Wednesday, December 30, 2009

Keynes Promoted the Destruction of Free Market Capitalism



This is part four of our discussion of John Maynard Keynes and his 1936 book The General Theory of Employment, Interest and Money.  So far, we have uncovered some very interesting ideas buried in the famous economist's most well known work.  Here is what we discussed in parts 1-3:
This will not be our last post on Keynes but it will probably be our most important.  All the way back in 1936, Keynes laid out the game plan that government officials and central bankers have followed until this very day.  Last post, we noted that Keynes was the source of Bernanke's economic stimulus game plan.  Today, we will show that Keynes's influence goes far beyond this.  His influence is the guiding policy for our entire economic and political system.  To put it bluntly, Keynes promoted the destruction of free market capitalism.  Skeptical?  We will provide the proof right here.  Let's get to the quotes and you can be the judge...

All quotes below can be verified for their accuracy by referencing the full text, which is available online for free here.

Chapter 22, Section III
In conditions of laissez-faire the avoidance of wide fluctuations in employment may, therefore, prove impossible without a far-reaching change in the psychology of investment markets such as there is no reason to expect. I conclude that the duty of ordering the current volume of investment cannot safely be left in private hands.

Did you get that? Keynes declared that free markets must be removed of their role of allocating capital, which is the very backbone of capitalism.  Those promoting themselves as Keynesians are in favor of something that is very different from free market capitalism.

Chapter 24, Section III
The State will have to exercise a guiding influence on the propensity to consume partly through its scheme of taxation, partly by fixing the rate of interest, and partly, perhaps, in other ways. Furthermore, it seems unlikely that the influence of banking policy on the rate of interest will be sufficient by itself to determine an optimum rate of investment. I conceive, therefore, that a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment..

I suppose that since Keynes only wanted a "somewhat comprehensive socialisation of investment" that he was somewhat more in favor of free market capitalism than Karl Marx.  How wonderful.  You have to laugh at the ignorance or gall that it takes for someone to declare themselves both a Keynesian and a free market capitalist.

Chapter 24, Section III
It is not the ownership of the instruments of production which it is important for the State to assume. If the State is able to determine the aggregate amount of resources devoted to augmenting the instruments and the basic rate of reward to those who own them, it will have accomplished all that is necessary. Moreover, the necessary measures of socialisation can be introduced gradually and without a break in the general traditions of society.

This is perhaps the most prescient quote of the entire 20th century.  Keynes is saying that the government can come to wrestle control from the free market, not by the forceful confiscation of private property as characterized by Communism, but by merely determining the rules behind who gets the property.  Today, we call one extreme form of this mechanism a government bailout.

Further, he noted that if the socialization is done gradually then there is no need for a violent and abrupt upheaval, as found via a Coup d'état.  Does this not precisely describe what has taken place over the past century?  A slow, steady creep of socialization has conquered the western world.

Passages like those found above are why I do not believe in conspiracy theories.  Who needs them when the great stories of history are laid out for you in black and white?

I'll leave you with one final thought.  When economists speak of Keynesian economics, the above ideas are what they are promoting.  If they do things and promote ideas that seem antithetical with free market capitalism, now you know why.
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