Keynes, “Keynes”, and Keynes

October 9, 2012

This was my reply to Tad Tietze’s note on the left and Keynesianism, over on Facebook, which followed a discussion about Syriza and its programme for Greece. It’s been suggested that it’s quite a useful summary of the left’s various confusions about Keynes, so I’m reposting it here – I think it can stand by itself:

The “confusion” Tad mentions is the one that, unfortunately, exists across the left and into wider society. It falls into at least three parts: first, over what anyone understands by “Keynesianism”; second, over what Keynesians themselves say; third, over what Keynes himself actually said or thought. The last, by itself, is of largely academic interest, but it tends to end up creeping into – and informing – the other two.

On the first one, I think the popular understanding of “Keynesianism” is that it is a kind of social democratic macroeconomic management – that government should spend a bit of money to provide services, and that it should spend more in recessions. I’d guess that for the majority of Labour-supporting workers over here that kind of “Keynesianism” reflects a basic social democratic common-sense view about the world. Importantly, it’s not phrased – directly – as a strategy for managing capitalism; it’s strategy for *mitigating* capitalism, which is a distinct thing – and quite different to what an academic or professional economist Keynesian might think they are doing. So there’s a tension, already present, in what “Keynesianism” means for most. Ignorance of that tension is exactly why it is such a mistake for those on the radical left to start denouncing “Keynesianism”: we have to start from the element of good, social-democratic consciousness popular “Keynesianism” contains, not dismiss it in toto. The “Keynesian” demand to end austerity is the *starting point* for a wider critique and the more radical politics that are needed.

This dismissal of “Keynesianism” by the left, I think, reflects a confusion on their part over the second element – what Keynesians themselves say. The “Keynesianism” that dominated economic ideology throughout the post-war period was a strategy for managing capitalism. It had, as a result of its efforts to contain popular demands, more progressive features than the broadly neoliberal period that followed it; nonetheless it was a strategy for managing capitalism. That much I think the radical left more or less gets right.

Where it starts going wrong is in its understanding of what that strategy actually contained. There is – and remains – a spectrum of Keynesian opinion, from the “New Keyensian” consensus that still dominates academic economics, to the far more radical “post-Keynesian” critiques, at least some of whom would explicitly argue they are anti-capitalists. There is remarkably little in common amongst them: Philip Arestis, a leading post-Keynesian, has provided very sharp critiques of the New Keynesian consensus; Gregory Mankiw, a leading New Keynesian, was economic advisor to George W. Bush; you may have seen the recent debates between Steve Keen and Paul Krugman; and so on. The spectrum here ranges from explicit and deliberate management of capitalism in the overt interests of capital, to anti-capitalist programmes conducted in the interest of workers.

What they share, broadly, is at least some relationship to the research programme Keynes himself initiated – the macroeconomy as an object of study and policy action – and a focus within that on (1) the centrality of aggregate demand and (2) the relationship of the monetary system to aggregate demand. (This is probably too broad brush, but I think that’s a fair summary.) Very roughly, in Marxist terms, a concern with the problem of realization and the issues raised by volume 2, rather than (as in more supply-side approaches) a concern with the problems of volume 3.

But this reproduces the tension we see in the popular understanding of “Keynesianism”, in more nuanced form. On one end of the spectrum there are “Keynesians” like Mankiw whom I simply cannot imagine anyone remotely on the left allying with; on the other there are those like Stockhammer with whom very obviously we would. To sweep *all* of this away as *simply* capitalist management or whatever is to gloss over real intellectual and political distinctions. Those distinctions matter, because at least this side of an obviously revolutionary situation, even radicalized workers and popular classes will remain attached to an essentially reformist belief in the possibilities for mitigating the consequences of capitalism, rather than pushing for its overthrow.

Of political necessity, the radical left must work with those who want (ultimately) to reform capitalism; and, if it wants to get beyond the stage of sloganeering, it must develop credible political strategies and programmes with those who do not want abolish capitalism. That would mean, for the economy, working with radical Keynesians: the aim for the radicals, in terms of developing a credible response to the crisis, would be to develop something along the lines of Trotsky’s 1934 Action Programme, or the 1938 Transitional Programme – without fetishizing the contents of either – a credible description of an immediate set of reforms that also indicate the steps beyond capitalism. (For the UK, this would critically include a serious onslaught on financial capital).

(There’s a secondary issue in this: the intellectual and political defeat of the left over the last thirty years has taken a particularly extreme form in academic economics, with Marxists being pushed the absolute fringes of the academy and, without external institutions – certainly in the UK – willing or able to fund serious research, the reduction of Marxist economics too often to the province of hobbyists and cranks. One response to this defeat has been the appearance of “post-Keynesian” as a good label to attract funding and some modicum of institutional support for work that would, in practice, more properly be labeled Marxist.)

Note, by the way, that a “radical Keynesian” programme in this case would mean *hugely* more than just “governments spending more money”: it would include, inter alia, the overhaul of the financial system, the democratic direction of investment, and so on. Keynes himself – to come to the third confusion –at least toyed with this, concluding his General Theory with a call for the “euthanasia of the rentier” and the “socialization of investment”. Keynes was unabashedly, unashamedly pro-capitalist and elitist (retaining, for example, his Presidency of the Royal Eugenics Society right up until his death); nonetheless he identified circumstances in which in order to save capitalism it was necessary to destroy it. It is this tension in his work that the radical left needs to play up to, rather than smothering: that the (correct) insights of Keynes (in aggregate demand, in the dysfunctionality of finance) need bringing out and the contradictions need exacerbating. The anti-capitalist elements should be brought to the fore. A blanket dismissal of “Keynesianism” as such cannot do this.

A crude “Keynesianism” – ie the government spends more money – would work only over the short-term, in current circumstances: there is sufficient spare capacity out there now that, for example, a reversal of austerity would immediately reduce unemployment. It cannot work over the longer-term; the wider dysfunctions of the economy would need to be addressed (its relationship to the environment; the direction of financing and investment), which of course immediately starts to move you in an anti-capitalist direction. That’s what I mean by starting with Keynesianism – the first steps on an anti-capitalist response to the crisis start with a crude Keynesianism, since we must end austerity.


  1. A response from Hassan:

    ‘Excellent summary James. I would add just two points. Firstly, a class analysis of Keynesianism would stress the intra-bourgeois conflict between financial capital and industrial capital. Terrence Beckett (when he was head of the CBI) challenging Thatcher to a bare-knuckle fight over interest rates while she was feted by the City of London is a good example of this “Keynesian” class dynamic.

    ‘The breaching of the Bretton Woods capital controls, and the way this fed into the increasing impossibility of an independent control of the interest rate to promote full employment and growth is another example of policy tensions between productive and financial capital. I mention these specifically because strict capital controls and an independent interest rate policy for full employment are great “transitional demands” which have a firm Keynesian case behind them and permit of an alliance between industrial capital and workers against finance.

    ‘Secondly, on the Keynesian tradition, I would flag up Kalecki´s work on the Political Economy of Full Employment because it points to the inherent limitations with the above strategy. Even productive capital will turn on the workers after a certain point. Kalecki is useful at pointing to the conditions in which this kind of thing is likely to occur and the need to have an independent response (esp. important that workers´ have an independent political base within trades unions and to have this integrated with the state on a social corporatist basis). In this sense it seems to me that “Keynesianism” is really useful for analysing the class conflicts within advanced capitalism and constructing strategies on this basis.’

  2. […] to a blog post he did last October explaining how Marxists like me are too hard on Keynesians (https://faithfultotheline.wordpress.com/2012/10/09/keynes-keynes-and-keynes/).  Meadway’s main argument is that you should not tar with the same brush leftist or […]

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