50 Years Ago: The Keynesian Myth

The basic proposition of the Keynesians comes to this: steady growth at full employment level can be kept if the State controls spending and investment so that when a boom is developing it cuts down, and when a slump threatens it increases its spending.

Keynes had been a critic of laissez-faire for a long time before he wrote his General Theory. He was a member of the Liberal Party and sympathetic to the kind of State capitalist schemes the Fabians pushed. When he wrote this book he already had an international reputation as a leading economist. His book was given wide publicity because in it a well-known economist provided a theoretical justification for policies already being tried in the 1930’s. Keynes’s theories and policies—equalizing taxation, cheap money. State control—were eagerly spread by the Labour Party and “progressives’’ generally. After all, this was what they—and Keynes himself, for that matter—had long been advocating. Helped by these partisans Keynesian economics has become the dominant theory. In Britain it completely conquered the universities and government departments. In America some conservative economists are still fighting a rearguard action on behalf of laissez-faire against Keynes’ theories which they see as State Capitalism (to them “socialism”).

It is true that Keynesian economics is a theory of State Capitalism. It is a theory that Capitalism can be managed by professional economists from government departments. It is Fabianism in a new guise: capitalism run by “experts”.

In Britain the first Keynesian budget was that of 1940 so the “experts” have been in charge for over 25 years. How have they fared? Have they been able to control capitalism?

Under capitalism the market is the king; it decides what is produced and when. After the last war there was an expansion of the world market which, with a few minor upsets, has continued ever since. It is this expansion of the world market rather than State control which has been the major factor in the relatively full employment in some parts of the world.

This particular combination of circumstances has allowed the Keynesians to claim as the benefits of their “economic management” what in fact are the results of world market conditions favourable to the capitalists of the countries concerned.

(from article by A.L.B, Socialist Standard, February 1966)