, we’ll be fine. The only way you can do this is if you drive the interest rate down towards zero, and that’s what you should do. So you have to have strict capital controls, otherwise, people will take their money out.”

Crotty interprets Keynes’ s policy ideas as socialist. “His socialist plan, means, we’re going to have to manage our trade, we should have industrial policies, we should have wage policies, we should have geographical location policies. And all of this to achieve not just full employment, but the creation of arts, the building of cities, the building of housing, and so on. In his socialism, there’s still private markets, but they are small. He keeps saying if we don’t have socialism, we’re going to have chaos, we’re going to have revolution.

But does this view of Keynes the ‘socialist’ really hold water? Crotty argues that it does because Keynes “decisively rejected the traditional theory of perfect competition, applauded the ongoing trend toward increased reliance on public corporations, and argued that the government should not only accept the current movement toward cartels, holding companies, trade associations, pools and other forms of monopoly power, but should proactively assist and accelerate this trend in order to regulate and control it. Keynes argued that an increasing part of the country’s largest and most important private companies were evolving toward a status that could make them as easy to regulate as public corporations.”

As Crotty puts it, Keynes’ central point was that the emerging importance of the system of public and semipublic corporations and associations combined with the evolution of collusive oligopolistic relations in the private sector already provided the foundation for a qualitative increase in state control of the economy.  Crotty concludes “Keynes was unabashedly corporatist.”  Indeed – I would add that his concept of corporatism was not dissimilar to that actually being implemented in fascist Germany and Italy at the time.

And who was to run this corporate capitalist/socialist state?  According to Keynes’ biographer, Robert Skidelsky, it would be “an interconnected elite of business managers, bankers, civil servants, economists and scientists, all trained at Oxford and Cambridge and imbued with a public service ethic, would come to run these organs of state, whether private or public, and make them hum to the same tune.” (Skidelsky 1992, 227-28).

Keynes rejected laissez-faire and “doctrinaire State Socialism” because what is “needed now is neither free-market competition nor quantitative central planning but “regulated competition” (19, 643).  Keynes goes on, “we must also be prepared to experiment with all kinds of new sorts of partnership between the state and private enterprise.  The solution lies neither with nationalisation nor with unregulated private competition; it lies in a variety of experiments, of attempts to get the best of both worlds. The Government must recognise the trend of soundly run business toward trusts and combines.  It must be prepared to recognise their existence as beneficent institutions in right conditions; and it must adopt an attitude towards them at the same time of encouragement and regulation.” (19, 645)  In this way, we “will get the best both of large units and of the advantages that might be expected of nationalisation, whilst maintaining the advantages of private enterprise and decentralised control.”(19, 649).

Keynes’s ‘socialism’ was really the so-called mixed economy of capitalist combines and government control, all run by “an elite of business managers, bankers, civil servants, economists and scientists, all trained at Oxford and Cambridge.”  This is what Crotty describes as ‘liberal socialism’.  For me, it is neither liberal nor socialist; but elitist and capitalist.

What were the practical economic policies of Keynes’ socialism, according to Crotty. Keynes proposed a National Investment Board that would have funds of between 4-8% of GDP to invest to ensure that economies moved in productive directions.  This proposal was part of the Liberal Party Manifesto in 1928 – and not accidentally is now part of the UK Labour Party’s in 2019 under Corbyn and McDonnell.  This apparently, according to Crotty, is what Keynes meant by his famous phrase, the “socialisation of investment”.

But just in case you think that Keynes wanted only his elite to run this corporate capitalist state, he also patronisingly advocated that “To make the worker feel that “he is treated as a partner and not as a mere tool,” (238), (he) proposed that every firm be legally required to form a “Works Council” to facilitate “permanent, regular, and established methods of consultation [between management and labor] in every factory and workshop of substantial size” (472).  Shades of the ‘social market economy’ with its workers councils of modern Germany!

That’s Crotty’s evidence that Keynes was against capitalism and for socialism.  For me, it merely shows that Keynes reckoned that capitalism was no longer a system of ‘perfect competition’ (it never was of course) but had evolved into ‘monopoly capitalism’. And this was a good (‘beneficent’) thing, requiring only the nudging and direction of a ‘wise educated elite (of men)’, dutifully supported by the workers, in order to deliver prosperity for all.

And there is plenty of evidence in Keynes’ writings that he really stood for ‘managed capitalism’, and not socialism by any reasonable definition.  As he wrote: “For the most 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. Our problem is to work out a social organisation which shall be as efficient as possible without offending our notions of a satisfactory way of life.”

The profit motive must remain: “The loss of profit may be due to all sorts of causes, but short of going over to communism there is no possibility of curing unemployment except by restoring to employers a proper margin of profit.” As Keynes argued that “Economic prosperity is…dependent on a political and social atmosphere which is congenial to the average businessman.” As  American economic historian, Bruce Bartlett explains: “He offered for the economy a hierarchical ideal.  The creative center of the system was the skilled entrepreneur and the goal of policy was to cultivate his skills and ensure his inducement to invest.”

In his later years, Keynes praised the very laissez-faire ‘liberal’ capitalism that he appeared to condemn in the 1920s. In 1944, he wrote to Friedrich Hayek, the leading ‘neo-liberal’ of his time and ideological mentor of Thatcherism, in praise of his book, The Road to Serfdom, which argues that economic planning inevitably leads to totalitarianism.  Keynes wrote: “morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in a deeply moved agreement.”!

And did he stick to his view of ‘socialised investment’ as Crotty claims?  This is what Keynes said in his last years: “If our central controls succeed in establishing an aggregate volume of output corresponding to full employment as nearly as is practicable, the classical theory comes into its own again from this point onwards.” So once full employment is achieved, we can dispense with planning and ‘socialised investment’ and return to free markets and mainstream neoclassical economics and policy: “the result of filling in the gaps in the classical theory is not to dispose of the ‘Manchester System’ (‘free’ markets – MR), but to indicate the nature of the environment which the free play of economic forces requires if it is to realise the full potentialities of production.”

Keynes was a strong opponent of national economic planning, which was much in vogue after the Second World War. “The advantage to efficiency of the decentralization of decisions and of individual responsibility is even greater, perhaps, than the nineteenth century supposed; and the reaction against the appeal to self-interest may have gone too far,” he wrote.

Contrary to Crotty, Bartlett reckons that “Keynes was almost in every respect a conservative, both in philosophy and temperament, although he identifies himself as a liberal throughout his life. His conservatism was largely a function of his class.  When asked why he was not a member of the Labour Party, he replied; “to begin with it is a class party and that class in not my class.. and the class war will find me on the side of educated bourgeoisie.” Conservative icon Edmund Burke was one of his political heroes. Keynes expressed contempt for the British Labour Party, calling its members “sectarians of an outworn creed mumbling moss-grown demi-semi Fabian Marxism.”  He also termed the British Labour Party an “immense destructive force” that responded to “anti-communist rubbish with anti-capitalist rubbish.”

Keynes’ ‘socialism’ was openly designed as an alternative to the dangerous and erroneous ideas of what he thought was Marxism.  State socialism, he said, “is, in fact, little better than a dusty survival of a plan to meet the problems of fifty years ago, based on a misunderstanding of what someone said a hundred years ago.”  Keynes told George Bernard Shaw that the whole point of The General Theory was to knock away the ‘Ricardian’ foundations of Marxism and by that he meant the labour theory of value and its implication that capitalism was a system of the exploitation of labour for profit. He had little respect for Karl Marx, calling him “a poor thinker,” and Das Kapital “an obsolete economic textbook which I know to be not only scientifically erroneous but without interest or application for the modern world.”

John Kenneth Galbraith, the great heterodox economist of the Roosevelt and post-war years, and whose politics were well to the left of Keynes, reckoned, “The broad thrust of his efforts, like that of Roosevelt, was conservative; it was to ensure that the system would survive”.  Keynes’s friend and biographer Harrod tells us that underneath his veneer of trendy liberalism, “Keynes was always deeply conservative. He was not a Socialist. His regard for the middle-class, for artists, scientists and brain workers of all kinds made him dislike the class-conscious elements of Socialism. He had no egalitarian sentiment; if he wanted to improve the lot of the poor…that was not for the sake of equality, but in order to make their lives happier and better.” (without their involvement, we might add.)

It has always been difficult to be sure where Keynes stood on many issues as he changed and adapted his views continually.  Hayek criticised him for this and Keynes replied that “If the facts change, I change my views, don’t you?”  Even so, it seems that Professor Crotty may be on his own in thinking Keynes was an anti-capitalist socialist.

20 Responses to “Keynes: socialist, liberal or conservative?”

  1. Arthur Says:

    “Yet, when it was written, we could not have called it a socialist manifesto. … in 1847, socialism was a middle-class movement, communism a working-class movement. Socialism was, on the Continent at least, “respectable”; communism was the very opposite. And as our notion, from the very beginning, was that “the emancipation of the workers must be the act of the working class itself,” there could be no doubt as to which of the two names we must take. Moreover, we have, ever since, been far from repudiating it.”

    https://www.marxists.org/archive/marx/works/1848/communist-manifesto/preface.htm

    Engels explained the “socialism” of Keynes long before Keynes:

    “And the modern State, again, is only the organization that bourgeois society takes on in order to support the external conditions of the capitalist mode of production against the encroachments as well of the workers as of individual capitalists. The modern state, no matter what its form, is essentially a capitalist machine — the state of the capitalists, the ideal personification of the total national capital. The more it proceeds to the taking over of productive forces, the more does it actually become the national capitalist, the more citizens does it exploit. The workers remain wage-workers — proletarians. The capitalist relation is not done away with. It is, rather, brought to a head. But, brought to a head, it topples over. State-ownership of the productive forces is not the solution of the conflict, but concealed within it are the technical conditions that form the elements of that solution.

    This solution can only consist in the practical recognition of the social nature of the modern forces of production, and therefore in the harmonizing with the socialized character of the means of production. And this can only come about by society openly and directly taking possession of the productive forces which have outgrown all control, except that of society as a whole. ”

    https://www.marxists.org/archive/marx/works/1880/soc-utop/ch03.htm

    Also long before Keynes, Hilferding and other “socialists” proposed something rather similar to Keynes. Its been pretty well established as the “welfare state” for more than half a century now.

  2. Ali Says:

    The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire.

    Keynes, Foreword to the 1936 German Edition of the General Theory

  3. nemonemini Says:

    https://redfortyeight.com/2019/06/05/dmnc-and-keynes/
    This interesting ‘dialectic’ over Keynes the socialist leaves a bit of skepticism re: the buttoned down English crypto-elitist, but he certainly shows the beginnings of post-capitalist transitional hybridization. The idea of ‘democratic market neo-communism’ at redfortyeight.com shows a cousin attempt to start with a liberal system and remorph it into some kind of socialist system. There is a crucial stage where the control of resources must be determined: we use the idea of a Commons instead of ‘socialist’ state capitalism.

    • vk Says:

      I think “syncretism” is the most precise term here instead of “hybridization”. Communism was simply a reality in the inter-war perdiod: to ignore it would essentially discredit any academic of the period.

      With WWI, classical liberalism simply collapsed. The next generation had to create another narrative (because that’s what Keynes was: an ideologue; he didn’t have the will and the intellectual capacity to create another theory) in order for capitalism to survive. And, since capitalism was still far from depleting its possibilites, at least one narrative would arise and would be successful: Keynes just happened to capture the spirit of the time from the point of view of the dominant classes of the time.

  4. Biswadip Says:

    I am not sure it is helpful to discuss a thinker in terms of labels – socialist, liberal etc. Internal critique demands critical analysis of the key ideas of a thinker’s system – “genuine refutation must penetrate the opponent’s stronghold and meet him on his own ground” (Hegel) and I don’t believe this is served by “refuting” that Keynes can be considered “socialist” by picking out isolated quotations etc.

    • Calgacus Says:

      Indeed. That is a favorite quotation of mine too. Here is another similar one:

      • Calgacus Says:

        (Accidental post above) Continuing:
        “Once a man has reached the point where he no longer knows things better than others— that is, when it is a matter of total indifference to him that others have done things badly and he is only interested in what they have done right— then peace and affirmation have entered his mind.”

        And Keynes, Hegel & Marx did a lot right. Often enough, in their strongholds, they defeat their opponents, for they discovered things of enduring value. Liberal socialism is not a worthless or oxymoronic concept, especially taking “liberal” in its American, not European meaning. There is not any real difference between the Keynes of the 30s and 40s (or 20s) for that matter.

        Marx was not a mere god, but a man, who made “mistakes”. (Cf Hegel, Whitehead & many others on the mistake of fearing mistakes) Gold buggery, relating gold to money and consequent absurd terror at (social) “deficit” spending was Marx’s biggest. The error greatly magnified by epigones, Who often became as resistant to empirical observation and blatantly obvious fact as today’s neoclassicals – who at least have the excuse that they are paid mouthpieces, while “Marxists” persisting in this error have become anachronisms. Even a thinker as valuable as Hilferding had this terror of nothing in Bruning’s Weimar. Keynes’ monetary theory is far more consistent with historical research on money done since the time of Marx ( & Keynes). And Hilferding (like Marx) had the excuse that he preceded Keynes, FDR, the New Deal, the postwar era, etc – which utterly refuted (neo)classical “sound money” twaddle.

        Keynes (and his father ;-)) called himself a “socialist” often enough. Accurate enough if one is interested in conceptual understanding rather than club membership. Haven’t read that Crotty book, but the right way to progress is through combining two parallel thinkers – Marx and Keynes as many like Crotty, Dudley Dillard and above all today’s MMT do.

      • vk Says:

        But Hegel was talking about serious thinkers, who were capable of delineating their own theoretical systems, not mere ideologues like Keynes.

        You simply cannot put second rate vulgar economists like Keynes on the same par as Hegel and Marx. Otherwise everybody should be taken seriously: would you lose your precious lifetime dissecting Jordan Peterson’s “thinking”; or worse: would you put his “thinking” against Marx’s in order to try to extract a “valuable” debate?

        Contrary to myth, vulgar economics was always a thing during Marx’s lifetime. It’s just that he demolished the non-vulgar part and only the vulgar was left. But you won’t see vulgar economists being dissected by Marx: he had the wisdom he needed to advance science, and should not lose his time with farces.

        And I don’t have any problem with stating Marx “committed errors”. The problem is: what errors? I’ve read many anti-Marxists in my lifetime, in an honest attempt to see his theory’s weaknesses, and I can tell you with the utmost confidence that none of them came even close to scratching his theory. All the arguments were either about a fictitious Marx (that only exist on the ideologue’s head) or a non-scientific (i.e. an absolute joke).

      • mandm Says:

        “Marx was not a mere god, but a man, who make mistakes…”

        A remarkable insight, Calgacus! But you seem to have been blinded by your own glib brilliance.

        What is “goldbuggery”? a kind of dialectical mistake or a nasty double entendre? And Marx’s “consequent absurd terror of (social) deficit spending”–what’s that? Marx as an obsolete “English” liberal, but “excused” into obsolescence because he preceded the elite, empirical, up to date American liberal club chaired by Keynes and FDR, who blazed the path toward the blatantly obvious fact in hand of MMT?

        You insinuate much in few words, but neither Marx nor his mistakes are to be found in your blind, groping glibberish.

  5. jackrasmus Says:

    ‘Liberal Socialist’ is of course an oxymoron. Crotty confuses Keynes of the General Theory (chapters 12 and conclusion) with Keynes of World War II policy maker. There is little continuity between the two. In his conclusion to the GT Keynes left an economic ‘grenade’ under the table of mainstream economics by writing the problem with capitalist economy was twofold: it couldn’t provide full employment and had an inherent tendency toward inequality. Chapter 12 critiques the rise of finance capital and the ‘professional investor’ separated from his company. THis was the fundamental trend of capitalist evolution. Keynes sought to counter this trend toward financialization by policies encouraging the ‘enterprise investor’ who was committed to long run development of his company. The problem with this analysis was it looked at individual capitalists, without an institutional framework for the trend. Just encourage ‘real’ capitalism, by state policy, instead of financial capitalism. Keynes’ chapter 12 stands out as an aberration in the GT. After it, he goes back to critiquing the ‘real’ economy, real asset investment, and the need for State action to somehow jump start it after a depression. Minsky picks up where Keynes’ ch. 12 left off, adds an institutional framework suggested by his (Minsky’s) mentor, SImon, and we have the Minskyan thesis developed as Capitalism once again began sliding into crisis in the alte 1970s. What Crotty’s describing was Keynes of wartime UK. His views then were directed at two objectives: one was war mobilization capitalism that was more akin to ‘corporatism’ than socialism; another was the general fear among capitalists everywhere that the postwar global capitalist system might very well slip back into a depression. Keynes’ late views (Crotty’s focus) were about how Capitalists, with the aid of enlightened intellectual–aka economists like him–might reform capitalism along the lines of more state like management of the system. Keynes was not a socialist of any variety. He was very anti-Marxists, as MR’s quotes indicate. He was a classic liberal intellectual capable of changing his views chameleon like, which he did. Keynes of 1936 GT was Keynes the critic of the then prevailing school of Neoclassical (Marshallian) economics, a conceptual framework that could not explain the great depression, a school that tried to adapt the microeconomic view of perfect competition, writ large to the macroeconomy. It was an abject failure. Keynes attempted to reform that conceptual framework to better explain the anomaly of the great depression that neoclassical econ couldn’t explain. In the process of conceptual reform he developed several useful concepts and notions that better explained the process (multiplier, liquidity trap, marginal propensity to consume, marginal efficiency of capital, futility of interest rate policy in a depression, etc.). But he couldn’t and didn’t make a full break. (The very idea of marginal propensity and marginal efficiency revealed he was still locked into the nonsense of neoclassical economics to an extent that preceded him). Mainstream neoclassical economists fought his 1936 views tooth and nail, and prevailed. What came out of Keynes GT was the ‘neoclassical synthesis’, which was simply a cherry picking of what in Keynes did not challenge the status quo or economics as a discipline and wed that selection of ‘safe’ ideas to the old neoclassical framework. Voila, what we got was ‘Keynesian Economics’ which is totally incapable of predicting the evolution of capitalism or even business cycles. That ‘hybrid’ Keynesianism is not Keynes of the GT. But that doesn’t mean Keynes or the GT was socialist either. Nevertheless, mainstream economics never even mentions Keynes’ concluding chapter and its condemnation of capitalism as a system that cannot provide full employment and tends in essence toward more and more inequality. But nearly a decade later, during the war, Keynes had himself ‘evolved’ into a proto-corporatist who believed that enlightened economists like him, and ‘enterprise capitalists’ (not professional finance capitalists) could structure and manage, with the assistance of the capitalist State, a kind of capitalism that could better mobilize capital for war and prevent, post war, a return to depression. Crotty misinterprets this to mean that this was a kind of socialism. To believe it was is to believe that the US economy today is socialist. After all, it’s been on an ever increasing war production footing for decades, accelerating int he 21st century. The State is involved in subsidization of capital by fiscal and central bank monetary policy as never before. The irony of it, for Keynes, is that in the driver seat are the very finance capitalists who Keynes critiqued (in Ch. 12 of GT). Just look at who’s been running US policy: Goldman Sachsers in Trump’s administration, Citibank before from Clinton to Bush, Trump himself is a notorious commercial real estate finance capitalist, who made his billions with shady investment banks like Deutsche and the Russian Oligarchs. In short, Keynes corporatist late views have come to pass. And look what we have today. Crotty’s view represents a wing of left economists who are trying to employ bourgeois economic concepts to create a socialist or progressive alternative. Keynes as a socialist is just a companion ideological notion to other currents like Modern Monetary Theory (which is just Quantitative Easing capitalist theory turned on its head). There’ll be more such nonsense before the next crisis is over, the coming of which is around the corner I’ve argued.

    • vk Says:

      The root of the discord surrounding Keynes is that he wasn’t really a theorist. He was an ideologue that was “deified” by his successors as a theorist in order to legitimize his own ideology.

      There’s really no “Keynesianism” as a theory strictu sensu. The same is true for Monetarism, MMT, etc. etc. Post-classical Economics don’t really have a theory, but a constelation of doctrines that are called theories. Deep-down, they pretty much are all pseudo-scientific variations of classical liberalism (which is extinct).

      Nowadays, only Marxism survives as a true theory in the Economics field.

  6. Magpie Says:

    Jackrasmus is right: “liberal socialist” is an oxymoron. Somewhere in his article on Prof. Crotty, J.W. Mason writes about his “careful but original reading of Keynes”. I think to call it highly idiosyncratic, although less diplomatic, would be more accurate.

    On top, I think it disturbing that Crotty seems to believe there is no much distance between socialism (with whatever adjective one might attach to it) and corporatism.

    On the other hand, I can empathise with Prof. Crotty. M’Lord wasn’t famous for being consistent. Crotty’s odd conclusions may be the inevitable product of taking Keynes seriously and his writing at face value.

    • michael roberts Says:

      Magpie – I agree with all your points and those of Jack. Keynes changed his views more often than his shirts probably to fit in with what he saw was the best way of reconciling the faults of capitalism with the needs of people – an impossible task.

  7. antonio Says:

    ‘’Keynes changed his views more often than his shirts’’
    Yes, and it is possible that Keynes’s desire to reconcile the failures of capitalism with the needs of the people had much to do (all, in my opinion) with 1,917. That had to do with being a conservative economist in the ascendancy of socialism. Socialism that was in the upward phase of its first impulse. These changes of opinion would happen to most conservative economists of their time, I suppose. That situation of Keynes and others, and as for their shirts, can also be described as ” the shirt did not reach the body. ” For that reason, for that BAD and FEAR, had to change his views and shirts frequently.

  8. JIm Devine+ Says:

    A predecessor of Keynes’ “liberal socialism” (sic) can be seen in Edward Bellamy’s late-19th century utopian novel, “Looking Backward.” He saw capitalism’s tendencies toward concentration and centralization of capital as allowing a painless marriage between capital and the state, producing a technocratic state socialism, which he assumed to be benevolent.
    (By the way, a lot of people in Keynes’ time predicted the rise of “monopoly capitalism,” including Joseph Schumpeter and Bruno Rizzi (the “Bureaucratization of the World”).)

  9. antonio Says:

    On the other hand, Keynes never got to see (if you are an elite in England or another Western country is not easy to see) that socialism was only / is an expanded capitalism. Capitalism expanded on its property, and by way of the State, to the totality of society. A State, of course, under the rule and command of its citizens, that step that socialism has not given … .is still. I did not see it, but I suspected it. Your support for the state as an important economic agent in an economy proves it ..

  10. benl8 Says:

    We humans have a long ways yet to go, but Keynes imagined an improvement, and that should not be lost.
    Robert Pollin wrote a paper in 2006 titled “‘Socialization of Investment’ and ‘Euthanasia of the Rentier’: the Relevance of Keynesian policy ideas for the contemporary US Economy”. My point is that Keynes imagined a significant improvement to economic life when he imagined the planned death of the Rentier, and he postulated the “socialization” of investment. I recall in 1945 Clement Atlee took those ideas when his Labour Party nationalized about 40% of the British economy. Today the UK’s “socialized” medicine garners the highest self-approval rating in the Commonwealth comparison of national health care systems. Socialization is a big improvement in human well-being, and our failure to socialize, not just medicine but many other facets, in the U.S. is a visible disaster for millions. It’s totally obvious when 3 men own more than some 125 million adults (half the adult population in the U.S.) that our distribution system is rotten to the core. How long that can be ignored and permitted?

    Pollin’s aritcle’s preface states,
    “In making these points, I contrast the US financial system with the bank-based or ‘voice led’ systems, such as those in Japan, France or South Korea. The paper then sketches a series of policy proposals which would address these problems. These proposals include regulatory policies which would ‘level the playing field upward’ among all financial intermediaries, and credit allocation policies that give preference to projects with high social rates of return. The proposals also aim to substantially increase the degree of democratic accountability within the financial system.”

    Is this the best end result imaginable, democratizing investment? Is money theft? Should a wealth tax impose a top-savings level, such as a 100% tax on wealth above $20 or $50 or $100 million? I think that’s how I’d start the change, and euthanize the rentier. As an amateur economist I don’t have strong ideas, but I’ve read enough to know that Keynes improved the world, and post-WWII his trade ideas and balancing policies would have spread prosperity much wider and quicker than today’s incredibly impoverished status quo. Most likely the dissemination of ideas will empower and enliven the “workers”, whoever we are, and create a non-denominational system that liberates the abundance that is captive now in our self-defeating system.

  11. Stephen F. Diamond (@StephenFDiamond) Says:

    The most informative assessment of the kind of thinking Keynes was engaged in at that time is by Hal Draper in an article that appeared in New Politics in the early 60s entitle Neo-Corporatists and Neo-Reformers. Hal developed his critique from the perspective of the theory of bureaucratic collectivism. He saw Berle, Keynes, etc as post capitalist thinkers who were pushing the “bureaucratic collectivization” of capitalism in parallel to the emergence of stalinism. Here is the URL: http://www.unz.com/print/NewPolitics-1961q1-00087/

    In Hal’s worldview, this was yet another example of “socialism from above.”

    I think this development was not the forerunner of a new mode of production but instead a reaction to the problems posed for capitalism by the socialization of the means of production.

  12. Dean Says:

    It’s not credible to present Keynes as a socialist. He was a liberal and made clear on several occasions his hostility to centrally planned state socialism. However, he believed that capitalism needed to be pro-actively managed by governmental agencies to avoid recurring crises, preserve currency stability and avoid gross social inequalities. Most contemporary liberals reject this. His refusal to take Marxist economics seriously led to some important mistakes: for example, he predicted a future of leisure for the masses, as robots and automation would reduce the working day. In practice, the opposite has occurred, for reasons that Marxism accurately predicts but Keynesianism fails to. In short, Keynes didn’t accept that the logic of capitalism made instensified labour exploitation inevitable; nor did he accept the long-term tendency for the rate of profit to fall. In fact, there is no evidence that he regarded profit rates as key to understanding capitalist economies. The evidence suggests that, in this respect at least, Marxism has better predictive value, which is why it continues to be relevant despite its detractors.

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