This book sees Keynes as neither villain nor hero and develops a sympathetic ‘left’ critique. Keynes was an avowedly elitist and pro-capitalist economist, whom the left should appropriate with caution. But his analysis provides insights at a level of concreteness which Marx’s analysis largely ignored and which were concerned with issues of the modern world which Marx could not have foreseen. A critical Marxist engagement can simultaneously increase the power of Keynes’s insight and enrich Marxism. To understand Keynes, whose work is liberally invoked but seldom read, the book first puts Keynes in context, explaining his biography and the extraordinary times in which he lived, his philosophy and his politics. The book describes Keynes’s developing critique of ‘the classics’, of mainstream economics as he found it, and summarises the General Theory. It shows how Keynes provides an enduringly valuable critique of orthodoxy but vital insights rather than a genuinely general theory. The book then develops a Marxist appropriation of Keynes’s insights. It argues that Marxist analysis of unemployment, of money and interest, and of the role of the state can be enriched through such a critical engagement. The book addresses Keynesianism after Keynes, critically reviewing the practices that came to be known as ‘Keynesianism’ and different theoretical traditions that have claimed his legacy. It considers the crisis of the 1970s, the subsequent anti-Keynesian turn, the economic and ecological crises of the twenty-first century, and the prospects of returning to Keynes and Keynesianism.
Towards a critical but constructive appraisal of Keynes’s thought
The introduction describes the structure and rationale of the book. It argues that Keynes should be seen as neither villain nor hero and that while the left should appropriate his ideas with caution, he provides insights at a level of concreteness which Marx’s analysis largely ignored and which were concerned with issues of the modern world which Marx could not have foreseen. A critical Marxist engagement can simultaneously increase the power of Keynes’s insight and enrich Marxism. The introduction describes how, to understand Keynes, whose work is liberally invoked but seldom read, the book first puts Keynes in context, explaining his biography and the extraordinary times in which he lived, his philosophy and his politics. The book describes Keynes’s developing critique of ‘the classics’, of mainstream economics as he found it, and summarises the General Theory. It shows how Keynes provides an enduringly valuable critique of orthodoxy but vital insights rather than a genuinely general theory. The book then develops a Marxist appropriation of Keynes’s insights. It argues that Marxist analysis of unemployment, of money and interest, and of the role of the state can be enriched through such a critical engagement. The book addresses Keynesianism after Keynes, critically reviewing the practices that came to be known as ‘Keynesianism’ and different theoretical traditions that have claimed his legacy. It considers the crisis of the 1970s, the subsequent anti-Keynesian turn, the economic and ecological crises of the twenty-first century, and the prospects of returning to Keynes and Keynesianism.
The chapter argues that while the purpose of this book is to discuss Keynes’s ideas, these make better sense in the context of his life and times. Both the life and the times were extraordinary, and despite Keynes’s individual brilliance, there is a strong case for seeing him as a product of and spokesperson for his class and nation. Keynes’s thinking was shaped during a period of remarkable social and economic upheaval. From an age of apparent stability and complacent British imperial hegemony, he lived through two world wars, the descent into the Great Depression and times of sharpened class struggles. A liberal economics based on enlightened self-interest in which, by assumption, neither states nor unemployment existed made sense neither as theory nor ideology, and Keynes became the most prominent of many economists trying to articulate a more realistic theory, a theory which would better describe capitalism but also better defend it. By the end of this period, Keynes had become both the world’s most famous economist and a leading player in the negotiations to shape the post-WWII order – now a world where the US had displaced Britain as the dominant power. The chapter’s content highlights how Keynes’s life (1883–1946) spanned this extraordinary age. It is divided chronologically into four parts, from 1883 to 1914, to 1929, to 1939 and to 1946, marking vital stages in Keynes’s intellectual and political career.
The chapter discusses Keynes’s philosophy. Probably more than any major economist since Marx, Keynes thought deeply about political and philosophical issues. He was a sophisticated thinker, close intellectually as well as personally to several leading philosophers of the age. He was particularly strongly influenced by Moore, and wrote one major work, the Treatise on Probability, which operates at the intersection of mathematics, logic and philosophy. There is controversy about the influence of this early work, and of Keynes’s philosophical thought in general, but there are important connections between his philosophy and his mature economics. It is argued that Keynes never develops an entirely coherent overall philosophy. This undermines grander claims for a ‘Keynesian economic system’ and for the generality of the General Theory. Keynes develops profound insights, around intuition, organic unity, time and uncertainty, which he does not always follow through, and makes philosophically provocative statements from whose implications he pulls back. An apparently individualist idealism and questions about the basis of knowledge might, if pushed to their (il)logical conclusions, appear radically incompatible with a genuinely critical political economy. More positively, however, these ambiguities enable the adoption or appropriation of Keynes’s insights in a way that a more rigorously internally consistent system might preclude. In particular, Keynes is right that individuals act in the face of real uncertainties and that this has important economic implications.
Keynes was intensely political. He was an activist, a populariser of economic ideas, an influential Treasury official and seldom for long out of touch with the British prime minister of the day. Economics was never a neutral scientific endeavour, and it makes sense to understand his economics in the light of his political views. Keynes wants to develop a more realistic theory, but even his most abstract work is oriented to providing a better guide to policy. Keynes wrote in the ‘advice to princes’ tradition, offering a better guide for rulers of the existing system. As usual with Keynes, there are ambiguities and his political stance is contested, but it is argued that although Keynes says some different things, he fairly consistently occupies a space bounded on the one hand by a conservatism drawn particularly from Edmund Burke and on the other by British liberalism. The first two sections of the chapter discuss these two influences. The third section discusses alternative claims that Keynes was a socialist, arguing that while there were radical aspects to his thought, Keynes is better understood as a pro-capitalist not a socialist thinker. As the fourth and final section continues, Keynes brings in the state, but in a quite consistently liberal way in that he still conceives the requisite level of state intervention as being minimal, albeit while raising the perceived necessary minimum. A specifically British, but also more broadly a national rather than international or global, orientation also informs and limits Keynes’s political economy.
This chapter introduces economics as Keynes encountered it and then how his own work before the General Theory begins to break from orthodoxy. First, it discusses the classics as they were understood by Marx, for whom ‘classics’ was a qualified term of approval, as distinct from the ‘vulgar’ school of mere apologists. It briefly identifies what was lost from this tradition in the later marginalist revolution in terms of its treatment of economic aggregates and economic interrelation, which Keynes substantially recovers, and in terms of the classics’ focus on production and growth, in which Keynes has little interest. This first section then discusses the beliefs which Keynes criticised, the adherence to the quantity theory of money and Say’s Law. The second section introduces Jevons’s and Marshall’s marginalism, their vision of an exchange economy, the concepts of utility and disutility, and their attitude to money, production and labour. Keynes has a somewhat ambivalent relationship: both in and against this tradition. There is a sense in which he can point out its failings precisely through a more careful application of its principles. The third section discusses Keynes’s own early work, particularly the Tract on Monetary Reform and the Treatise on Money. Keynes would retrospectively see himself as having still been orthodox when he wrote these earlier books, but they anticipate important later themes and the Treatise, in particular, sometimes makes more radical departures, and attempts a more dynamic analysis, than would the General Theory.
Keynes’s General Theory of Employment, Interest and Money is a notoriously difficult book, which this chapter tries to explain as simply as possible. Keynes could be a great stylist and the General Theory’s many quotable passages have enhanced its appeal. Elsewhere, however, Keynes’s prose is dense and the arguments highly technical and convoluted. In contrast to other great works of political economy like Smith’s Wealth of Nations or Marx’s Capital, the General Theory was never meant to be understood by non-specialists. The difficulties of comprehension appear to be confirmed in the way the General Theory has been subject to widely different interpretations, as a radical departure or a mild amendment of the orthodoxy he was criticising. The chapter argues for something in between. The General Theory provides a substantial critique of standard economics but it does this by engaging with the mainstream on its own terms, and this qualifies claims of Keynes’s radicalism. The chapter provides a very brief overview and commentary on the overall argument of the book and its conceptual priorities. It is then organised around sections on savings and consumption, on money and the rate of interest, and on investment and employment, introducing a general discussion of how this leads to Keynes’s vision of the prospect of ‘unemployment equilibrium’ and the possibility of state intervention to ameliorate this. A final substantive section discusses dynamic change, cycles and long-term tendencies, into which it suggests the General Theory provides important but subsidiary insights.
This chapter argues that a more adequate understanding of unemployment can be developed by building on Marx and Keynes. Both Marx and Keynes already theorise unemployment, but a better theory can be developed through a critical, Marxist appropriation of Keynesian insights. The first section identifies Marxist arguments around so-called ‘primitive accumulation’ and how the establishment of a ‘reserve army’ of labour is functional for capitalism. Suggesting that such functional arguments are useful but insufficient, the chapter accordingly continues by identify important arguments in Marx and Keynes by which agents’ motivations can be understood to reproduce unemployment. The second section identifies Marx’s depiction of imperatives to accumulate, which create alternative processes of labour recruitment and displacement, and the third section identifies how Keynes’s model of unemployment equilibrium points to situations in which entrepreneurs rationally fail to increase employment. Keynes’s model provides a potentially important ‘snap-shot’ of what need to be reconceived as dynamic and changing processes. The fourth section accordingly develops claims made by both Marx and Keynes that capital’s adjustments are uneven and hence conducive to reproducing unemployment. There are multidimensional, sectoral, temporal and spatial processes of uneven development which mean there are at most only a series of moving equilibria. The fifth section turns to states and economic policy, reiterating that states can and do act, pursuing more or less effective employment policies, and that unemployment remains a contested political achievement.
Like the chapter on unemployment, this chapter and the next argue that there are problems and lacunae in Marx’s understanding of money and finance which a critical engagement with Keynes can help to address. Marxists agree with Keynes in insisting that money is not ‘neutral’. There is a specific financial moment which can impact on investment. Therefore, in as far as a Marxist analysis of money remains incomplete, so too does any analysis of the broader political economy. The chapter accordingly identifies three related areas where such a constructive dialogue can potentially enrich monetary analysis. The first involves thinking about money’s social relations and its material properties. Money has specific material properties, which both reflect and reflect on capitalist social relations, potentially taking them in new directions. The shift between different monetary systems – bimetal, gold, gold exchange, pure fiat money, electronic money – are neither simply policy choices nor the requirements of some abstract capitalist teleology, and they can have substantive economic repercussions. The second section argues that the non-neutrality of money means that money needs to be reintegrated analytically and that Keynes’s critique of the mainstream view that money does not matter, that money is neutral, usefully highlights the ineliminable importance of money, the specific financial and state monetary moments, and how these impact on the real economy. The third section continues that an engagement with Keynes’s concept of liquidity preference, extended and understood as a social and institutional phenomenon, can enrich Marxist monetary analysis.
This chapter turns to questions of profit, interest and interest rates. The first section focuses on why the classics and Marx see profits in the wider economy as providing the basis for any adequate theory of interest. The financial sector can ultimately only appropriate a share of value created elsewhere. It is, however, necessary to go beyond this simple fact, and a critical engagement with Keynes can add valuable nuance. The second section therefore revisits Keynes’s critique of orthodoxy and his alternative depiction of interest rate determination through the interaction of liquidity preference and the money supply. It will be argued that starting within, and directing his critique towards, the will-o’-the-wisp that is conventional theory provides an insufficient basis for an effective alternative. Keynes can demonstrate the fallacies of his opponents’ priorities but cannot secure his own. The classics’ view can provide an anchor while at the same time, Keynes’s insights should provoke a constructive reform of the classics, as analysis moves from an abstract generality to concrete investigations of profit and interest and their relation. The third section argues that Keynes’s insights into liquidity preference and state power can be better reinterpreted as second-order effects, grounded in a classical/Marxist view of profits as the basis of interest but acknowledging questions of institutional power within finance, in the state and inter-state relations, from which both Marx and Keynes abstract. So reinterpreted, Keynes’s insight allows progress beyond the classics’ generalisations particularly in terms of understanding interest rate variability.