Mr. Keynes Goes to the Bank of England

The news that Mr. J. M. Keynes, the “rebel against financial orthodoxy,” has become a director of the Bank of England and may in due course become governor when Mr. Montague Norman retires, inspires great hopes among his admirers in the Labour Party, but it will not cause even the slightest flutter of excitement among Socialists. His admirers may congratulate themselves at his appointment because he opposed the return to the gold standard in 1925 and advocated “unorthodox” proposals such as a managed currency and State control of interest rates, but they should remember his own words: “My trouble has been that orthodoxy has always caught up with me.” In other words, his quarrel with the administrators of capitalist finance has always been at bottom that they did not know their job properly, and should take some tips from him. He has never been concerned with our job of getting rid of capitalism.

It will be recalled that Mr. Keynes was active early in the war with his scheme for “compulsory savings,” the idea being that a proportion of every wage should be deducted and paid to the Government for war expenditure, and that the amount should be repaid after the war. The scheme is now applied in a modified form to income tax payments, part of which will be returned later on. Mr. Keynes may claim to have provided the Government with a shrewd scheme for the painless extraction of part of wages but it would be interesting if he could be induced to explain exactly how the workers are going to get it back after the war. Of course they will receive the money, but what exactly will be the real result in terms of work and articles of consumption ?

The first point to notice is that the labour and materials which go into shells and bombs and guns and are destroyed in the war no longer exist. They cannot be brought back. So that if, during wartime, the workers spend only part of their wages on food, clothing, etc., and forego other consumption in order that shells may be produced and destroyed they have in effect and for the time being suffered a reduction of wages.

But, say Mr. Keynes and the Chancellor of the Exchequer, what the workers have given up during the war will be made up to them afterwards. In other words if, during a war a nominal wage of say £5 a week was reduced to £4 a week, a nominal wage of £4 after the war will be brought up to £5 by these payments. (These figures are not actual ones but are merely taken for illustration.) But after the war (as always) it will be the working class who will be producing the articles which all the nation consumes. Then (as always) the wealth the workers produce will belong to the capitalist class, and what the workers get out of the total will be their wages. If they are to get a larger amount it can be in two ways, either by reducing the share that goes to the propertied class or by working harder and producing a larger total. Remembering what happened after the last war (the great “work harder, produce more” campaign, carried on by the Government and by a group of Labour leaders and economists) we may well anticipate that the workers will be told that the great destruction of the war has to be made good and will be asked to provide their own “bonuses” by working harder. If they don’t, they will certainly be told by employers that there isn’t enough to go round and wages must be reduced. Do Mr. Keynes and the Government intend to rack their brains finding some cast-iron scheme for preventing wages from being reduced (and prices from rising), and for preventing employers from dismissing workers, in short a scheme for forcing an all-round reduction of the wealth of the propertied class in order to raise the standard of living of the workers?

An illustration may help to show the essence of the matter. There was once a tenant who worked some acres of land on condition that he surrendered half his crop to the landlord. Then came war and the landlord said we shall each have to hand over some of our share to feed the troops, but your loss will be put right for you later on. When later on came, the landlord said, “Now that the destruction of the war has to be made good, I am afraid I still can’t let you have more than half the crop, but the promise will be kept. You shall have a larger amount, for I will let you work harder and produce a, bigger crop. Thus your half will be larger and you will be repaid for what you gave up.” And the tenant, while not very clear about the matter, had a feeling that there was something wrong somewhere.

It would certainly be interesting to have the shrewd Mr. Keynes explain the second part of the trick of turning your butter into guns and getting the butter back afterwards.

P. S.