Economics and Business
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.
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.
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.
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.
Keynesian scholarship is enormous and diverse. Rather than feigning an overview of the literature, this chapter sketches three broad trajectories of Keynesian critique to make an argument that each remains limited by an ambiguous and unsatisfactory break with neo-classical economics. The chapter first considers neo-classical synthesis Keynesianism, associated with Samuelson’s textbook introduction to economics, the IS/LM (investment savings/liquidity money) models of Hicks and Hansen, and the Phillips Curve interpretation of inflation. Second, the chapter looks at market imperfections, considering alternative New Keynesian and post-Keynesian accounts, with briefer notes on money and financial instability. Despite declarations of mutual hostility, the relatively moderate New Keynesians and the putatively more radical post-Keynesians have much in common in their emphasis on imperfections, implying that neo-classical world of perfect competition remains central to their vision, even if as a focus of antagonism. There is often common ground too in hopes that states can reduce the imperfections or ameliorate their consequences. Third, the chapter considers an alternative strand of post-Keynesianism which puts more emphasis on time and uncertainty. Potentially profound insights tend to be reined in as they are marshalled for an in-house squabble with mainstream economists. Even as a more fundamental critique, the identification of radical uncertainty shows the follies of much of the existing economic formalism without providing the basis for an alternative political economy.
This chapter focuses on the policy and practice of the remarkable post-WWII boom and its unravelling in the 1970s. According to many accounts, the period of managed capitalism and sustained growth and stability gives meaning to the term ‘Keynesianism’. Experience never matches theory exactly, but reconsidering whether or to what extent the long boom followed Keynes’s prescriptions can usefully inform an understanding of what happened in history and also how policy and practice might be changed today. The first section, concentrating on the experiences within leading rich-country economies, argues that much of economic history and policy is hard to square with Keynes’s ideas. The second section considers the international system in this period, identifying elements of which Keynes clearly would have approved, particularly in the implementation of controls on cross-border capital movements. But there were also strongly anti-Keynesian elements, particularly in the way the post-WWII Bretton Woods system disciplined trade-deficit but not trade-surplus countries. The third section considers the crisis of the 1970s and the abandonment of the Bretton Woods system. Policies that at least appeared to draw on Keynes were implemented without conspicuous success. Lacking the historical counterfactuals, it is hard to judge whether alternative policies – whether anti-Keynesian or more determinedly Keynesian – might have worked better. The crisis, however, was widely perceived as a crisis of Keynesianism, and the section considers its implications for Keynesian policy prescriptions and the meaning of Keynesianism.
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 builds on the basic arguments of the two previous chapters. Money is an inherently imperfect and shifting measure of value; it is endogenous to capitalism but this is not equivalent to seeing it as ‘non-state’, because the state itself needs to be conceived as within, not without, the capitalist system as a whole. Institutional forms change how money works, and the actions of these institutions, particularly of states, matter in the sense of making a real difference not only to monetary forms but to accumulation. The first section comments generally on debates around exogeneity, endogeneity, and the role of the state and other institutions in managing money. The second section illustrates this, drawing on important historical examples of the essential role of states and other financial institutions in monetary affairs and hence in capital accumulation. It is impossible to tell the history of money within the scope of a single short chapter, but six important examples emphasise the conceptual points. This section develops the earlier discussions about money and interest, particularly about the non-neutrality of money and the need to take this seriously in terms of its impacts on capital accumulation and to move from relatively abstract accounts to concrete depictions of institutional relations.