Clintonism, Monicagate and the budget

Doug Henwood dhenwood at
Wed Feb 10 14:20:36 PST 1999

curtiss_leung at wrote:

> Does Keynes's paradise have anything to do with Mandeville's _Fable of
> the Bees_? I'm asking because a position like Mandeville's might
> provide some help for those despairing of hair-shirt leftism. Any
> vanguard party that would promote economic vigor through consumption,
> lax morals, and tolerance would be one I'd join...

Not this specific paradise, no; Keynes's Eden ruined by thrift is in the Treatise on Money. But there's a passage in the General Theory celebrating Mandeville. Please forgive me the unbearable pomposity of quoting myself, from Wall Street:


Liquidity preference draws attention away from the level of savings and towards the question of how they're allocated. Orthodoxy argued in Keynes's day, and continues to argue in ours, that higher savings rates are to be encouraged, so that new investment could be more cheaply financed. The implication is that investment capital is short. Keynes argued instead that while investment can be "congested" through a shortage of cash -- difficulty in amassing borrowed money under the finance motive -- it never can be congested by a shortage of savings. He called this "the most fundamental of my conclusions within this field." For the society as a whole, long-term investment can fund itself. "Increased investment will always be accompanied by increased saving," wrote the optimistic Keynes, "but it can never be preceded by it. Dishoarding and credit expansion provides not an alternative to increased saving, but a necessary preparation for it. It is the parent, not the twin, of increased saving." Attempts to reduce pressure on cash by cutting back consumption -- the prescription of orthodox thrift-promoters of the 1920s and the 1990s -- will do so, but only by depressing income and ultimately investment. Moreover, "spending releases funds just as much as saving does, and ... these funds when released can then be used indifferently for the production either of capital goods or of consumption goods" (CW XIV, pp. 216, 219, 222, 229, 232, 281, 282). Money must circulate, not congeal into a hoard.

Like the Treatise, the General Theory's message is resolutely expansive: spending, not sparing, generates wealth. Moralists, whether Calvinist, neoclassical, or even Marxist, find this aspect of Keynes scandalous, a reaction he seemingly went out of his way to provoke. Much of Chapter 23 is devoted to a rehabilitation of historical kindred spirits, of whom official opinion disapproves: mercantilists, immoralists, underconsumptionists, promoters of usury laws -- even that old monetary crank Silvio Gesell.

Among the immoralists is a book that a Middlesex grand jury of 1723 convicted of being a nuisance, Bernard Mandeville's Fable of the Bees. The poem and commentaries "set forth the appalling plight of a prosperous community in which all the citizens suddenly take it into their heads to abandon luxurious living, and the State to cut down on armaments, in the interests of Saving" (CW VII, pp. 359-362). The community sinks into deflation and despair. Mandeville's tale is "not without a theoretical basis," as Keynes points out. In the commentary, Mandeville argued that while an individual family can save itself rich, a nation cannot -- an observation that Adam Smith probably had in mind when he wrote, contrary to the fabulist, "What is prudence in the conduct of every private family can scarce be folly in that of a great Kingdom." Mandeville's advice to the state was to practice the economics of joy, encouraging manufactures, arts, and agriculture to produce to their fullest, and to cultivate "the Fruits of the Earth and the Labour of the People, both of which joined together are a more certain, a more inexhaustible and more real Treasure than the Gold of Brazil or the Silver of Potosi."

To this Keynes added his own fillip:

<blockquote> No wonder that such wicked sentiments called down the opprobrium of two centuries of moralists and economists who felt much more virtuous in possession of their austere doctrine that no sound remedy was discoverable except in the utmost of thrift and economy both by the individual and by the state. Petty's "entertainments, magnificent shews, triumphal arches, etc." give place to the penny-wisdom of Gladstonian finance and to a state system which "could not afford" hospitals, open spaces, noble buildings, even the preservation of its ancient monuments, far less the splendours of music and the drama, all of which were consigned to the private charity or magnanimity of improvident individuals. </blockquote>

By Keynes's telling, Mandevillean exuberance disappeared from respectable circles until Malthus who, like Keynes, opposed Smith's doctrine that capital is increased by parsimony. Malthus feared that mass poverty would cause a chronic insufficiency of demand, leaving capital and labor to languish unemployed. Against this tendency towards anemia, Malthus celebrated the economically stimulative effect of "unproductive consumption on the part of the landlords and capitalists" (CW VII, p. 363).

Here Keynes seems very much like a rebel within his own class. As Marx (1963, pp. 170-172) argued, Mandeville and Malthus were part of an offensive to counter Adam Smith's distinction between productive and unproductive labor. Capitalism, Marx argued, reproduced "everything against which it had fought in feudal or absolutist form" -- a parasitical elite. Smith, speaking for the early capitalists, found this stratum an obstacle; they contributed nothing useful, consuming social wealth but producing nothing in return. This was not well-received among the better orders. In Marx's words, the "'higher grade' workers -- such as state officials, military people, artists, doctors, priests, judges, lawyers, etc. -- some of whom are not only not productive but in essence destructive...found it not at all pleasant to be relegated economically to the same class as clowns and menial servants and to appear merely as...parasites on the actual producers." This "compromise" between the capitalists and the burdensome elite found "the do-nothings and their parasites...a place in this best possible order of things." Malthus and Mandeville, Marx conceded, were to be preferred to later apologists, because they recognized the parasitism of the unproductive even as they found their overconsumption helpful. Mandeville even held that "Evil" is what makes us social creatures, and is "the solid Basis, the Life and Support of all Trades and Employments without exception" (Marx 1963, pp. 375-376).

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