Who John Maynard Keynes was NOT
Posted in Uncategorized by demandside on December 14th, 2008 Not a New Dealer, for one. Also commodities Grinch steals Christmas and beyond.
Monday’s Backcast
Today’s backcast starts with who John Maynard Keynes was not. In particular, our take on the eminent economist differentiating him from the New Deal.
Then a return to a favorite theme of ours, the commodities bubble. The stock market may be down forty-five percent. Housing may be down twenty percent. But that pales before the rise and fall of the commodities markets. Oil is trading at one third its value only five months ago. The prices of other commodities are bankrupting businesses from recycling to steel-making.
We end with commentary from Joseph Stiglitz, abbreviated from his Vanity Fair article this month, addressing one of the most crucial debates in the current economics. In order for the free market ideologues to rescue their failed system, it is becoming necessary for them to rewrite history, which they are doing with ever more energy. Stiglitz establishes the facts.
First,
Demand Side economics arises from two interrelated and complementary streams of policy, led by the economic thought of John Maynard Keynes and the social and political efforts of the New Deal.
John Maynard Keynes (British economist and public servant, 1883-1946) was not:
- An ivory tower academic. Although he matriculated at Eton and studied and taught at King’s College Cambridge, Keynes was sophisticated socially, active in the world of Art and was a public servant of high standing both early and late in his career.
- A Labour Party supporter. Keynes was attracted to the Labor Party superficially, but opined that in the end the party was a class party and “the class is not my class. If I am going to pursue sectional interests at all, I shall pursue my own. When it comes to class struggle and such, my local and personal patriotisms, like those of everyone else, except certain unpleasant zealot ones, are attached to my own surroundings. I can be influenced by what seems to me to be Justice and good sense, but the class war will find me on the side of the educated bourgeoisie.” (Cited in Robert Lekachman, The Age of Keynes, 1967, p. 41.)
- A New Dealer. There is absolutely no doubt that Keynes supported direct employment and such programs as the Civilian Conservation corps and Work Projects Administration. But it was Keynes major interest to salvage capitalism by stimulating aggregate demand. His was an aesthetic or intellectual revulsion when faced with poverty and unemployment, as it represented the failure and stupidity of a system.
That Keynesian aims and those of the New Deal are not mutually exclusive and, in fact, reinforce one another is something to ponder.
In the situation we face entering 2009, the New Dealer would focus on Health Care and the Environment, The Keynesian on infrastructure and energy technology.
Note to Wikipedia, it may be that the Keynesian prescription was not fully adopted as policy until 1961, as you say, but it was implicit. The New Deal alumni who produced the Employment Act of 1946, the signal piece of economic legislation in American history, produced a mandate for the president to actively manage the economy for “maximum employment, production and purchasing power.” The first two, of course, are straight Keynesianism. Purchasing power was included as the essential compromise with orthodoxy, but is not inconsistent.
Now, the commodities bubble and bust.
You have heard us banging this drum since the bubble began, and we have not been totally alone, but it sometimes feels like it. When you’re right, the only thing more frustrating than people who refuse to admit it is when nobody notices. The bubble was not suddenly meaningless when it expired. We would argue that the enormous gains by producers and speculators in the bubble mirror the crippling losses by consumers and rational investors, losses that have directly contributed to the current collapse of consumer demand.
And there are other losers. First, we’ll listen in on Potential Energy, a podcast by Kirsten Sanford and Alex Lindsay. This was published August 7, 2008.
POTENTIAL ENERGY
The received wisdom of high prices for fossil fuels into the indefinite future is an echo of the high and rising home values for as far as the eye could see. Certainly the collapse in the energy bubble, coal and oil falling in unison since July, recreates the conditions following the collapse of prices in the early 1980s following the Iran oil embargo.
Here is a more recent clip from Bruce Gellerman and Living on Earth, exposing the bubble’s effect on another recent issue of notoriety, conversion of the corn crop into ethanol. The corn farmers who sold ahead into the futures market may still be happy. It looks like all others are not.
LIVING ON EARTH
We have to tease out one phrase: “It’s still booming in terms of supply,” says Lane. “But it’s hard to make it a business these days.” Framing the market from the demand side is ever so much more efficient and effective than fooling around with subsidies and tax breaks on the supply side. For everyone.
and let’s be clear, we are in a helluva mess.
So when Republican Senators from the South try to hide behind a free market ethos in their attacks on organized labor, one should politely point out that the free market has collapsed and there is nothing to hide behind.
Still, some are saying that we ought to let the ship sink and those who are affected will simply learn to breathe under water.
Hopeless.
Standard Podcasts: 
