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Source link: http://archive.mises.org/12599/was-keynes-a-liberal-2/

Was Keynes a Liberal?

April 30, 2010 by

How can someone who expressed a wistful sympathy for the “experiments” of the Nazis, Fascists, and Stalinists, someone whose mockery was reserved for the society of laissez-faire, be considered a liberal? FULL ARTICLE by Ralph Raico

{ 24 comments }

Paul Stephens April 30, 2010 at 10:26 am

Very good and comprehensive article. I read Harrod’s Life of Keynes many years ago, and studied several of the notable critiques of Keynes by Hayek and others to some extent, but always came back admiring Keynes the more – especially since Hayek’s main problem with Keynes, the man, was with his homosexuality and the other social eccentricities of the Bloomsbury Group, in which Hayek even included Bertrand Russell – surely the greatest real Liberal of all.
I’ve just been reading a critical biography of Trotsky by Robert Service, whom I am told “began as a Leftist” (working class variety), but is now accused of performing “a second assassination” on that much-revered Marxist statesman. It might be very useful to compare Keynes and Trotsky as exceptionally intelligent, public-spirited, and democratic-minded men who were devoured by the circumstances of their times to become ogres in the modern Liberal pantheon. And Raico goes there, to some extent, in his discussion of what Keynes and the Fabians (NOT the same as Bloomsbury, although they overlapped) thought of Soviet Russia and Stalin.

I no longer call myself a “liberal” simply because “liberals” are, and have always been, the party of corporate capitalism. They may be more or less egalitarian, more or less interested in social justice, and more or less in favor of peace, family-scale business and commerce, and free trade of people and products to the extent that national boundaries are only a convenient administrative category – not walls and barriers to enslave and exclude us.

Where liberals have gone wrong is much the same as where Keynes went wrong – they became apologists for the monopolies and trusts, and ultimately for what Marxists call “International Finance Capitalism” or “Monopoly Capitalism,” depending on the context. Capitalism is NOT equivalent to free trade and free markets. Capitalism can ONLY mean, “an economy owned and controlled by the owners of capital, who also own and control the mechanisms of the state, the prison system, and the military.” Whether or not libertarians WANT it to mean that is irrelevant. That is what it means, in theory and in practice. Dump capitalism. Forget capitalism. No one but the capitalists, themselves, should advocate or support it (and many of them do not, either).

It would take a much longer article than Raico’s to answer everything he says, and much of it is non-controversial, and needs no response. However, let me say this about the following:

“Changes in prices, wages, and interest rates, according to Keynes, do not fulfill the function ascribed to them in standard economic theory — tending to generate a full-employment equilibrium. The level of wages has no substantial effect on the volume of employment; the interest rate does not serve to equilibrate saving and investment; aggregate demand is normally insufficient to produce full employment; and so on.”

I believe that Keynes was attempting to find the answer to the crisis of his time – why unemployment persisted, investment and demand declined (contrary to Say’s Law and other received wisdom), etc. The policies which resulted from that discussion, and which some Keynesians still advocate and defend, basically didn’t work. As Raico points out, markets weren’t free, deflation (to a previous gold price before the War) was rampant, and Europe was devastated by a war which had just exterminated a third or more of the European males age 18-30 – and most of the best and brightest who would have been the leaders in business and the professions. With that in mind, it is strange that the Great Depression in Europe wasn’t much worse than it actually was, and of course it immediately segued into Stalinsm, Nazism, Fascism, and a British Churchillian equivalent. Amazing, in retrospect, that Keynes had warned of all this happening in his 1920 book, “The Economic Consequences of the Peace”.
That’s probably the reason Keynes was so popular and influential. He was one of the best-connected intellectuals of his time (personally doubling or tripling Cambridge University’s endowment, among other things, through his shrewd financial speculations in the currency markets). And yet, he maintained a real Liberal perspective through all of this. If he saw some good in what Hitler and Stalin were doing for their ravaged countries, it certainly wasn’t because he supported totalitarianism or the Holocaust. Those came later, and he fought against them to the last.

newson April 30, 2010 at 11:14 am

keynes’ success in the markets is an interesting and not uncontentious question. see chap 10 in
http://mises.org/books/dissent.pdf

thanks for the tip on trotsky.

Beefcake the Mighty April 30, 2010 at 3:06 pm

“Capitalism can ONLY mean, “an economy owned and controlled by the owners of capital, who also own and control the mechanisms of the state, the prison system, and the military.” ”

Sorry, but this is a complete load of shit.

Len Jones May 2, 2010 at 1:32 pm

I completely agree with that “load of shit” as you put it. Capitalism in and of itself identifies a system that must not be allowed to go unregulated. It has led to trade imbalance, creation of FDI policies which have helped to weaken national security, and has also provided a means for “capitalists” to exploit the lack of human rights protections in foreign countries.

Vanmind May 1, 2010 at 2:19 am

“Capitalism can ONLY mean, “an economy owned and controlled by the owners of capital, who also own and control the mechanisms of the state, the prison system, and the military.”

Yeah, see, that’s a fallacy.

Joe May 2, 2010 at 5:16 pm

You blame Capitalism for a lot of things but I don’t believe you know what it is. How can anyone in a free enterprise system with property rights control anything? You must look to the one culprit of control, and that is the government. The citizens of this country gave the government the monopoly on control and force to form this nation and society. Look beyond the end of your nose and you might see the forest for the trees. If anyone turns into a crook when they use Capitalism is a crook not the system they used. Do you ever wonder why big business goes to Washington and eats at the trough? They want to get into bed with government to get an advantage over their competitors. So how can you run a free market system today with a government that basically throws out the constitution and caters to anyone or anything to gain power and control. Don’t blame Capitalism blame government. If it wasn’t for Capitalism we would still be living in mud huts trying to figure out where our next meal was coming from.

paul stephens May 3, 2010 at 3:46 pm

The simple answer is “capitalism IS the government we hate and fear.” And that was true even without the “free market” Neo-cons and Alan Greenspan. We owe everything we have to freedom, the independent peasantry (who aren’t usually nice people, but they have food for sale – until companies like Monsanto and Cargill create global monopolies in toxic GMO’s), and the small businesses which provide most of our jobs and necessities of life. Capitalists make these into large-scale industrial monopolies, which are then taken over by warlords to provide the weapons and troops for their imperial ambitions. Capitalists, with few exceptions, really are the bad guys, and when they try to do good, their wealth is expropriated for more harmful purposes.

Jacob Steelman April 30, 2010 at 10:36 am

Thanks Professor Raico for a most interesting article on Keynes. Keynes is just another intellectual spin doctor advancing the ruling elites’ agenda to advance the state and thwart the discipline of the free market economy. He provided the economic rationale for the age of the rise of the total state in the United States, Germany, Russia, England, Spain and other countries. The ruling elites understand the harshness of the laissez faire economy and its highly efficient utilization of capital and allocation of the factors of production in the production and distribution of goods and services. They understand it and do not like the power of the free market which may not support their plans. They need a Keynes to “explain” why it is necessary for the state to intervene in the free market and alter the demands of consumers for the goods and services the consumers desire. They need a Keynes to “explain” why the malinvestments caused by fiat money and fractional reserve banking system of the state sponsored banking cartel should continue. Keynes provided the rationale around which all the statist intellectuals could rally much as Al Gore has provided the statists intellectuals arguments to support the bogus claim of climate change. If enough intellectuals and experts continue the lie eventually the public buys into the lie so it becomes accepted as “the truth”. It is only when the libertarians and Austrians say “the emperor has no clothes” that the “truth” is exposed for what it is – a lie and a con game.

(8?» April 30, 2010 at 12:35 pm

Why can’t we call him a Neoliberal, thus correctly categorizing him as an incoherent destroyer of ideas, along the lines of the Neocons (who’ve put their idiocy on full display over the last few decades)?

Both it seems, are filled with the destructionism necessary to distill the chaos they need so that they can “create order” from it.

El Tonno May 1, 2010 at 1:17 pm

“Neoliberal” is currently being used in Europe as a smear against people who advocate deregulation, laissez-faire and state disintermediation. Before that, it was apparently used as a broad category to characterize such diverse ideas as those coming from the the Chicago School of Economics or the Austrians.

So, no.

Roderick T. Long April 30, 2010 at 2:33 pm

“Maurice Cranston contends that no one would deny John Locke inclusion in the liberal ranks in spite of his adherence to mercantilism”

But surely it’s worse to revive a discredited mistake than to be one of the first few to make it. It’s an even worse error TODAY to believe that the earth is the center of the universe, or that heavier objects fall faster than light ones, or that slavery is a just institution, then it was when Aristotle believed those things. (Not that there weren’t good reasons to reject those ideas back then, especially the last two; but it’s still less excusable to accept them today.) Likewise, one earns less credit for holding the right views on those matters now than would accrue to someone who got them right back then.

JL Bryan April 30, 2010 at 3:25 pm

I want to second this–Locke didn’t have the lassiez-faire or Austrian tradition available to study. He was providing the insights that helped these things get started. You can’t expect him to have a Misesian view of currency, either, considering he was born a couple centuries before Mises.

Bruce Koerber May 1, 2010 at 9:02 pm

Keynes was consumed by his ego. As a result he thought of himself as a philosopher/economist/leader, and also, as a result he was attracted to the horrific and perverse ideas that would exterminate humans and human civilization. “We’re all dead in the long-run” is Keynes own words that summarize the annihilistic nature of Keynes’ ego.

paul stephens May 3, 2010 at 3:50 pm

Read the article, again. Nearly every quotation which Raico provides is, as they say, “spot on.” I can’t help but think that Raico is simply posing as an opponent to get us benighted “libertarians” to read what is some of the best social philosophy ever written.

Ned Netterville May 2, 2010 at 8:41 am

It is absolutely amazing to me that Austrian economists feel compelled to waste time on John Maynard Keynes seventy some years after Keynes published THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY and fifty some years after Henry Hazlitt utterly demolished any claim Keynes ever had to being an economist with his 1959 book THE FAILURE OF THE “NEW ECONOMICS,” an extraordinary line-by-line refutation of Keynes’s GENERAL THEORY. A year later, Hazlitt published a collection of devastating scholarly attacks on Keynes’ GT tripe in a work entitled THE CRITICS OF KEYNESIAN ECONOMICS. In it Hazlitt assembled a panoply of articles dissecting and demolishing Keynes’ economic nonsense by some of the most respected economic scholars of the day. After Hazlitt, nothing more need by said about Keynes other than “rest in peace.” Of course the reason Austrians waste time on Keynes today is that naive Keynesian disciples survive to this day spouting his quack nostrums or what they think are his nostrums. One possible cure for people who still admire Keynes or think he contributed anything to economics is to make them actually read THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY.

David May 2, 2010 at 7:26 pm

Keynes would be described as “liberal” these days in the United States only because “liberal” has come to mean what “progressive” used to mean. When he was alive, he was wrong to describe himself as a liberal– but it was an attractive title to have. To declare yourself liberal would have been to pay yourself a great compliment in those days.

paul stephens May 3, 2010 at 3:56 pm

If you read Harrod or otherwise study Keynes’ life in detail, you’ll find a much different person than the cartoon jokester which most of you seem to see. First, like Hayek, he was the son of a leading academic – in his case, logician/mathematician. He was a very acute thinker – a real polymath who understood and remembered everything he ever heard or read. That, alone, should be a clue.
One can argue with his technical economics (which was contextual and formulated under desperate circumstances). So what if it was wrong, in some technical or historical respects? He was an experimental scientist. Let’s do something, even if it’s wrong. This is the real Liberal spirit, not quoting chapter and verse, and trying to trip up one’s adversaries with quotations taken out of context.
I still applaud Raico for his selections, here. Everything he quotes from Keynes is, to me, wise and incontrovertible.

Beefcake the Mighty May 17, 2010 at 12:49 pm

“Let’s do something, even if it’s wrong” is as much religious dogma as any
slogan regurgitated by a libertarian ideologue.

Ned Netterville May 6, 2010 at 11:20 pm

Paul Stevens, Read Hazlitt’s FAILURE OF THE “NEW ECONOMICS,” then read Keynes’ GT, so that every stupid thing he wrote therein is in context. Keynes had a rapier-like wit and was a master of sarcasm if not of satire, embellished, as Mises described it, by “cheap rhetorical tricks.” (Mises was referring to some of Keynes’ clap trap in THE ECONOMIC CONSEQUENCES OF THE WAR. But I am curious: You say he wrote “some of the best social philosophy ever written.” Can you give me an example of such from his GT?

Btw, you definition of capitalism seems to accord with that of Karl Marx, who, as an economist was about as bad as Keynes himself, but whose social philosophy was considerable more original. But what you and Keynes and Marx want capitalism to mean is, to mimic your Keynes-like put down, irrelevant. You would have a better understanding of capitalism if you relied for your definition on a brilliant economist–say, for example, Mises–rather than those two quacks. Or, try this: capitalism is the one and only economic system that must and will prevail in the absence of force (viz., the sanctioned initiation of force by the state).

Abhimanyu Jha May 17, 2010 at 12:33 pm

If Keynes is a quack, then so are Mises and Hazlitt. In fact, every economist or scientist, who tries to formulate a solution to the best of his abilities and beliefs are quacks. To say that “capitalism is the one and only economic system that must and will prevail in the absence of force”, even by Mises, is close to, though not as much, stupid and unrealistic as Marx’s “from each… to each…” Both are utopian statements that ignore the reality of human organization and action. The American founders, believers in Burke’s “Tragic Flaw” theory, knew power can take many forms, agglutinate, and aggrandize, including capitalistic power, and there will be no such utopian state where people with one kind of power (money in capitalistic society, political in socialist and marxist) will not try and succeed in getting other kinds. Checks and balances are needed to make capitalistic system effective (of course, infinitely less than a communist state), and I believe, Keynes was just trying hard to get that balance.

And trying does NOT always mean succeeding. Ad Hominem attacks like this one does no good.

Peter Surda May 18, 2010 at 4:07 am

Dear Abhinmanyu,

To say that “capitalism is the one and only economic system that must and will prevail in the absence of force”, even by Mises, is close to, though not as much, stupid and unrealistic as Marx’s “from each… to each…”.

You are committing a grave error. Ned’s claim is a tautology. If you take the superset of economic systems and eliminate those that use force, the subset that is left over is free trade. This has nothing to do with historical inevitability, moral superiority or economists’ egos.

Ned Netterville May 8, 2010 at 3:12 pm

Paul Stephens wrote: “I believe that Keynes was attempting to find the answer to the crisis of his time – why unemployment persisted, investment and demand declined (contrary to Say’s Law and other received wisdom), etc.”

Whatever Keynes was attempting to do in his GENERAL THEORY is certainly subject to conjecture, but one of the things he manifestly attempted to do in it was to “refute” the “received wisdom” of Say’s Law, an endeavor at which he utterly failed. However, the way in which he attempted to “refute” Say is typical of the various devious means he resorted to throughout the GT in his futile effort to discredit and replace some of the unimpeachable wisdom of several truly great classical economists with his own–although unoriginal–mercantilist poppycock. Keynes attacked Say’s law by lifting a definition of it out of context from a work by John Stuart Mill. Had Keynes quoted Mill’s entire pertinent remarks on Say’s law, the absurdity of Keynes’ “refutation” would have been so readily apparent he could never have attempted to make his ridiculous “refutation” claim. Say’s law, correctly stated and understood, remains 100 percent valid today: “It is worthwhile to remark that a product is no sooner created than it, from that instant, affords a market for other products to the full extent of its own value. When the producer has put the finishing hand to his product, he is most anxious to sell it immediately, lest its value should diminish in his hands.”–http://en.wikipedia.org/wiki/Say’s_law. Given the indisputable fact that Keynes quoted Mill’s statement of Say’s law out of context, how can you, Mr. Stephens, possibly praise Keynes and attack Mr. Raico with these words: “This is the real Liberal spirit, not quoting chapter and verse, and trying to trip up one’s adversaries with quotations taken out of context.” Hell’s fire man, that is what Keynes did, not Raico.

Paul Stephens wrote of Keynes: “He was a very acute thinker – a real polymath who understood and remembered everything he ever heard or read.” If that was true, and it demonstrably is not–hell’s fire, man, Keynes fell hook, line and sinker for eugenics, which no acute thinker ever did– than Keynes would be an even greater rogue, for the kindest thing one can say of Keynes’ economic “theories” and his policy nostrums in his GT is that the poor chap was in over his head and didn’t know any better. Anyone calling himself an economist who would endorse the quixotic monetary policies of, Silvio Gesell, as Keynes did, is either an idiot or a charlatan–take you pick.

Abhimanyu Jha May 17, 2010 at 1:15 pm

Or you may get a better idea of Keynes, and the huge number of positive similarities between Keynes and Hayek here…
http://www.skidelskyr.com/site/article/book-review-after-serfdom/

Whig July 7, 2010 at 7:21 am

Interesting article! Of course, there is the ever present terminology problem over ‘Classical Liberals’, ‘New Liberals’ and ‘Neo-Liberals’ – which can be either terms of abuse or praise and mean different things across the Atlantic. Keynes probably would have defined himself a Liberal, but not in the sense that Mises would have defined himself a Liberal (what I would call a true Liberal)! Perhaps we should adopt Hayek’s term ‘Old Whig’ – although in American ‘Whig’ is generally antithetical to libertarians (although the origin is in opposition to executive power). In Britain, it’s a dead term – although the Whig ‘view of history’ is a term of abuse. I think that it should be resurrected, but not as a ‘neo-Whig’ party, or ideology, say – but as an ‘Old Whig’ as Hayek would have had it…

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