Saturday, September 26, 2009

Keynes and the Ideology of Planning

Tibor R. Machan

In recent months John Maynard Keynes has enjoyed a renewed prominence. In the course of doing so he has been presented to the current population of interested parties as a scientist or at least non-ideological thinker. Several books are out now giving Keynes much praise, despite the arguable failure of his policy recommendations (and the dubious honor of having said the Nazis could make the best use of the policies he advocates). This is in sharp contrast to the alleged lost dominance of so called market fundamentalists, as Paul Krugman likes to refer to those who prefer a free society to one run by the likes of him and other Keynesians.

Just to set the record straight, here are a couple of quotations from Keynes from a book that didn't make him famous and few now mention, The End of Laissez Faire, published in 1927 and based on lectures he gave in Berlin in June of 1926.

“Let us clear from the ground the metaphysical or general principles upon which, from time to time, laissez-faire has been founded. It is not true that individuals possess a prescriptive ‘natural liberty’ in their economic activities. There is no ‘compact’ conferring perpetual rights on those who Have or on those who Acquire. The world is not so governed from above that private and social interest always coincide. It is not so managed here below that in practice they coincide. It is not a correct deduction from the principles of economics that enlightened self-interest always operates in the public interest. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear-sighted than when they act separately.

“We cannot therefore settle on abstract grounds, but must handle on its merits in detail what Burke termed ‘one of the finest problems in legislation, namely, to determine what the State ought to take upon itself to direct by the public wisdom, and what it ought to leave, with as little interference as possible, to individual exertion’.” John Maynard Keynes, The End of Laissez Faire (Hogarth Press, 1926; London, L. & Virginia Woolf, 1927.)

The attitude for which Keynes is often praised, of looking at economic matters without bias and only with an eye to how to promote stability, especially in the labor market, is not in evidence here. Keynes shows clearly that he was completely opposed to the free market and considered it perfectly legitimate for government to plan aspects of the economy. He may have even had some sympathies for laissez-faire but these were not convictions, only weak preferences.

What Keynes was eager to promote is the idea of the government's unbridled authority to tinker with economic affairs. That is the point of insisting so vehemently that nothing exists that stands opposed to that authority, no notion of Adam Smith's natural liberty, John Locke's natural rights, and other classical liberal ideas that were at one time beginning to be used so as to pull the rug from under those who saw fit to interfere with other people's economic decisions and circumstances.

In the little book he wrote, way before his General theory, of Employment, Interest and Money (1936) for which he is so famous, Keynes compares the free market to a jungle where some animals have the natural attribute of being able to reach the leaves on top of the trees in the midst of a draught, thus making out far better than fellow creatures who are left hungry, unable to obtain food any longer. In this he was in agreement with another champion of egalitarianism, the recently deceased Harvard political theorist John Rawls, who in his A Theory of Justice (1971) also embraces the idea that men and women are pretty much helpless as to the place they hold in the economy and society in general. No one is really able to escape his or her fate. We are all like those giraffes and gazelles in the wild, with the former naturally advantaged while the letter naturally disadvantages when there is scarcity of food.

Now of course in the wild no one rises to the powerful position of a government to remedy matters, which is what Keynes is clearly lamenting. But he says that people are in much better shape because those unable to fend can be helped by governments if we only empower it to do this.

Without entering a lengthy debate, the one Burke was referring to, it is worth noting that Keynes is contradicting himself. In the first place people are helpless and end up economically disadvantaged but then it turns out that they aren't at all helpless but are able to empower governments to remedy their situation.

Now if they are able to do this complicated thing, why are they unable to improve their lot in the market place, by education, networking, innovation, entrepreneurship, and some luck? It seems that for Keynes the sole avenue for self-improvement is to go to governments and seek their coercive support. Among other things what he fails to notice, as did Burke and other statists, is that government is composed of people and all the people with the power (some) others bestow upon them (or they grab) are susceptible to all the foibles Keynes attributed to people in general. But while in the free market place--and in free societies, more generally--there are checks against people inflicting their will on others--such as the protection of their rights, a minimal government function that may actually be carried out successfully--when governments gain the power to plan an economy they tend not to do this with justice and wisdom but with arbitrary force. And that is indeed inescapable because governments don't really have a clue as to what to do for millions and millions of people from on high. So what is left for them to do? To advance the visions of government officials, that's what, visions that have to do with their agendas and not with any mythical public interest or common good.

Keynes was wrong back then and his followers are wrong now, thinking that our salvation lies with government.

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