http://www.thenation.com/article/163795/what-would-keynes-do-forum
October 5, 2011
The Nation
What Would Keynes Do? | A Forum
Doug Henwood , Matt Yglesias and James K. Galbraith
WWKD: "Somewhat Comprehensive Socialization"
By Doug Henwood
Before I say what I didn't like about Thomas Geoghegan's essay on
Keynes, I want to applaud something I really like about it: his
dismissal of protectionism. That's rare on the left, especially the
labor left. You often see analyses coming from our side that compute
job losses from trade--basically by dividing trade deficits by country
by the average U.S. wage--while allowing no offsetting gains from
trade.
To steal Keynes's word, any protectionist moves by the US now would be
"treacherous"--they could drive the world into deep recession.
Obviously the US trade deficit is unsustainable, but our voracious
demand for imports has been a great support for the global economy.
Taking that away suddenly would be disastrous. Something's got to give,
but that's a project for the long term.
But I fervently disagree with the emphasis Geoghegan places on keeping
interest rates low. As any Keynesian could tell you, in a depression,
even a zero rate of interest cannot overcome fear. In an economy as
rocky as this, investors prefer US Treasury paper--which has continued
to trade at ever-lower interest rates since the S&P downgrade--to
riskier bets. (Prospects in private markets can't be great if investors
are willing to lend a supposedly busted Washington money for 10 years
at a rate well under 2 percent.) That is precisely why the government
has to do some investing: no one else is.
As Keynes said, "For my own part I am now somewhat sceptical of the
success of a merely monetary policy directed towards influencing the
rate of interest. I expect to see the State...taking an ever greater
responsibility for directly organising investment." He was always coy
about exactly what he meant by this, or his statement later in the
General Theory embracing "the somewhat comprehensive socialization of
investment." Bringing Keynes back means talking about that sort of
thing, with some more precision.
Joan Robinson said that it was a pity that Keynes talked so much about
investment without talking about what investment should be for. She has
a point. The burying bottles only to dig them up example may be
reductio ad absurdum, but it's still revealing.
The investments that the private market is not making are those
necessary to deal with climate change. Clean energy, fast trains, all
that wonky stuff like smart grids and retrofitting isn't the kind of
thing that gets the heart racing, but it all has enormous potential to
generate not only domestic economic growth in both the short and the
longer term, but also to keep earth reasonably habitable.
Keynes wrote a famous essay on how economic growth would eventually
lead to a life so materially abundant that our grandchildren maybe
could give up on all the money-making and become civilized epicureans.
Today we have to wonder if they'll have a non-miserable place to live.
If we want to revive something of Keynes's hope for the generation
after the next, we need at least a somewhat comprehensive socialization
of investment.