Keynes and the Bastards

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Mon Aug 9 12:27:58 PDT 1999

There is a nice section "Was Keynes a Socialist" in Galbraith and Darity's textbook Macroeconomics (Houghton/Mifflin, 1994):

"Keynes immediately added that such a socialization of investment 'need not exclude all manner of comporomises and of devices by which public authority will cooperate with private initiative.' Moreover, only investment planning was involved : 'Beyond this no obvious case is made out for a system of State Socialism which would embrace most of the economic life of the community.' After all, argued Keynes, 'It is not the ownership of the means of production which is important for the State to assume. If the State is able to determine the aggregate amount of resources devoted to augmenting teh instruments and the basic rate of reward to those own them, it will have accomplished all that is necessary.' [same as John Roemer?rb]

"Keynes was serious then when he expressed enthusiasm for the social philosophy of the idiosyncratic Argentinean emigre Silvio Gesell, whom Keynes described as a 'strange and unduly neglected prophet" albeit a 'crank.' Gesell had striven to construct, quite explicitly, what Keynes corrected described as an 'anti Marxian socialism.' And Keynes himself, while contemplating a 'somewhat comprehensive socialization of investment,' was insistent that his own scheme would avoid authoritarianism while 'preserving' the desirable aspects of 'present day capitalistic individualism,' namely the twin goods of 'efficiency and freedom.' However unless steps were taken to end the unemployment crisis, Keynes feared, few would continue to put up with the ills of 'present day capitalistic individualism."

Keynes' concepts are indeed quite slippery, e.g., the marginal efficiency of capital (an objective or subjective concept?) and the euthansia of the rentier or elimination of the functionless investor. What for example did Keynes mean by the abolition of interest through the elimination of the functionless investor? An elimination of the price paid to commercial banks for creating media of payment/high power money or the elimination of property income as such? The disappearance of *interest* need not mean the euthanasia of the rentier of course since the functionless investor would merely old other assets (e.g. stocks) instead of holding debts (bonds). And what would it mean for the banks to get no reward for creating media of payment if this is what Keynes meant by the elimination of the functionless investor? Since the commercial banks are indispensible in a capitalist system, Keynes would have to propose a complete socialisation of the banks since if their services were to be offered gratis their costs would have to be covered out of general taxes. but this is not what Keynes meant by a somewhat comprehensive socialisation of investment, yet that would be the only way to abolish interest as a cost on firms. And if Keynes meant to abolish the rentier class, he should have advocated 100% tax on all income from property, or nationalisation and socialisation of all income yielding property. But this he did not do either. So it seems that no meaning can be derived from his famous call for euthanasia of the rentier or a somewhat comprehensive socialisation or (one could argue) the marginal efficiency of capital. Keynes seems to have been a confused and confusing man, perhaps a first rate intellect who became so mentally unsettled and unstable by his catastrophic times that he descended into the true underworld of demagogues and cranks. yours, rakesh

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