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Gypsy and Willy

No. 451

The Ghost of John Maynard Keynes

April 12, 2010

John Maynard Keynes is another of those names that you have probably read or heard. He was a twentieth century macro-economist...like Marx before him...but he advocated government policies that he advised would "save" capitalism from the inevitable collapse that Marx foresaw. Keynes is mainly known for advocating "interventionist" economic policy by governments to counteract the negative effects of free market corporate consolidation. In particular, when the boom half of the cycle reverts to bust, he said that governments could keep the growth ball moving by pumping money into the economy. It didn't matter whether this money really produced anything. The idea was to keep factories running and workers working long enough for the tempo of growth to resume, thus producing the wealth to pay off the debt incurred by the intervention. This idea was tested during the great depression by the Roosevelt administration, but really did not appear to work. However, the problem was not that Keynes idea wouldn't work, but that the amount of the stimulus was insufficient to do the job.

Then came World War II. It provided a perfect test of Keynes theory. By producing enormous quantities of killing machines and ammunition, enormous amounts of money were injected into the economy and produced nothing of lasting value. The whole purpose for the tools of warfare is to destroy and be destroyed. You might just as well have printed up the money and dumped it into the ocean.

That worked...and how it worked! The U.S. productive capacity was vastly increased. Sending all those men into the meat grinder of WW II had the secondary effect of changing a worker surplus into a worker shortage. It also gave women and the descendants of former slaves the first real opportunity they ever had to take part in well paid and skilled productive labor. When the war ended, there was a short term problem with all those surviving men returning home and looking for work. However, since the rest of the world...the parts in which the war was actually waged...had been devastated by the destruction, the U.S. was uniquely positioned to become the factory and breadbasket of the world. It quickly assumed that role. Thus the Marshall Plan was born. Another "perfect" Keynesian experiment which spent a lot of money rebuilding Western Europe and Japan, keeping the industrial boom ball rolling and creating unprecedented amounts of wealth in a relatively...historically speaking...short time.

The trouble with this approach, which any bean-bagger can tell you these days...is that the debt never seems to get paid off, but rather...as in any pyramid scam...gets larger and larger...exponentially. Having adopted the "progressive" ideas of Marx, governments never seemed to summon the will to even try very hard to pay the bill for them. Like a youngster with his first credit card, the cornucopia of available goods and services to be obtained was just too great a temptation to worry about paying for it. Furthermore, printing a lot of money and dumping it (in the ocean, in a war, or just to "save" the banks) always creates inflation...that is, the value of the dollar just keeps going down. An economist might say that too much money is chasing too few good, so the prices of those goods increases accordingly. Then the inevitable overproduction occurs and another cycle begins.

Just so you don't think we are going to blame liberals for all the ills we are experiencing, we should note that conservatives tend to try...unsuccessfully in even the very short run...to return to some previous state of affairs that they assume was much better for the vast majority of people. The problem with that is that it is simply not true. There either were no "happy days" in the imagine halcyon past...who would trade poverty in the twenty first century for the "luxury" of the eighteenth century...when the U.S. constitution was written...or...the vast majority of people did NOT benefit from the whatever was happening. We like the example of the much touted "democracy" of ancient Greece. Unfortunately, four out of five people in that "democracy"...were slaves, Oops!

So, concerning the poor amongst us, liberals dump largess on them so that they do not have to worry about being "responsible" for their situation and conservatives just say, "Fuck 'em if they can't take a joke." In truth, however, all of this is really just talk, because all governments in the West, whether they call themselves liberal or conservative, firmly embrace the Keynesian "solution." All of this tends to mask...for a short time, historically speaking...the failures of capitalism.

So, does this mean that we favor communism or some "non-profit" form of economy like that spelled out by so-called communist governments? No way! But it does lead us to predict that nothing substantive will be done about it by either liberal or conservative governments about this until it is way too late. That is, capitalism will collapse world wide within this decade, probably before. Recover? Probably not this time.

What happens thereafter is up to us...the people. At some point we will spell out what we personally think should be done, but first we have to talk about a lot of other problems than the economy to lend substance and plausibility to what we will propose.

Talk to you later...


To contact Gypsy or Willy and comment on what they have written...or anything else...write to willy@dreamagic.com (Willy Chaplin).or gypsy@dreamagic.com (Gypsy)


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