Tracing the lost legacy of Keynesian liberalism.

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Wednesday, August 4. 2021

Tracing the lost legacy of Keynesian liberalism.

The Man Who Saved Capitalism from Itself - Tracing the lost legacy of Keynesian liberalism.

Posted by The Barrister in History at 13:50 | Comments (9) | Trackbacks (0)

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His risk-averse radicalism resonates in our era, when the political left is concerned with guaranteeing stability (food, housing, health care, steady jobs, protection from environmental dangers), whereas the right has become the party of disruption and insurrection.

In other words, he drew up the blue prints for how the Marxists would be able to destroy capitalism by promising stability rather than revolution, i.e. a guarantee that the elite would be sustained rather than overthrown.

#1 Christopher B on 2021-08-04 16:01 (Reply)

Christopher B: In other words, he drew up the blue prints for how the Marxists would be able to destroy capitalism by promising stability rather than revolution, i.e. a guarantee that the elite would be sustained rather than overthrown.

That makes no sense. Marxism posits revolution as the inevitable result of class conflict. Conversely, Keynesianism economics is a theory of markets.

#1.1 Zachriel on 2021-08-04 17:14 (Reply)

Gramsci and others from the Frankfort school modified the class conflict theory to race conflict theory as there were too many people in the middle class to buy into class conflict. And that is where racist, racist, racist came to the forefront and here we are with BLM, equity, 1619, white privilege and endless diatribe from the marxist academy.

#1.1.1 indyjonesouthere on 2021-08-04 18:21 (Reply)

A typical attempt at misdirection that indicates you know pretty well what I mean but, since your salary depends on aggressive defense of the bougie status quo, you're going to feign ignorance. No theory that features government control of two-thirds of investment, and therefore a similar amount of economic activity, is one of markets. Borrowing a phrase, Keynes and his acolytes may have intended to rule well but they certainly intended to rule. The Marx-inspired dunces who captured control of the Keynesian edifice for the last thirty years or so only mean to do the later, and for their own benefit.

David Brooks did one of his broken-clock articles that bears on this and shows a glimmer of understanding. (H/T:Glenn Reynolds) Emphasis added.

QUOTE:

I got a lot wrong about the bobos. I didn’t anticipate how aggressively we would move to assert our cultural dominance, the way we would seek to impose elite values through speech and thought codes. I underestimated the way the creative class would successfully raise barriers around itself to protect its economic privilege—not just through schooling, but through zoning regulations that keep home values high, professional-certification structures that keep doctors’ and lawyers’ incomes high while blocking competition from nurses and paralegals, and more.

And if you want class conflict, more from Brooks

QUOTE:

And I underestimated our intolerance of ideological diversity. Over the past five decades, the number of working-class and conservative voices in universities, the mainstream media, and other institutions of elite culture has shrunk to a sprinkling. When you tell a large chunk of the country that their voices are not worth hearing, they are going to react badly—and they have.

Bread and circuses works for awhile, until it doesn't anymore. Eventually the faux-stability of ossified institutions comes crashing down.

#1.1.2 Christopher B on 2021-08-05 06:25 (Reply)

indyjonesouthere: Gramsci and others from the Frankfort school modified the class conflict theory to race conflict theory

The claim was that Keynesnism promoted stability in markets to destroy the market system.

Gramsci posited a war of position against cultural hegemony, but it still resulted in a revolutionary war of maneuver to install a socialist system. Not everyone who wants to change the culture wants to install a socialist state.

Christopher B: No theory that features government control of two-thirds of investment, and therefore a similar amount of economic activity, is one of markets.

The sweet spot for the government sector turns out to be about 1/3 to 1/2, which is what the most successful modern economies have.

#1.1.3 Zachriel on 2021-08-05 06:57 (Reply)

There is no "sweet spot" for the administrative state. It always seeks total control and you need only look at government growth in terms of employment and government growth in terms of budget. Gramsci government always makes way for the oligarchs at the top and a big welfare class at the bottom. It is essential for the Gramscis to destroy the stable middle class in order for big government to flourish. That is what the current administration is doing and most every democrat party administration is doing. Destroy the kulaks and destroy stability.

#1.1.3.1 indyjonesouthere on 2021-08-05 11:08 (Reply)

indyjonesouthere: There is no "sweet spot" for the administrative state.

The most advanced economic systems are mixed systems, with robust markets and social safety nets. That's called evidence.

indyjonesouthere: you need only look at government growth in terms of employment and government growth in terms of budget.

Federal net outlays have been 20% of GDP since WWII, at least until the economic collapse at the end of the Trump administration.

Federal employment is about the same today as it was in 1970, even though the population has expanded by 2/3. (The short-term blips are due to the census.)

#1.1.3.1.1 Zachriel on 2021-08-05 13:04 (Reply)

Keynes was overrated. His back and forth with the Austrian School is famous and, at this point, they are basically proven correct.
Keynes' analysis was correct - pump priming works, as long as you pay it back when things improve. Sadly, he ignored (the Austrians did not) the political imperative that somehow, magically, debt can go on forever as long as it wins votes and seems to improve life. Put the grandkids at risk for today's party to continue.
Keynesianism is vote-buying, and now it's true more than ever. Of course, today's debt binging is less capitalism and it's NOT Keynesianism. It's socialism (small 's') in a creeping form. Because eventually the debt DOES crowd out private investment, and eventually all things must be nationalized to 'fix' what the debt broke. Or, in the short term, the bailouts have to continue as each crisis occurs, until nationalization seems to be the 'only solution'.

Keynes was right - but he wasn't properly followed or listened to, so therefore he is very wrong, as well. The Austrians recognized all this and showed him the flaws of his theories...but Keynes had a willing and receptive political audience. And, let's face it, he nailed the Economic Consequences of the Peace pretty spot on. When someone gets something right, we tend to think he'll get everything 'right'.

Despite someone's belief in 'sweet spots' for government control, there is no 'sweet spot'. Generalizing that modern economies are 'successful' despite massive and expanding debt to cover the growing control of government in economies - the naivete is overwhelming. There simply is no 'sweet spot'. The proper 'role' for government in the economy should be not picking a percentage and adhering to it. Emergent Order would indicate that it fills some kind of small role which fluctuates in limited ways, at very small levels.

Comparing economies is a fool's game. Especially for the uninitiated. Cultural and social tolerances vary. Iceland, for example, may be a good place to be heavily socialized. It is very small, it's heavily concentrated in one region, it is a homogenous culture, it has massive barriers and extremely limited resources. While I tend to view socialism as being successful if it's a voluntary exercise, Iceland has a social and cultural imperative which supports that voluntary nature to a very large degree.
That simply can't work here in the US, let alone anywhere else (maybe in New Zealand or other small island states - but New Zealand is facing its own reckoning at the moment and I wouldn't want to live there).

I know there's a troll who will spend time dissecting this and spreading misinformation, but I'll leave it at this. I've done my study and work on the topic of Economics. He has not. That I'm certain of.

#2 Bulldog on 2021-08-05 10:52 (Reply)

Bulldog: Keynes' analysis was correct - pump priming works, as long as you pay it back when things improve.

It's called countercyclical policy, contrary to classical economics advocating procyclical policy, which exacerbates the market cycle.

Bulldog: Sadly, he ignored (the Austrians did not) the political imperative that somehow, magically, debt can go on forever as long as it wins votes and seems to improve life.

Reagan promised that the U.S. could cut taxes and increase revenues, which was poppycock, but it worked for political advantage. The key is that Americans have to support taxes for the programs they want, including Social Security and Medicare. Sweden, which has an extensive social safety net, typically has a budget deficit of only 3-4%, and that is using their own currency, not the Euro.

Bulldog: Keynes was right - but he wasn't properly followed or listened to, so therefore he is very wrong, as well.

Virtually all economists recognize the importance of countercyclical policy. Just like setting flaps on an airplane, it only works if you follow the policy. If you run large deficits during expansions, as did Bush-43 and Trump-45, then you leave the country vulnerable to economic shocks—which is exactly what happened.

The U.S. should have invested in infrastruture at the beginning of the Obama administration when there was significant slack in the economy along with vast underutilized human and material resources. Then it should have raised—not cut—taxes during the Trump expansion. The result would have been that the U.S. would have been cash rich just when the pandemic struck and would have been able to utilize the improved infrastructure during the current recovery, instead of hitting every pothole along the way. But it was apparently more important to stick it to the "libtards."

Bulldog: Emergent Order would indicate that it fills some kind of small role which fluctuates in limited ways, at very small levels.

If the government is too small, it can't respond effectively to economic or other shocks.

#2.1 Zachriel on 2021-08-05 13:33 (Reply)

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Wednesday, August 4. 2021

Tracing the lost legacy of Keynesian liberalism.