Keynes & The Keynesian Appeal

April, 2009 Feature--Truth Based Logic

John Maynard Keynes: Scoundrel, Fabian Socialist & economic poseur. Why Keynesian pseudo economics appeals to Socialists, National Socialists, Fabian Communists, demagogues, corrupt office seekers & amoral businessmen. Government fiscal policy & private risk.

By any rational or civilized standard, John Maynard Keynes was a totally amoral scoundrel. Keynes At Harvard, a well documented study by Zygmund Dobbs, first published by Archibald Roosevelt's Veritas Foundation (Conservative Harvard Alumni) in 1962, thoroughly exposed Keynes as a Fabian Socialist sociopath, deliberately seeking to undermine free market Capitalism. Dobbs also showed Keynes to be a notorious homosexual pedophile, who predated NAMBLA, advising other wealthy & depraved British Leftists where, in the third world, they might expect the best price for "bed & boy." This vile bit of history is not, of course, our point.

We intend to discuss Keynes & his economic theories, their effect on present & future prospects and why they would appeal to anyone. Keynes might have been the most evil man who ever walked the earth, yet have written and spoken economic sense. It would not be fair argument to damn an economic theory, simply because it was formulated by an evil man. Yet in this case, the scoundrel in Keynes was the whole man. His economics reflected the same total disdain for moral standards--the same sociopathic tendencies--as did his misuse of pre-adolescent boys. It is sad that so few are even aware of Keynes actual place in the breakdown of fundamental principles, once recognized as essential to healthy markets & economic well-being.

We will focus, then, not on Keynes' personal deviancy, which may have injured a few score, but on Keynes' malicious economic quackery, born in other warped tendencies--quackery that has injured Nations numbering in the hundreds of millions. While noting the obvious mischief in a Keynesian fiscal policy, our primary purpose will be to explain the appeal of Keynesian economics; how & why some see pragmatic, if not moral, benefit; rather than seek to duplicate broader, more detailed, refutations one may find elsewhere. For clear assessment of Keynes' role in the 20th Century Leftist assault on the West, we strongly recommend the aforesaid Keynes At Harvard, (linked below). For the clearest refutation of Keynes' economic theories, we recommend Henry Hazlitt's definitive 1959 response, Failure Of The "New Economics." We will also address a source of possible confusion with respect to Keynesian fiscal policy.

Why & To Whom Keynesian Policies Appeal

To understand the "hows" & "whys" of Keynesian appeal, one might start with the well documented fact (in Keynes At Harvard) that John Maynard Keynes was a key participant in the British Fabian Society, which set out in the late 19th Century to turn Great Britain into the Socialist domain, seen now, by tactics of deception--their chosen symbol, a wolf in sheep's clothing. (The full title of the book is Keynes At Harvard--Economic Deception As A Political Credo.) Keynes' role was to offer rationalizations for a Socialist advance in Britain and the West, while pretending to solve problems inherent in free markets. The Keynesians succeeded by studied obfuscation of essential elements of dynamic human interaction, while Keynes glibly laughed off concern over long term effects with amoral quips, "In the long run, we are all dead."

In one sense, perhaps. But among the moral & honorable; among those with wisdom & forethought, progress is a multi-generational pursuit, driven by multi-generational purpose. An important motivation, for productive human conduct, has always been to pass on the growing fruits of each generation's achievement to that generation's posterity. This is the exact opposite to Keynesian counter-cyclical policy, which would compromise the future to arrest a temporary cyclical downturn.

Socialism, in all its manifestations, substitutes centralized planning & control for individual motivation & aspiration in the direction of human conduct. Even on questions of morality--the philosophy of ethical behavior--of the nature of good & evil, of what is altruistic and what is not, Socialist movements--of every sort--challenge the diverse traditional mores of the earth's peoples. And, unlike more traditional systems, there is a cold "utilitarianism," despite all pretenses of good or kindlier intentions, present in every Socialist movement, whether Fabian, Social Democratic, Nazi, Communist or some other or blended variety. While some Libertarians have mistakenly argued with Mill that a free market is indeed the most utilitarian--clearly true;--that truth arises not in cold analysis or deliberate manipulation of factors, but from moral, non-material, principles. It reflects natural law & the nature of man, that which responds best where every individual is held to personal responsibility & accountability for his own conduct; is personally responsible for success or failure.

America, in her first years, demonstrated the essential principle. We postulated not a Keynesian dependence on expensive or expanding Government, no Communist or National Socialist pursuit of enforced new cultural norms; but a Federal structure, where every State--each political economy in a macro sense--was responsible for its own internal affairs, including any public determination of norms of conduct; while each individual remained responsible for his own level of achievement, within a market focused only by the dynamic daily decisions of interacting participants. An explicitly defined & limited Central Government was to provide sound money & uniform measures, while sanctifying & protecting the obligation of contracts. Under the American system, we prospered as no people had ever quite prospered. And the premises, involved, enjoyed both wide popular support and intelligent individual involvement, evident in the profound and clearly rational nature of our political discourse in the early 19th Century. (A similar, non-centralized collection of local, semi-autonomous, political economies flourished in Switzerland; yet one better extended into the present era by a sound sense of ethnic continuity.)

The effective continuity of any system, Classic Monarchy, Republic or modern Socialist utilitarian, must ultimately depend upon a foundation of support from socially well placed individuals. Consider what may happen when such fails:

1. Louis XIV corrupted the French Aristocracy, deliberately drawing them to festivities in lavish Palaces, to undermine anything resembling local autonomy, so essential to a limitation on Central power. A Century later, classic France was swept away by a revolution in the streets of Paris that spread like wild-fire, the earlier power of the aristocratic base for the Bourbon Monarchy having been effectively destroyed by generations of neglect, deliberately brought about by Bourbon folly in pursuit of unsustainable personal power.

2. The former Soviet Union, born in the collapse of the over-extended Romanovs--their power shattered after sending a grossly under-equipped army to be cannon fodder in a war with Germany (leading to wide-spread mutiny by those who would ordinarily have been the first line of defense)--itself collapsed, when Communist indoctrination of a functional bureaucracy became little more than a bad joke, as reported by the great Russian writer Solzhenitsyn.

While Russia fell to the Bolshevik version of Socialist utilitarian collectivism with the collapse of the Romanov power structure, the presence of strong, economically 'savvy' & patriotic middle-classes, made the pursuit of any Socialist utilitarian collectivism far more difficult in the West. Keynes provided a British Fabian Socialist answer to the problem, in effect persuading capitalists, themselves, to back into Socialism in a mistaken belief that they were promoting their own interest. That this approach would have even greater appeal to Leftist theorists in America, where economic growth had been more dramatic than in Britain in the waning days of the 19th Century, should be readily apparent. The impetus for such deception would only accelerate, as America roared into the 20th Century, her basic social & political foundation intact.

Advancing perceived interest or purpose by deception, is certainly not unique in human history. In both Keynes At Harvard & The Great Deceit (Veritas, 1964), Dobbs showed the strong mutual attraction between British Fabians & German National Socialists. Hitler & Goebbels understood the Fabian approach and were very happy to employ Keynesian economics. Yet the fall of Germany to totalitarian Socialist utilitarians in 1933 was primarily facilitated by the virtual destruction of middle-class wealth in the hyper inflation of 1922/23. Many, who had been part of the foundation for German social & political institutions, were desperate to embrace a new dispensation. But without disparaging the ability of the Nazis, as skilled masters of deceit, to mislead their own people, Keynes was of great value to their cause by providing rationalizations to discourage dissent in the academic, media, political & business communities. Yet consider the fuller significance of the German lesson, for the Socialist minded in Britain & America, in the 1930s and thereafter.

The Keynesian approach to any business downturn is a policy of contrived inflation--Governmental deficits, monetized with fiat money, intended to reblow a bursting economic bubble. While the claim is that this can be reversed whenever the planners (always increasing central power) deem it advisable, there is in fact no practical way to withdraw the benefit of the monetization from the same people originally "stimulated." Whether an effort to temper the resulting inflation is done by taxation, or by a taxation like manipulation, the major impact will fall, not on the improvident who may have contributed disproportionately to the downturn, but on the provident and frugal who did not. Moreover, an ever increasing political involvement shifts more and more of the political and social power away from the participants in a free market, to a new parasitic political order, which can only interfere with the dynamic potential of any market, free to immediately adjust to each changing phenomenon.

At its best, Keynesian economics backs us into a Socialist utilitarian collectivism, ever more totalitarian, ever more destructive of the true potential of a free market. Yet that is at its best! If the contrived inflation gets out of control--and given the built in Socialist entitlements now in place, at some point that is almost certain--then you have the wholesale economic destruction that brought the Socialists to dictatorial power in Germany! (Not that Hitler's own version of the New Deal did not embrace a Keynesian approach.) For a fuller understanding of Keynesian tactics and methodology, again, the online version of Keynes At Harvard is only a click & seconds away, via the link below. Yet understand that the greatest appeal of that methodology lies in the ability of the Keynesians to rationalize greater dependence on centralized economic power in the hands of those, who seek to control the activities of peoples with long-standing cultures of individual rights, including respect for private property in the fullest sense, coupled with traditions of personal responsibility.

Keynesian theory was allowed to obfuscate economic reality, because it rewarded those who had macro economic objectives with a rationale to manipulate conditions for ulterior purpose. Thus, the recent Congressional "Stimulus" plan should not be seen as an aberration, in that it appropriated vast sums for projects that had little, if any, direct relationship to stimulating flagging markets. From the first, Keynesian theory was designed to undermine economic freedom, not enhance its achievements. It should not be over-looked that both the Keynesian "New Deal" in America and Hitler's "New Order," were sold to many as necessary to head off Communism. The fear, promoted, was that without Macro-economic tinkering--even regimentation on a vast scale, particularly in Germany--Capitalism could not survive the Depression.

Keynes offered a convenient illusion, a program to save the economy by increased dependence on ever more intrusive Government. Thus the Keynesian appeal to Socialists and demagogues of every hue; thus the popularity among those seeking some magic agency to rescue them from personal responsibility for their own future. Thus the appeal, also, to some leading businessmen as a way to reduce real wages--the labor cost of operations--by inflation, without employees' being aware of what was being done to them. And yet, in the siren song of dependence on massive collectivist intrusions into the dynamic functions of the Market, Keynes' macro economics denied the only proven benefit that a macro economic policy had ever conferred on any market.

One must understand that macro economic statistics do not have an independent existence. They are simply aggregations of the results of a vast array of economic decisions, made every day by millions of market participants. The only time macro policy can succeed, is when Government seeks to remove impediments--arbitrary restraints on economic freedom or avoidable factors that inhibit economic choice. The United States' Constitution worked well, when it was actually followed, because all the economic powers granted related to creating predictability in the Market; not predictability of result--that has never been possible--but predictability in uniform measures, sound money; in the rule of law & the enforcement of contractual obligations.

Those businessmen, who embraced Keynesian folly as a way to reduce real wages, often overlooked the reality that it also reduced the value of accounts receivable. And, while it reduced the real cost of what they owed creditors; by making banking & finance more risky, it encouraged the sort of reckless leveraging that led to the recent meltdown.

The history of Governmental efforts to control or manipulate actual market performance has proven one disaster after another. The reality is that no attempt by a select few--by committees or bureaucrats removed from the daily behavior of the individual participant--to plan, control or stimulate market decisions, can ever prove satisfactory substitute to the organic ability of a free Market to adjust to the ever fluctuating dynamics of human action & interaction. The reason is not hard to grasp. The free Market puts every participant on his mettle to find what best suits his purpose, as reflected in an ever changing scene; but a scene, immediately before him! It calls on the best that is within each, who would prosper materially--as the best that is within each who would pursue the less material--in acting to the best perceived effect, within his immediate personal ken.

No committee, analyzing yesterday's statistical aggregations, can provide an equivalent dynamic potential. Rather, when the intention is to macro manage a market, using aggregations of the results of countless millions of past decisions, Government--always more remote--can only get in the way, far more destructively than could any passer by, throwing sand into a gear box.

Never Confuse Government Fiscal Policy With Entrepreneurial Risk

One aspect of Keynesian dogma that does make sense--that appeals to the widest spectrum of non-Socialist adherents--is that which proposes new expenditure on public facilities, roads, bridges, and the replacement of disintegrating public buildings, at times when there is major unemployment, or falling costs of labor & material. The idea, certainly not original with Keynes, is sound, provided the motive is to obtain good by recognizing market conditions, in doing what must be done sooner or later; and thus, by timing, obtain a net long term savings to the Government. That such expenditures may help reverse a severe--as opposed to constructive--cyclical downturn, is an added benefit; as is simply putting unemployed labor to work, even if only temporarily. What must not be done is to extrapolate from this obvious point to the insane notion that there is a benefit in wasteful Governmental spending, intended to artificially pump "money" into an economy, without benefit to the Government or its provident and frugal citizen.

Our caveat would be as obvious as the prior concession, save for a frequently seen pattern in the rise of private business; one not analogous to Government deficit spending, but which may be so mistaken. Many an entrepreneurial success story has involved leveraging limited capital, a small 'grub stake,' with borrowed money; a debt often repaid with ease, if the venture flourished. While far more new ventures fail--particularly among those that tolerate wasteful behavior--than ever truly prosper, that makes less appealing study than that of great success. But that is only one aspect of an essential point. Obviously, no Government is analogous to the individual who risks all on a new venture, or persuades someone to risk capital to invest in or lend money to the enterprise. A Government's duty is to the whole people. It is not in competition with citizens or subjects. Nor can it risk going out of business.

Indeed, a Government has no money to risk, save what it taxes from its citizens--either directly or by devaluing their capital reserves via the issuance of fiat money to inflate the currency. It can never be in the moral position of a banker risking his own money, or that of a corporation he controls. What Government risks, at any moment, always has the effect of redistributing other people's wealth to those favored by the project. Where, in a Constitutional Republic, that project is not one clearly authorized by the Constitution, it is as immoral as it is reckless--in the American context, hardly what the Founding Fathers, who forbad direct taxation but in proportion to a census (that is, falling evenly on every person) had in mind.~

William Flax

~ [There may be exception in an economic crunch in a need to furnish high tech armaments via naval appropriations to the Armed Services, where private financing is not available to build necessary plants. This special situation is not involved in the present crisis.]

Keynes At Harvard--Quacks In Education

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