Revising Keynes

I just read an article promoting the idea that perhaps Keynes was misunderstood. Maybe he wasn't anti-capitalist, and maybe he didn't think budget deficits were desirable. It even went so far to suggest that he believed in free markets, but realised that they often created failures that would need state intervention.

Given that many Americans feel that Obamacare is the beginning of the thin edge of the socialist wedge into the US compounded by the exaggerated impact of Keynes' association with Roosevelt's New Deal-again viewed by many as a "Socialist Plot"- it is not difficult to understand how his General Theory has been distorted by Milton Friedman's free-marketeers from the University of Chicago.

Free market hysteria and the pursuit of hyper capitalism has created an economic single mindedness which, when promulgated by people lacking a strong conviction of what is right or wrong, has resulted in blind alleys of ideology driven economic policies destroying any attempt at a rational dialogue by claiming they stand for god and country and castigating everyone else as liberal or socialist, and certainly "un-American".

Of course free markets are desirable-as are most utopian ideas. The problem arises when the private sector bases its focus on models requiring surreal conditions for their ideas to work. Theirs is not a general view, it is a personal, individual view.

Call me old-fashioned, but I always thought that Keynes' view of the economy and the private sector was similar to Clemenceau's comment "that war was too important to be left to the military".

That is the cornerstone of his argument. In the face of a liquidity trap such as we have now, where a lack of confidence on the part of the private sector stops investment and increases unemployment only the state can step in and generate employment and thereby demand which will stimulate the economy.

But this is an easy target for a group that preys on the uneducated and gullible masses. They highlight the fact that his idea are presented as a General Theory, not fact, thereby transsubstantiating Keynes' ideas into into the evil faith of big government, the doorway to socialism.

It's amazing that the whole argument about supply and demand always seems to forget that without employment, and thereby wages, all the supply in the world will just rot on the shelves.