ENTRY
[ESC]DOC TAYROC'S [UNSOLICITED] ECONOMICS HOT THOUGHT
Marx and the Death of the Author: Keynes Part II: Here's Johnny
As a fan of 1990s era Star Trek I would like to here have the moment of Majel Barret going 'Previously on Deep Space 9' and a brief recap of the previous episode, but I here I'd also have to do it in a very in media res version where I simultaneously jumped back to a previous point in the time line. By which I mean, of course, the previous entry ended with the American bourgeois getting over excited by factories, a concept they claimed they invented despite British economist Adam Smith having observed them before their economy existed as a legally discrete entity. The result of this American over enthusiasm, of course, was the 1929 crash of the New York Stock Exchange, often regarded as the loudest early symptom of the period known as the 'Great Depression'. But to fully understand the world that Keynes was reacting to, we have to jump back, yet again, to the moment the Hapsburgs finally and truly realised no one liked them, that fateful 1914 day in Sarajevo.
Instead of retreating into introspection on their unpopularity, the Hapsburgs decided to use violence. Such actions, of course, being one of the reasons no one liked them. This violence attracted the attention of another deeply unpopular family, the Romanovs. The Romanovs were now led by Nicholas II, and Nicholas II knew that he had the charisma of Keir Starmer and the administrative skills of Liz Truss. That is to say, he was profoundly lacking in any of the traits necessary to be the simultaneous head of state and government of a major European power. The major European power in question was trying to play 'catch up' with the rest of Europe by trying to create a bourgeois, but the bourgeois class noticed there was more wealth to be found outside Russia, and thus took what assets the Russian Empire had left and sold them off to British, French, German, and other foreign bourgeois entities without much thought as to how it would impact the Russian proletariat, leaving little room in the Russian economy for Russian development. When Russia suddenly found itself at war with Germany, the distinct lack of resources in the local economy became profoundly more obvious to everyone, and the short term profit seeking behaviour of the bourgeois was now having long term negative effects. Thankfully for the bourgeois, they could afford to relocate away from the problems, and Nicholas had neither the charm nor the skill to prevent this occurring. What is more, despite Nicholas knowing he lacked these necessary attributes, he sincerely believed God had given him 'magic blood' and so he had to rule Russia regardless.
In 1917 the people of Russia finally decided to put that magic blood theory to the test, and in 1918 Bolshevik partisans demonstrated conclusively the blood was not magic by spraying it all over the walls of Ipatiev House. Tsarist Russia had come to a remarkably quick conclusion.
As I've mentioned a not insignificant number of times before, what followed was a bloody civil war and eventually the proclamation of the new Union of Soviet Socialist Republics (USSR) by 1922. As I've also written before, we're not here to discuss what the Soviets actually were or weren't, nor to discuss the merits or demerits of Lenin, Trotsky, or Stalin. We're just here to acknowledge the Soviet Union existed, and by the time the 'capitalist world' descended into the Great Depression there are two things to note about the Soviet Union:
It existed
It didn't experience the Great Depression.
Unlike modern China, the Soviets rejected the Capitalist World system entirely, rather than try to centre themselves in it. As such, the global 'after shocks' of the Great Depression had little bearing on the ongoing economic development of the Soviet Union. This fact, mixed with the aforementioned total rejection of the capitalist system, was a source of immense discomfort for the bourgeois classes of Britain and America as they watched their system further falter in the aftermath of the 1929 collapse. For the first time since the Napoleonic War, the basic assumptions of bourgeois capitalism were being questioned and 'that crazy Marx' and his followers seemed to have pulled together a viable alternative to the bourgeois system.
Marx might have been right after all.
In a truly free marketplace of ideas we'd let the Soviet Union be and let people choose which ideology they prefer. Capitalists, as you may have noticed, can't actually allow perfectly free marketplaces as this inhibits efficient extraction of wealth, and godforbid, people might prefer the competition. As such, the capitalist will always seek the elimination of the competition, part of why capitalism has this nasty tendency towards monopolisation. When this is extracted to the geopolitical realm, the Soviet Union and other socialist economies cannot be tolerated, rather they must be eliminated so as to ensure the capitalist mode of production has an absolute monopoly on global resources. This will become more important as the 20th century continues.
For now, economists still favouring the capitalist mode of production had no choice but to engage Marx. As long as the Soviet Union existed, regardless of what it was actually doing inside of itself, it represented an existential challenge to the continuation of capitalist logic itself. As the Great Depression continued, a not insignificant number of the 'surplus army of labour' packed up bags and left capitalist countries for the Soviet Union since it appeared that's where economic opportunity now existed. Whether or not the Soviets were actually truly 'Marxist' or 'Communist' was immaterial, the mere existence of the Soviet Union undermined the capitalist hegemony.
Keynes is one of those economists still favouring the capitalist mode of production. He is, as mentioned in the previous post, very much a product of British bourgeois thinking, which had based its identity in capitalism since the 17th century. As such, 'thinking outside the box' was a remarkable epistemological challenge. When you come from a place of privilege, any challenge to the privilege becomes an attack, inhibiting your capacity to engage with it in any 'level-headed' way. Further complicating thing is the place 'science' was when Keynes was doing his work.
In 1859, Charles Darwin published On the Origin of the Species. Darwin wasn't that interested in the wider politics of the British Empire during Pax Britannia, he was interested in finches and their beaks and what it might suggest about where homo sapiens may have originated. Unfortunately for the human species, Herbert Spencer was interested in the wider politics of the British Empire, and so we got 'social Darwinism'. Spencer, you see, sought a scientific theory to validate British supremacy over her empire, since Britain hadn't historically used religion to justify it to the extent that the French, Spanish, and Portuguese had. Spencer, therefore, sat out to prove 'scientifically' the supremacy of the Anglo-Saxon over the Celt and other races under British rule. Spencer sat out a hierarchy of races that put the white Anglo-Saxon at the top and the Black [word I'm not going to write, but yes he explicitly used that word] at the bottom. Finally, he argued that the Anglo-Saxon and their capitalist mode of economy had become so finely evolved through the 'survival of the fittest'.
Real biologists and students of evolution know that the evolutionary process doesn't always yield improvement. It's a sloppy, messy, stochastic process that sometimes yields 'positive' results, but has no agency and therefore has no concept of 'good' and 'bad' and 'improved' over 'made worse'. It just works through random chance over the course of hundreds of millions of years, far beyond the scope of the written history of humankind. All this to say that understanding all of evolutionary biology through the over simplified lens of 'survival of the fittest' was an oversimplification then and now. Further, no where in the idea of biology do we treat individual races within homo sapiens as discrete species. There is simply no justification for this, as biologically the differences are superficial at best. It'd be like saying my two cats are different species because one is calico and the other is black and white. Actual science matters little to bigots, as do any other form of reason or logic. Rather than learning how to shed their bigotry through science and reason, they appropriate the language of science or reason to justify their bigotry. The most thorough misuse of our natural tendency for confirmation bias. Spencer's 'social Darwinism' would become 'scientific racism' would become 'eugenics'. Soon capitalism itself picked up the language of eugenics, it was the 'scientific' mode of production, since it was 'survival of the fittest'. Nature itself ordained it, and to go against capitalism and white supremacy were to go against nature.
Keynes was openly into eugenics, and it's not hard to see this deeply flawed understanding of the human race creep into many of his assumptions. Capitalism might have failed in 1929, but it was still worth saving because it was the 'natural order of things', and therefore held intrinsic value. Marxism remained 'against science' in the mind of Keynes, and there was still room to assert that 'propping up the weak' would have long term deleterious effects. Of course, the idea that capitalism itself could be 'the weak' was simply out of question.
This is all important because some assert that Keynesian is a form of socialism. This might well be true, but the better way to engage it is as the 'minimal amount of socialism possible' to 'save capitalism'. Again, this is done because the assumption is that capitalism both can be saved, and should be saved and Keynes likely gave no viable consideration to any alternative to these assumptions. As such, Keynesianism is devoid of critiques of the nature of capital, or of class struggle, or of class at all. It sees capital's natural tendency towards monopoly and assumes the state will always have the will to enforce anti-trust laws. It sees capital's natural tendency towards a 'reserve army of surplus labour' and deems the state to be an employer of 'last resort' to quell the masses. It sees capital's risk adverse nature and centralising nature and makes the state into 'lender of last resort'. Giving those capital rejects a 'safe landing' but with the assumption that capital is the preferable alternative. The powers of the state expand, but the state will still defer to capital. Capital must exist, but it also must sign a 'social contract' with the state, akin to the one signed by the rest of the citizenry. Regardless, the logic of capital will still persist.
The 1929 crash had a lot of obvious reasons. Modern factory labour could produce a surplus of 'cheap' goods at a rate that had been previously unheard of. However, the employment conditions in these factories typically made it difficult for the workers to enjoy the fruits of their labour. Labour had attempted to respond to this through the act of unionising. Capitalist states, ever the vanguard of the bourgeois revolutions of a century prior, responded with both implicit and explicit violence to put down these labour movements. Part of the implicit violence was that of classism, lampooning the workers as greedy, lazy, entitled, and uneducated. 'They hated capitalism because they didn't see the bigger picture' or 'understand it'. As such, a sophisticated, educated type like Keynes would yield his influence within the state to show them the error of their ways.
And so came the first wave of third way-ism. If the British state could temper capitalism's worst excesses, then the effect would be the rehabilitation of the image of both capitalism and he state, thus saving the bourgeois revolution the embarrassment of acknowledging that it was starting to run out of steam after over two centuries in charge of the British economy. Of course, one of the easiest way to rehabilitate the bourgeois revolution was to further strip the remnants of the British feudal aristocracy that hadn't fully integrated into the bourgeois of what little assets and power they had left, further accelerating a process that Cromwell had started in the 1640s. Of course, in a few decades after this action television series like Upstairs, Downstairs and Downton Abbey would frame this as a tragedy, oh how sad these aristocrats couldn't extract rent from the peasants on their land any more, truly a bygone era of Britain forever lost. But for the rest of the political establishment, there was little interest in saving many of these decaying social institutions that had lived well past their sell-by date, and (finally) moved much of their land into public ownership.
The Labour Party was, in those days, closer to being as left-wing as it has been accused of being since its inception. Still no where near the Bolsheviks, but nearer to Lenin than Blair at this point in its existence. Further, the recent fracas with the Germans had created a very odd sort of class solidarity amongst the British proletariat, who had just spent the better part of four years fighting and dying in the name of the state, and now they reckoned the state owed them for the lasting emotional, physical, mental toll that being shot at for four years in the unrelenting slog of industrialised war does to one.
It was into this period of change and economic collapse that Keynes released his single most famous work, The General Theory of Unemployment and Prices, in 1936, which laid out the core tenements of what would become Keynesian economics. (Henceforth I'll refer to it as The General Theory, since that's what everyone else refers to it as). If you're a fan of the 1986 John Hughes film Ferris Bueller's Day Off, you may recall a scene where failed economist, game show presenter, racist, and fascist apologist Ben Stein was giving a room full of secondary schoolers a lecture on supply-side economics. Supply-side is still the order of the day, and was the mode championed by the likes of Friedman, Greenspan, Reagan, and Thatcher. It is, of course, the most capitalist a capitalist can be, as the idea is the producer of goods has no social duty in the consumption of them. It can merely make as many as it wants, dump them into the 'free market' and somehow consumer surplus makes us all richer. With the jobs created, and the trickle down, and all that. It is a hollow, stupid idea, but if you present it in a monotonous enough way with enough big words attached, and have someone good at playing pretend-boring-intellectual grown up like Ben Stein, then the alternatives are the childish ones, the products of naive dreams or a lack of knowledge of the economy. Take that, Joseph Stiglitz, Robert Reich, Hyman Minsky, John Maynard Keynes, and of course Karl Marx, you're the silly ones because you don't have Ben Stein being playing 'reasonable adult' in the room.
Keynes, was the beginning of 'demand-side' economics. What good was a massive consumer surplus if no one could afford to consume the surplus goods? Rather, Keynes argued, sound economics policy pushed for full employment, and if there was still a consumer surplus at the other side of full employment, then it was industry that needed to scale down, not consumption that needed to scale up. Despite being an avowed anti-Marxist, Keynes had just attempted to tackle one of Marx's central critiques of capitalism:
Capitalist production can by no means content itself with the quantity of disposable labour power which the natural increase of population yields. It requires for its free play an industrial reserve army independent of these natural limits.
Up to this point it has been assumed that the increase or diminution of the variable capital corresponds rigidly with the increase or diminution of the number of labourers employed.
The number of labourers commanded by capital may remain the same, or even fall, while the variable capital increases. This is the case if the individual labourer yields more labour, and therefore his wages increase, and this although the price of labour remains the same or even falls, only more slowly than the mass of labour rises. Increase of variable capital, in this case, becomes an index of more labour, but not of more labourers employed. It is the absolute interest of every capitalist to press a given quantity of labour out of a smaller, rather than a greater number of labourers, if the cost is about the same. In the latter case, the outlay of constant capital increases in proportion to the mass of labour set in action; in the former that increase is much smaller. The more extended the scale of production, the stronger this motive. Its force increases with the accumulation of capital.
- Karl Marx, Capital Vol 1 Sec 3
This is to say, Marx observed the tendency of capital to maintain what Marx termed an 'industrial reserve army' of 'surplus population' necessary to production in order to keep wages low. The implicit or explicit threat of unemployment, and all the social, fiscal, and legal costs associated with unemployment (especially in 19th century Britain, but also especially in post-Thatcher Britain and post-Reagan America) forced workers to labour for relatively low wages. Further, capital sought to use automation to further alienate labour from skills and value, in order to make individual workers more replaceable. The capitalist push for universal education in 18th and 19th century Britain came from two sources; first, a Protestant desire for everyone to read the Bible in the hopes that everyone would become a Biblical literalist like they had become. Second, and more important, if every worker could read and do basic maths, then they would no longer have to pay extra for the individuals who could read and do basic maths. (I'm planning a series on different philosophies of education and so we will return to this in later posts).
Keynes, in his stated push for full employment was doing Marx, and proving yet again that the most prominent opponents of Marx had never taken the time to read him. Or perhaps he had, imitation is the sincerest form of flattery and that.
Of course, as a Marxist, I'm not going to say that Keynes is a Marxist. Because he's not. And here's why, Keynes still believed in the inherent good of the free-market, it just needed a guiding hand alongside that long promised invisible hand. In order to justify where the visible hand of the state was needed to guide the invisible hand, Keynes had to set out what runs consumption, and he came up with this formula:
C = a + bY_dOh it's a straight line again. It's always a straight line. Crazy how statisticians and econometricians always come back to y = mx + b. The constant here is a, which is 'constant demand', or the consumption of price inelastic goods. bY_d is consumption relative to income. This is where our price elastic goods live. Price elasticity of demand calculated thusly:
\varepsilon = \frac{\partial Q/Q}{\partial P/P}That is to say the change in quantity consumed divided by consumption is then divided by the change in price divided by the price. In plainer terms, there are some goods that you will consume less if the price increases. My Steam Deck and my considerable Steam library is an awfully nice thing to have, but I purchased my Steam Deck long before the current RAM crisis and most of my library was purchased during one of Steam's many sales. Would I purchase a Steam Deck today? Maybe, and it's relative to my income and how much I feel I can justify owning a Steam Deck. I rather enjoy having one, the idea of a Linux-powered gaming machine backed a company that still agrees with me (for now) that I own the things I buy is very appealing. More appealing than forking funds over to a company, like say Sony or Microsoft, that have increasingly open disdain for consumers. However nice a Steam Deck or Steam Machine is, however, I can indeed live without video games and/or make do with the computer hardware otherwise at my disposal. My 'regular' computer, is a bit less price elastic, as most of the modern economy functions in the internet, making both an internet connection and a computer closer to a necessity. Much closer to necessity than they were when I was a kid in the 1990s and both computers and the internet were 'luxuries'. I can live without a computer or an internet connection, but I do so at increased personal cost. What I can't live without, especially in a climate like Britain's is heated shelter, water, and food. Those become price inelastic. Further, I'm a neurodiverse type, and have a lot of the old depression in me. As such, I regularly need healthcare services, which are also price inelastic. Thanks to the NHS, I don't pay much for my medication here in the UK, but when I was doing my schooling in the states, I paid considerably more. It wasn't fair, but I literally needed to in order to remain a 'functioning member' of the economy. (£9.90 is still too much, of course, and we should fully nationalise the NHS again, no public-private partnerships, please. If you've ever voted Tory before, never do so again, the £9.90 is only in England! In Scotland they don't pay at all!).
Keynes' argument was, in short, that the government take over the price inelastic goods. The things people needed to survive and/or participate fully in the economy were to be the domain of the state. Before The General Theory, we had seen some of this in Britain in the inter-war years. The above mentioned 'class consciousness of the trenches' had resulted in the Homes for Heroes programme that saw a rapid expansion of public housing across Britain. In the pre-capitalist era, the church provided many of these services as well, as did the various forms of pre-modern state that had existed. Graeber points to many, many pre-capitalist societies both inside and outside Europe that just did this by default as his means of arguing that capitalism was never inevitable. Regardless, capitalism needed the threat of the USSR, internal revolt, and ongoing economic collapse to have some sense knocked into it. Even then, many of the capitalist class in Britain, the US, and Germany still preferred fascism to this, as fascism promised them literal captive populations to be that surplus army of labour and to honour their right to private property. In the US, Franklin Roosevelt was already pushing forward with many Keynesian programmes, and the result was George W. Bush's grandfather instigating an attempted fascist coup in the form of the 'Business Plot'. Unfortunately for them, the man they tapped to be the military strongman, Smedley Butler, was a closeted socialist who exposed their plot to the masses. As punishment, only two of Prescott Bush's descendants got their respective turns to push the US to the far-right.
In the Bush family, we see the first failing of Keynesianism. In Britain, price inelastic goods got largely nationalised. Energy came under the concern of, amongst others, British Gas. Railway infrastructure, which had been dominated by four government-sanctioned monopolies (London and North Eastern Railway (LNER), Great Western Railway (GWR), London, Midland, and Scottish Railway (LMS), and Southern Railway (SR)) got nationalised into British Railways. Council housing projects popped up across the nation, and all telecommunications became part of the General Post Office (GPO). Most famously, healthcare (minus mental health, dental care, and eye care because big 1948 brain moment) got nationalised and centralised into the National Health Service (NHS). Education became further universalised, and free up to the undergraduate level, as such the British university system had its largest expansion since its inception in the pre-England days of the University of Oxford. For those who didn't desire a liberal arts education, polytechnics also opened across the island. The result, of course, was the most rapid improvement in the quality of life for the average Briton ever recorded, and a subsequent explosion in consumer demand, as with all the necessities cared for, people could afford to buy luxury goods. Similar programmes in the states saw similar results, and thus the 1950s and 60s would become known as the 'golden age of capitalism', with soaring quality of life across the white parts of the British Empire and Commonwealth (Britain, Canada, Australia, New Zealand, the white bits of apartheid South Africa), the white parts of the US (sensing a theme yet?) and the 'well behaved' bits of Western Europe and East Asia.
The price elastic goods, as hinted, stayed entirely in the free market. As did a whole bunch of the military stuff and petroleum. And this is from whence the downfall of Keynesianism would begin, because it turns out the bourgeois class is the kind of people that, when you give them an inch, they take the mile. Tune in next week for the death of Keynes.
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