John Maynard Keynes (1883-1946) was an economic theorist whose views on money and unemployment became some of the most influential of the twentieth century, shaping government politice worldwide. Seeming to forget how badly that century went in its latter half as much as the first, scores of leftists have now been turning to various versions of Keynes theories as a one-size fits all catch phrase for what ever economic policy they want the government to pursue. Proponents include the New Economics Foundation, the Trade Union Congress, Counterfire, UkUncut and many other voices liberally beaitifed by the Guardian‘s typography.
The ideas of the grand Eton and Cambridge educated statesman are being used like leftist magic dust, in which any austerity measure can be batted away with the response that ‘Keynesian’ ideas prove that the government could increase unemployment by not cutting public services. This is, as I hope I can show a bit below, untrue on a number of levels. It’s not what Keynes said, it wouldn’t work, and I don’t think the left should want it to either – ultimately.
1. All problems can be solved by investment
Keynes was not a transhistorical writer, summing up decades of careful investigation so that we, the forunate inheritors, could apply his maxims to any given situation. He was, rather, a pragmatist. His theories were forged in the India Office before the Great War, and from that moment changed with the needs of his dear government. When people say that we need Keynesian investment, I assume they mean of the kind which boostered the British economy after the World War – an investment which was not levied through high taxation of the rich, but instead made on the back of the greatest loan from the USA the UK has ever had (negotiated by Keynes), and which vastly increased the deficit and the debt. So ‘increasing investment’ means ‘borrow more from richer governmemts’.
2. We need more Keynesian policy
This is exactly what the UK government is trying to do at the moment. The frantic sloughing off of labour and labour regulations – in other words, slashing wages and sacking people – is a method to increase profits. This is classic business strategy: when faced with a crisis, who get rid of your workforce and invest in machines instead, because they make surplus value more efficiently. By slashing public sector employment and encouraging the private sector to do the same, Cameron and co are trying to (1) increase national and business profits, and (2) prove to the world that the UK is a great place to invest their bonds in. Bonds = debt. The government is trying to increase its debts so that it has the money to invest in grand infrastructural projects. The Olympics are our version of 3rd Reich motorways.
3. Increased wages will make the UK economy grow
The trickle down effect has its mirror image in this beautiful neo-Keynesian mirage, the trickle up – in which it is imagined that so long as money is distributed from corpoations to their employees, then the money will immediately be poured into a circulation of consumption which will boost business and equal generalised national growth. This ignores the global dimension of the economic crash. Given the global insecurity of jobs, thanks to the tactics of businesses *everywhere* in response to a fall in profits, any extra money put into the sphere of the consumer is likely to stay there as savings rather than active consumption of products. This idle money can of course then be used by banks to fund a round of lending – but the lending will foremost go into the excellent rates being offered by desparate bond markets, not petty personal consumers. Second, any excess wages will be put into buying cheap products from wherever they derive – which is highly unlikely to be Britain just yet. Increasing wages here, if those monies did magically find their way back out into the sphere of consumption, would leave the country and boost another’s – though still probably insignificantly.
4. The state should enforce sustainable capitalism
This sounds weird when phrased as above, but it really is the argument that gets made. The new Keynesians phrase it like this: ‘the organisations of the workings class, or mass social movements a la UkUncut, need to push for growth in the economy in order to alleviate the poverty of normal people. Economic growth based on investment by this mass state capitalism (i.e. state control of industry and strong regulation of the financial sector, plus high taxation) will create a form of capitalism which put economic power back into the hands of the majority, and an environment without the risks of economic crisis, the disastrious effects of which we are currently witnessing.’ On an economic level, this misses an inherent structural fact of capitalism: it needs crises in order to survive. Capitalist crises are a method of rejuvenation, in which labour costs are slashed, new machines are bought, and the the classes (ruling and working) are recomposed. Crisis is part of the life cycle of the capitalist beast. Capitalism which is made more stable (i.e. with longer periods without crises) simple brings on harder, longer periods of crisis. The historical proof for this is quite simply the mid 1970s, the period in which the great Keynesian boom period turned out to have had nothing to do with Keynes, but instead was the elongation of american productive growth through industry built on the back of imperialist war, racist labour policy and interest from war loans. The crash came, and lasted for half a decade. This crash will last longer (we’re already five years in remember).
5. Growth is good for the working class
And here’s the moral peak of the new Keynes mountain, where the bureaucrats of the future throw their hands up and praise the monetary policy king. Economic growth, they cry, is the saviour of working people. It will provide jobs and with those, wages – and with wages, a higher standard of living. Underneath, many of the Labour party hacks understand that high standards of living are not the same as freedom, so I won’t make that critique here. However, they should understand that more jobs, once the effect of the crisis management has pulled through, will mean more bad jobs. This government is Keynesian. It wants to provide lots of jobs for working people – long, hard, badly paid jobs. Economic growth will arrive, but at a cost – perhaps on the back of a cheap war with Iran, perhaps through a reintroduction of racist immigration policy (mass cheap labour). If the working class benefits, it will only be because another mass of people have been delicately ignored. Economic growth can only happen through the massive extraction of labour from people; this is a far leap away from freedom or strength.