The economic crisis has naturally seen people with a brain looking for an alternative to the laissez-faire status quo. And even more naturally, people have been looking to the theories of Keynes, who up until 35 years ago was very de rigueur in mainstream economic circles.
In a sense many of the comments I make on this blog about not being that worried about the deficit and believing in government spending its way out of recession are tacitly Keynesian. It’s become the default line of attack from the left against the Austerians with their mindless, stupid household finance analogies and depression-inducing prescriptions of cuts and sell-offs.
(Owen Jones, for instance, is an advocate of a Labour government pursuing Keynesian policies in the name of socialism.)
And time has unsurprisingly vindicated the indictment of laissez-faire at least, with even the IMF now conceding that cuts don’t work and aren’t working. What we haven’t seen though is the emergence of a serious, new, coherent alternative. Labour is offering cuts but less of them and there are very few economists criticising the government from a non-Keynesian standpoint.
But is Keynesianism really the answer? After all, his theories have been tested before, and tested to destruction.
The right may have been correct to point out that Keynesian economics had run out of steam by the late 70s. But they replaced it with something even worse, and inequality has grown and wages for the majority have in real terms stagnated for a generation as a consequence of the imposition of that new intellectual ‘paradigm’, whilst the wealthy have got richer and richer (and continue to do so, even in these supposedly straitened times…….)
I read an interesting piece penned by Jack Conrad the other day in the Weekly Worker, paper of the Communist Party of Great Britain (not to be confused with the Communist Party of Britain, who publish the rather better known but also rather more dreary Morning Star. You need to get the populist touch comrades. You know, like I have.) Mr Mambo likes to read as broadly as he can. One minute you can find me checking out the world of celebrities on the Daily Mail website. The next I’m reading essays on Marxist economics. That’s how things work on this blog.
Anyway, it critiques Keynes and Keynesian thought from an avowedly Marxist standpoint, something you actually don’t see a lot of right now. I must confess to being deeply cynical about what the various left groups in the UK have to contribute, and as a consequence I’m inclined to dismiss their frequently absurd predictions. In fact the piece I am discussing here also finishes on a sadly typical preposterous note:
The Marxist perspective – extreme democracy, rebuilding the basic organisations of the working class from the top to bottom, Europe-wide coordination, establishing a Communist Party of the EU and sweeping away what is a moribund capitalism on a global scale – is bound to become common sense amongst all advanced workers within the next 10 or 20 years.
That would be lovely, wouldn’t it……..
Anyway, the piece is surprisingly lacking in an explanation on why Keynesianism is so flawed, other than repeated assertions that Keynes was no socialist and disliked the left and Marx. True, but hardly relevant.
There are the beginnings of a critique however:
Suffice to say, Keynesianism hit the buffers in the late 1960s. One of the unintended consequences of Keynesianism was a decline in the role of money (fundamental to capitalism). Furthermore, because of full employment, social security benefits, council housing, the national health service, etc, the system’s ability to discipline the working class through what Marx called “commodity fetishism” was reduced. Hence we can say that Keynesianism is a means whereby capitalism manages its own long-term decline through increasing the role of organisation, as against the role of the market. Markets, including the market in labour-power, are retained, but are thoroughly bureaucratised.
Under such circumstances, internal contradictions mount up. Economics is politicised and objectively the power of the working class grows at the expense of capital. Profit and growth rates begin to fall (in no small part because of the organisation and militancy of trade union power). Certainly in the 1970s, faced with a loss of control, the bourgeoisie pulled the plug on full employment in order to restore discipline over the working class. With the system visibly malfunctioning, the ruling class, crucially in the Anglo-Saxon world, broke with Keynesianism, downgraded productive capital and sought salvation in financialisation. Inflation was allowed to run hand in hand with the return of mass unemployment (an impossible combination, according to Keynesian theory).
There’s much of this that is true but I would still make a few observations.
- It’s a bit of a shame that the assertion “decline in the role of money” isn’t fleshed out a little more, as I’m intrigued to know what this actually means.
- Also, I think the statement about capitalism managing its (presumably inexorable) “long-term decline” could do with a bit of fleshing out and justifying. Call me naïve but I think the notion is contestable, at best.
- Economics is always “politicised”. The passing of Keynesianism as the prevailing ideology hasn’t changed that in the slightest.
- By asserting that profit and in particular growth rates fall as a consequence of union power, aren’t we in fact making the argument of the right for them? The logical corollary of this argument, that well organised and remunerated workforces are deadly for any private enterprise, could have some fairly wide-ranging consequences…….
- I’m quite prepared to believe that many on the right see a high unemployment rate as an innately desirable thing as a means of keeping wages down, but to state that “the bourgeoisie pulled the plug on full employment in order to restore discipline over the working class” implies that it was a conscious, deliberate, conspiratorial act agreed at some point by most or all of those who stood to benefit. I’m not sure the world works like that. Class exists and is the central cleavage in society, but I’m not sure the ruling class acts in concert any more than the workers do.
- Ditto the seeking of “salvation in financialisation”.
- And double ditto (tritto?) “(i)nflation was allowed to run”. Clearly there was a great movement on the right to forge a new set of confrontational, anti-union, anti-Keynesian policies but I’m not sure that that’s the same as ‘a decision by the bourgeoisie’.
My concern with the argument above is that it diminishes the political and ideological struggle waged against the Keynesian consensus and posits in its place a very schematic, deterministic chain of events. The struggle against Keynesianism was waged by many who had a vested financial interest in challenging the status quo, but others who were simply ideologically committed to a different way of doing things.
My other concern is that although it is perfectly valid to indict Keynes and his theories, what is the alternative? What does a genuine Marxist analysis and set of policy solutions actually look like, apart from abstract calls for ‘revolution’ and ‘workers rule’, which are terrific but frankly unimaginable anywhere in the world right now? Or do we just dismiss anything that is a lesser evil?