Home > Uncategorized > Carter on Keynes

Carter on Keynes

from Peter Radford

The biography of Keynes by Zachary Carter ends on a decidedly wimpy note.  The concluding chapter is devoted to the financial crisis of 2008 and the subsequent half-hearted sort-0f-Keynesian policy response.  Whilst Carter seems fine with his condemnation of neoliberal policies and is clear about the abject failure of the notion that financial markets act in either a self-correcting or a rational manner, he then goes on to ask why Keynesianism has proven to be so politically weak:

But pointing the finger at neoliberalism raises uncomfortable questions for Keynes and his defenders.  Why has Keynesianism proven to be so politically weak, even among ostensibly liberal political parties and nations?  The Keynesian bargain of peace, equality, and prosperity ought to be irresistible in a democracy.  It has instead been fleeting and fragile.  Keynes believed that democracies slipped into tyranny when they were denied economic sustenance.  Why, then, have so many democracies elected to deny themselves economic sustenance?”

Surely the answer is obvious.  Indeed, the answer is littered throughout the previous pages of Carter’s book.

Neoliberalism as it cohered in the second half of the twentieth century was essentially a reactionary effort to undermine democracy.  Carter himself aptly describes what emerged as a pseudo aristocratic mindset bent on protecting major asset owners, large corporations, and a singular version of personal liberty that allowed space for the co-option of government by those forces in the name of “liberty”, but which disallowed space for government action to protect the collective against those same forces.  In other words “liberty” was available to the powerful who owned the back channels into government and less so to those who relied on government to ameliorate the consequences of the activities of the powerful.

Democracy became a name that papered over a plutocratic reality rather than a fact.  The aristocratic counter-attack that gathered momentum in the 1970s and flourished in the decades since was designed precisely to deny the very sustenance that Carter wonders about.  The Keynesian vision, at least the version Carter describes, was firmly in the aristocratic cross hairs because it implied a focus on equality and a more generously shared prosperity.  It was also a grand philosophical vision, however naive, of a post-scarcity world rather than a technocratic focus on efficiency.  As such it ran counter to the essence of twentieth century corporate ideology with its relentless desire to assert the power of capital over that of labor.  Keynesian thought had to go.

Perhaps a more nuanced response to Carter is that Keynes tried to carve out a middle ground in a century where extremes were the norm.   Caught between the siren songs of fascism and Marxism and with early versions of capitalism apparently crumbling around him, Keynes was impelled to salvage a less extreme world.  This effort forced him to accept the real world around him which is why his economics is riven through with pragmatic acceptance of reality and eschews the fantasy worlds that others have preferred to theorize about.  It’s what makes him a more human and not a glittering prophet.

What comes across as a more vexatious problem is why it was that the economics profession was so eager to abandon this realism and infuse what became the commonly accepted, and thoroughly Americanized,  version of Keynesianism with odd bits of classical thought and misleading policy certainty kluged onto a sanitized Keynesian core.  There appear to be two main explanations:  one was the paranoia of Cold War America where even a faint whiff of collectivism was enough to destroy careers and gain the opprobrium of the elite and the media.  This alone forced many a good Keynes follower into the shadows.  Second was the ambition of people like Samuelson and Solow to re-build economics on a mathematical foundation.  This required re-configuring Keynes in ways that his ideas could not easily be confined.  The resultant version of Keynes, as we all know, is hardly Keynes at all.  Samuelson and his followers expunged the key elements of Keynes and slowly, through each new edition of their works, watered it down to accommodate the aristocratic counter attack.   So, ultimately when the aristocrats won the ideological war for the heart and direction of economics is was largely because the Keynesian side had shriveled into a technocratic shell more akin to a combination of maximizing mathematics and accounting rather than being a clear vision of society.

This is truly unfortunate because the loss of ideas concerning the role of radical uncertainty, complexity, and skepticism concerning equilibrium could all have helped move economics along a realistic path.  This is especially so given the enormous advances subsequently made outside of economics on all those fronts.

Naturally economics had to be battered into submission by the plutocratic elite in order to provide intellectual heft to its need for low wages, shareholder supremacy, unemployment, globalization, deregulation, and so on.  Getting it away from its Keynesian focus on all the attributes Carter lists, and turning it into a modest mathematical justification for all that the elite wished turned out to be less of a struggle than it ought to have been.

So, whereas Carter tries to be profound in asking why Keynesianism crumpled so easily, he is simply re-telling a well worn history.  Economics went wrong because it had to go wrong in order to eliminate a source of opposition to the plutocrats.  Keynesianism was allowed to continue to exist in academia only as long as it was tamed and de-fanged.  The irony is that as economics proclaimed itself as more scientific it was in fact becoming more political.

Re-inventing economics requires, by implication, being ready to recognize its political content.

But that’s not new either.

  1. June 28, 2020 at 12:34 pm

    I agree with Peter when, summarising, he says: (1) Neoliberalism as it cohered in the second half of the twentieth century was essentially a reactionary effort to undermine democracy. (2) Democracy became a name that papered over a plutocratic reality rather than a fact. (3) Keynes tried to carve out a middle ground in a century where extremes were the norm. (4) Economics went wrong because it had to go wrong [turning into a modest mathematical justification for all that the elite wished] in order to eliminate a source of opposition to the plutocrats.

    Here’s why.

    (1) Back in 1964 I compared Locke’s attempt to advance from paternalism to liberalism with Hume’s neo-liberal arguments for representative democracy, and since then followed the development of responsible cooperative democracy being reduced to irresponsible paternalism in both capitalist and state socialist forms – accompanied by global warming.

    (2) I’ve used this argument since economic arguments for civil partnerships recognising mutual commitments were distorted by renaming these ‘marriage’, seeking privileges given to those committed to supporting their children. This technique of getting folk to do evil things by calling them good can be achieved two ways: by half-truths (as where poet Wilfred Owen objects to “The old lie: Dulce et decorum est, Pro patria mori”); or by continuing to use the old word when the thing named changes, as has money.

    (3) I’m reading “Sophie’s World” again, and came across this interesting observation: “It is dangerous to eat too little, but dangerous also to eat too much. The ethics of both Plato and Aristotle contain echoes of Greek medicine: only by exercising [Keynesian] balance and temperance will we achieve a happy or ‘harmonious’ life”. Unlike Google, I’ve come across a modern version of this somewhere: “Muck’s only valuable when it’s very thinly spread”.

    (4) Reading a Marriage Encounter reflection last night on life together being a journey, I came across another about Physics [https://youtu.be/0T–WC4D1C0], which ends with Steven Hawking saying the same thing. My point is that Einstein covered the same ground that I have, but with a different understanding of mathematics. His General Theory assumes the universe G = f(G), whereas almost the starting point of Algol68 computing is that G is a variable, so G := f(G), i.e. it is not already equal to what we have now, but it evolves: it BECOMES equal.

    So at (2), taking the point of view of those who like the world the way it is, mathematics has changed, but no need to dwell on that. There is more money to be made by teaching equilibrium.

  2. Gerald Holtham
    June 28, 2020 at 3:54 pm

    I agree entirely with Mr Carter’s economics and his main points. I would take issue only on a minor point of sociology: his use of the word aristocratic. The economists who drove the neo-liberal agenda, and in so doing served the interests of the plutocracy, were no aristocrats. They were generally the children of immigrants into the United States escaping oppression of autocratic regimes in Russia and Eastern Europe. Their experience led them to see the United States as a haven from state oppression and the home of prosperity. They acquired a, no doubt, romantic view of the American dream. They were people with a commercial background suspicious of governments.
    They regarded Keynes, quite accurately, as the mandarin product of a privileged class, used to administering an empire and attending ancient universities, remote from commercial disciplines. They saw his economics as insufferably patrician and patronising, implying the people were stupid and the government knew best, having the know-how to stabilise and direct a free economy that was inherently unstable. They reacted against that with an ideologically inspired theory that supposed people in the economy already knew all there was to know (rational expectations) and that governments had no informational advantage. Their interventions would therefore be ineffectual at best, deleterious at worst.
    Mr Carter is right that their theory has very limited application in practice, ignores the comprehensive uncertainty present in most situations and underestimates the role of government in ameliorating breakdowns in macroeconoic co-ordination. It is also blind to issues of income distribution, which some of them do not even think an appropriate subject of economic analysis. Their theorising has certainly served the interests of the plutocracy that the United States has become and the economists concerned have been well rewarded as lackeys.
    The irony is that the “noblesse oblige” attitudes of Keynes could more accurately be described as aristocratic while the free-market attitudes of his undertakers were the product of small business class attitudes, known in Europe as Poujadist. As deindustrialisation has broken up the old masses of organised labour in the West there has been a growth of individualistic, consumerist attitudes to public affairs and so the plutocratic counter-revolution has continued to be successful in democracies. Its intellectual poverty is now clear but that will change nothing until the majority in the US and elsewhere recover a better sense of their own interests or get alarmed about the state of the natural environment. Keynes’ patrician background did lead him into one error: thinking that ideas change the world. The struggle of interests moves the world and the winners adopt and propagate the ideas that suit them. Marx, not Keynes, got that bit right.

  3. Gerald Holtham
    June 28, 2020 at 4:07 pm

    I should apologise to Mr Carter. I think it was Mr Radford in his review who used the word “aristocratic”..

    • June 29, 2020 at 2:44 pm

      Point taken. “Carter himself aptly describes what emerged as a pseudo aristocratic mindset bent on protecting major asset owners, large corporations”. Perhaps Mr Radford just overlooked the significance of the “pseudo”?

      I like your appreciation of the irony in the Keynesian vs Poujadist situation, Gerard, but from personality research I think the reality is a bit more complex than capitalists vs communists. It is more left brain vs left brain, intuition vs senses, reasonable vs empirical thinking; and even those can be dominated by fight vs flight instincts and extrovert socialisation vs introvert reflection. I myself agree with Keynes that it is ideas which move the world, but the ideas can be those of sensory rather than intuitive introverts, who in a Humean “winner takes all” type of representative democracy get the support of the around three quarters of the population – capitalist or communist – who think in terms of what they sense (empirically) rather than comparatively (i.e. relationally).

      Curiously, what has most prevented me moving the real world has been not being given permission – because empiricists see possession as 99% of the law. I’m currently reading about Kant in “Sophie’s World”, where my ethic of allowing everyone (including myself) sufficient slack (to be free to do our own thing and have others fit in with them) seems to be not unlike Kant’s “duty” ethic.

  4. Robert Locke
    June 29, 2020 at 5:06 pm

    “I myself agree with Keynes that it is ideas which move the world,”

    Is this the face that launched a thousand ships and burned the topless towers of illiun….?…

    Watch Triump to see how ideasmovethe world.

    • Craig
      June 29, 2020 at 8:35 pm

      Ideas rule the individual, and new paradigms, being particularly pungent and significant concepts, change history and progress humanity….forever.

  5. June 29, 2020 at 5:51 pm

    So Keynes is not Helen of Troy, and I did say sensory ideas (including new discoveries, and inventions like telescopes) were likely to have more clout that Keynes’s intuitions. On the evidence Keynes was right, but his clout, I understand, came from very hard-won persuasion. I’m hoping, as I watch Trump, for reaction rather than reflection!

    • June 29, 2020 at 5:58 pm

      “My eyes are dim, I cannot see …”. Answering Gerard, “left brain vs left brain” should of course have been “right brain vs left brain”, and answering Robert, it seems I accidentally cancelled the “reply” indenting my reply to his. (I remember doing so, but didn’t know what I’d done)!

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.