We Are All Keynesians and Socialists Now

February 15, 2009 in Socialism by Greg | 20 comments

Did anyone notice two recent news magazine cover stories recently proclaim that “we all really do seem to be Keynesians now”1 and “we are all socialists now”?2 The great irony that these two stories illustrate is the idea that government intervention in the economy ala Keynesian economics is now making socialists out of United States citizens.

Then-President-Elect-Barack-Obama Why is this supremely ironic? For the simple reason that Keynesian economics has consistently been pawned as the savior of capitalism.3 In 1965 a Time magazine article proclaimed “We Are All Keynesians Now” and contained the following with a quote from Lord Keynes’ book as the lead-in:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. – The General Theory of Employment, Interest and Money

Concluding his most important book with those words in 1935, John Maynard Keynes was confident that he had laid down a philosophy that would move and change men’s affairs. Today, some 20 years after his death, his theories are a prime influence on the world’s free economies, especially on America’s, the richest and most expansionist. In Washington the men who formulate the nation’s economic policies have used Keynesian principles not only to avoid the violent cycles of prewar days but to produce a phenomenal economic growth and to achieve remarkably stable prices. In 1965 they skillfully applied Keynes’s ideas—together with a number of their own invention—to lift the nation through the fifth, and best, consecutive year of the most sizable, prolonged and widely distributed prosperity in history.4

Thirty three years later, Michael Grunwald of Time recently reiterated this concept:

How-to-Spend-a-Trillion-Dollars-Time-Magazine-Cover John Maynard Keynes, the trendiest dead economist of this apocalyptic moment, was the godfather of government stimulus. Keynes had the radical idea that throwing money at recessions through aggressive deficit spending would resuscitate flatlined economies — and he wasn’t too particular about where the money was thrown. In the depths of the Depression, he suggested that the Treasury could “fill old bottles with banknotes, bury them at suitable depths in disused coal mines” then sit back and watch a money-mining boom create jobs and prosperity. “It would, indeed, be more sensible to build houses and the like,” he wrote, but “the above would be better than nothing.”

As President-elect Barack Obama prepares to throw money at the current downturn — a stimulus package starting at about $800 billion, plus the second $350 billion chunk of the financial bailout — we all really do seem to be Keynesians now. Just about every expert agrees that pumping $1 trillion into a moribund economy will rev up the ethereal goods-and-services engine that Keynes called “aggregate demand” and stimulate at least some short-term activity, even if it is all wasted on money pits.5

In other words, “just about every expert” thinks they are saving capitalism by being proponents of Keynesian economics. And yet, as Newsweek pointed out this last week, “we are all socialists now”:

The interview was nearly over. On the Fox News Channel last Wednesday evening, Sean Hannity was coming to the end of a segment with Indiana Congressman Mike Pence, the chair of the House Republican Conference and a vociferous foe of President Obama’s nearly $1 trillion stimulus bill. How, Pence had asked rhetorically, was $50 million for the National Endowment for the Arts going to put people back to work in Indiana? How would $20 million for “fish passage barriers” (a provision to pay for the removal of barriers in rivers and streams so that fish could migrate freely) help create jobs? Hannity could not have agreed more. “It is … the European Socialist Act of 2009,” the host said, signing off. “We’re counting on you to stop it. Thank you, congressman.”

We-Are-All-Socialists-Now-Newsweek-CoverThere it was, just before the commercial: the S word, a favorite among conservatives since John McCain began using it during the presidential campaign. (Remember Joe the Plumber? Sadly, so do we.)6 But it seems strangely beside the point. The U.S. government has already—under a conservative Republican administration—effectively nationalized the banking and mortgage industries. That seems a stronger sign of socialism than $50 million for art. Whether we want to admit it or not—and many, especially Congressman Pence and Hannity, do not—the America of 2009 is moving toward a modern European state.

We remain a center-right nation in many ways—particularly culturally, and our instinct, once the crisis passes, will be to try to revert to a more free-market style of capitalism—but it was, again, under a conservative GOP administration that we enacted the largest expansion of the welfare state in 30 years: prescription drugs for the elderly. People on the right and the left want government to invest in alternative energies in order to break our addiction to foreign oil. And it is unlikely that even the reddest of states will decline federal money for infrastructural improvements.

If we fail to acknowledge the reality of the growing role of government in the economy, insisting instead on fighting 21st-century wars with 20th-century terms and tactics, then we are doomed to a fractious and unedifying debate. The sooner we understand where we truly stand, the sooner we can think more clearly about how to use government in today’s world.7

Who can argue with logic like that? Certainly the United States government continues to move towards fascist and socialist forms of government – “a modern European state” ?? – under the aegis of both political parties. No wonder we were counseled that duty transcends party allegiance.

And how is this government transition being conducted? Under the auspices of Keynesians and neo-Keynesians in both political parties who falsely proclaim that the United States economy is still a “free-market style of capitalism.” That this is not the case, see the article Participatory Fascism.

The fact that Time and Newsweek took opportunity recently to proclaim citizens of the United States as Keynesians and socialists only highlights the irony of these charges while concealing the fact that Keynes had a long socialist pedigree. More on this later.

Sources:

  1. Grunwald, Michael. “How to Spend a Trillion Dollars”. 15 January 2009. Time. 15 February 2009.↩
  2. Meacham, Jon and Evan Thomas. “We Are All Socialists Now”. Newsweek. 15 February 2009.↩
  3. For example, see the many posts on this blog tagged John Maynard Keynes.↩
  4. “We Are All Keynesians Now”. 31 December 1965. Time. 15 February 2009.↩
  5. Grunwald, Michael. “How to Spend a Trillion Dollars”. 15 January 2009. Time. 15 February 2009.↩
  6. See Spread the Wealth.↩
  7. Meacham, Jon and Evan Thomas. “We Are All Socialists Now”. Newsweek. 15 February 2009.↩

Tags: Book of Mormon, Economics, Fascism, Government Intervention, John Maynard Keynes, Socialism

  1. Chris H.No Gravatar on February 15, 2009 at 5:46 pm

    From your title, I had hope that maybe you had converted. I have to get that Newsweek cover for my office. People like Paul Krugman (a leftist Keynesian) and most socialists are pretty annoyed with Obama for not going far enough in the name of bipartisanship. I tend to agree with these critics. Thanks for the post Greg.

  2. ScottNo Gravatar on February 15, 2009 at 7:24 pm

    Now we need to talk about the consequences of our accelerated Socialist path.

  3. GregNo Gravatar on February 15, 2009 at 8:29 pm

    Or fascist path. Either way, our society is quickly moving to the type of society envisioned by the Fabians and other socialists.

  4. GregNo Gravatar on February 15, 2009 at 8:32 pm

    Thanks Chris, in this case though I have to say I am glad to disappoint. Funny thing about bipartisanship, as the left goes further and further afield so do the so-called conservatives. Consequently, bipartisanship seems to have become a meaningless indicator of a person’s political principles.

  5. frankgNo Gravatar on February 15, 2009 at 10:47 pm

    I’ve gone from “show me the plan” to “forget it”. Big government can’t run its own life. I don’t want it to run mine.
    As politicians go further afield to fix the problems they’ve generated, some of us get left behind. I have no interest in bipartisanship if it means giving up my freedoms, beliefs, whatever to join the side that throws me a pittance.
    I feel like I’m watching the building of a new tower of babel.
    Greg, I’ll go back and reread your entries about Zion, etc. as so often I wonder where refuge will be in days to come, if we need to find it.

  6. Mark D.No Gravatar on February 15, 2009 at 11:28 pm

    From a Misean point of view, a central bank that manages the supply of a fiat currency is an intrinsically socialist mode of economic organization. A mode of organization that is impossible to manage without recurring financial and economic crises due to endemic misallocation of financial resources.

    So if one wants to know when the U.S. stepped firmly into the new era of socialist monetary policy, the date was August 15, 1971 – the day Nixon took the U.S. completely off the gold standard.

  7. GregNo Gravatar on February 16, 2009 at 8:49 am

    frankg – I guess it’s like the poet and philosopher George Santayana said: “Those who cannot remember the past are condemned to repeat it.” And by “repeat it” I mean the ominous warning in the last part of Ether 8.

  8. GregNo Gravatar on February 16, 2009 at 8:59 am

    Mark D. – Ah yes, the Bretton Woods agreement that was abolished in 1971. George Q. Cannon said that any attempt to deprive gold or silver as tender in payment of debts is a “violation of the spirit of the constitution” – see Gold and Silver Coin as Tender in Payment. How far have we come?

  9. Chris H.No Gravatar on February 16, 2009 at 3:17 pm

    Greg, you will have to explain how that is a violation of the spirit of the constitution. Are we talking about the Constitution of the United States?

  10. Chris H.No Gravatar on February 16, 2009 at 3:25 pm

    By acknowledging that Keynes falls within the Fabian tradition, your are acknowledging that he is a type of socialist that is in no way Marxist. Yet you (and others) continue to make allusions to Soviet style Marxism/fascism. This is either disingenuous or just misguided. Maybe both. Unfortunately the current administration falls far short of being Keynesian or Fabian Socialist. Obviously this is no consolation to you. For me it beats the alternative of Hooverism.

  11. GregNo Gravatar on February 16, 2009 at 3:33 pm

    Chris, check out the link in my comment to Mark D. above. It contains the proper references to the U.S. Constitution as well as George Q. Cannon’s statement concerning the “violation of the spirit of the constitution.”

  12. Chris H.No Gravatar on February 16, 2009 at 3:41 pm

    Oh, didn’t see the link. Still not buying it.

  13. Mark D.No Gravatar on February 17, 2009 at 12:50 pm

    Chris H., The most cursory investigation will demonstrate that Hoover’s and FDR’s economic policies were virtually indistinguishable. The “Hooverism” you speak of is a twentieth-century myth.

    That is, unless you really intend to express opposition to heavy handed government interference in the economy, large tax increases, price controls, astronomical tariffs, and hostility to free trade.

  14. GregNo Gravatar on February 17, 2009 at 1:06 pm

    Chris, you seem to be unaware that the Fabian Society is prominently mentioned on our blog. However, it’s interesting that you are trying to distance Keynes from “a type of socialist that is in no way Marxist”. That’s a standard Fabian line of propaganda.

    For example, as one writer remarked, “Marx’s socialist forces intended to ‘use its political supremacy to wrest, by degrees, all capital from the bourgeoisie’ and that private savings would be eliminated by the simple expedient of, ‘centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.’ This is pure Keynesianism 45 years before Keynes was born. The elimination of private savings and the ‘euthenasia of the rentier‘ was the touchstone of the entire Keynesian edifice. Government manipulation of credit policies and regulations that control production movements to undermine the principle of property rights was boldly and directly proclaimed by Marx:

    Of course, in the beginning, this cannot be effected except by means of despotic inroads on the rights of property, and on the conditions of bourgeois production; by means of measures, therefore, which appear economically insufficient and untenable, but which in the course of the movement, outstrip themselves, necessitate further inroads upon the old social order, and are unavoidable as a means of entirely revolutionising the mode of production. (The entire quote comes from Dobbs, Zygmond. “Is Keynesianism a Socialist Maneuver?“. Keynes at Harvard: Economic Deception as a Political Credo. Keynes at Harvard. 2009 Web Version. 17 February 2009. This last quote comes from Marx, Karl. Communist Manifesto. Introduction by Harold Laski, Chairman of the Executive Committee of the Fabian Society. Foreword by the Labour Party. London: Allen and Unwin, 1961. 144-45.).

    That the Fabians and perhaps others (see Socialism a Transition Stage for Communism) ala Keynesian economics and other tactics have been successful in nationalizing U.S. banks is apparent for all to see. See Jon Meacham and Evan Thomas comments above. Keynesian economics has also been used to successfully eliminate the role of savings in our economy; for example, see the article Keynesian Economics and Savings. That the current administration is approaching the present “crisis” based on Keynesian intervention should be apparent to all. $787 Billion apparent!

    Concerning the history of socialism and the Fabians’ ties to Marxism, Harold Laski of the Fabian Society pointed out in the 1961 reprint of the Communist Manifesto:

    The Modern, world wide Socialist movement has antecedents far back in history, but in its present scientific formulation it began with the appearance of the Communist Manifesto in 1848.(Ibid).

    That’s from the Chairman of the Executive Committee of the Fabian Society himself(!), although some point to Henri de Saint-Simon – a French utopian socialist – as the father of modern socialism. For his interesting experience with an “angel”, see Saint-Simon and Charlemagne.

    Lastly, you may want to get a copy of Contemporary Capitalism by John Strachey – another Fabian – who traced the roots of that movement to Marx. His book is mentioned in the post Strachey on Keynesian Economics.

  15. Mark D.No Gravatar on February 17, 2009 at 1:26 pm

    Greg, I hardly doubt that there are manifest similarities between Marxist socialism and any other form of state socialism we might care to name.

    However, the most critical difference was Marx’s advocacy of violent revolution. As such the term Marxist has come to refer primarily to those socialists who advocate violence in furtherance of their cause. In Europe, one of the biggest changes over the past few decades is that socialist political parties have largely disavowed their association with Marxism is this sense, while maintaining the general goal of achieving a socialist society by majoritarian means.

  16. GregNo Gravatar on February 17, 2009 at 3:48 pm

    Mark D. – Certainly there are forms of state socialism that are non-revolutionary. And as I mentioned on another post, there are forms of state socialism that have produced laudable results as is the case in some European countries.

    On the other hand, 150 years after the Communist Manifesto was published, the United States banking industry has now been nationalized and the rate of savings in this country is so low that the government now controls the reigns of credit, both of which were teachings of Marx. So in that sense I tend to disagree with the statement that there are no “manifest similarities between Marxist socialism and any other form of state socialism we might care to name.”

    As quoted above, “Marx’s socialist forces intended to ‘use its political supremacy to wrest, by degrees, all capital from the bourgeoisie”. Following that same line of reasoning, the Fabians sought to “accomplish socialism through a very gradual process using the voting booth and representative democracy as their instrument of change” (see Proposition 8, Mormons and the New Statesman). In this sense, I concur that “socialist political parties have largely disavowed their association with Marxism in this sense, while maintaining the general goal of achieving a socialist society by majoritarian means.”

  17. Mark D.No Gravatar on February 17, 2009 at 4:02 pm

    Greg, “I hardly doubt that there are similarities” means I agree that there most definitely are similarities. Double negative.

    I also agree with your point about Marx. I just mean to say that by convention, or as a matter of nomenclature, the term “Marxist socialism” is used to refer to violent revolutionary variety.

    I agree that the U.S. banking system is intrinsically socialist in its mode of operation, has been since the advent of the FDIC, and more especially so since we abandoned the gold standard starting in about 1968. And of course nearly all of these problems would be avoided if we returned to a gold standard and required banks to maintain a 100% reserve ratio on demand deposits in accordance with traditional legal principles. Inflation would evaporate, and depository institutions would never fail. No fractional reserve banking, no endemic financial crises.

  18. GregNo Gravatar on February 17, 2009 at 4:14 pm

    I’m sorry Mark D., I simply didn’t catch that! :( I’m trying to do to many things at once right now. Thank you for clarifying your comments. I think the gist of my posts and comments are to some degree just documenting the long slide towards forms of fascism/socialism our country has been implementing.

  19. Chris H.No Gravatar on February 17, 2009 at 6:49 pm

    Hmmm…I give up. I will be happy with my side having power.

  20. Mark D.No Gravatar on February 18, 2009 at 10:49 pm

    Chris H., Power may be some small comfort if the budding socialists of the world inflict the next Great Depression upon us the way they did the last.

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