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The General Theory of Employment, Interest and Money ()


Modern Library Top 100 Non-Fiction Books of the 20th Century (10)

    The outstanding faults of the economic society in which we live are its failure to provide for full
    employment and its arbitrary and inequitable distribution of wealth and incomes.
                -Conclusion to The General Theory

With these two assertions--the first dubious, the second simply wrong--John Maynard Keynes unleashed the most terrifying period of government expansion and social experimentation in the history of Western Man.  Keynes basic argument was that the boom/bust cycle of the economy was inevitable and that government should intervene to dampen both the peaks (via confiscatory taxation) and the valleys (via deficit spending).  The goal being to guarantee full employment and to redistribute wealth.  Now, it's understandable that the generation of men who faced the Depression were driven to propose some aggressive solutions, but if we have to choose one, this is the moment when Western Man blinked.  Keynes basically abandoned a two century old faith in the efficacy of capitalism and proposed that laissez-faire be replaced by the firm hand of government.

The ensuing fifty years saw virtually every nation of the West surrender increasing control of the economy to the government, accept extortionate tax rates, pile up staggering deficits, and, all the while, spiral farther and farther into the abyss.  The Keynesian Revolution brought the West to its knees before Margaret Thatcher and Ronald Reagan seized back control and began the long, and as we speak uncertain, process of returning power to the marketplace.

Interestingly enough, while the Left remains in thrall to his thoroughly discredited theories, it seems that Keynes himself might have been one of the first to abandon his own handiwork (this after all was a man who ditched the Bloomsbury Group and homosexuality when he fell in love with a ballerina), had he lived to see the disaster it was producing.  In the conclusion to his book he states:

    ...the ideas of economists and political philosophers, both when they are right and when they are
    wrong, are more powerful than is commonly understood.  Indeed the world is ruled by little else.
    Practical men, who believe themselves to be quite exempt from any intellectual influences, are
    usually the slaves of some defunct economist.  Madmen in authority, whom hear voices in the air,
    are distilling their frenzy from some academic scribbler of a few years back.  I am sure that the
    power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.
    Not, indeed, immediately, but after a certain interval; for in the field of economic and political
    philosophy there are not many who are influenced by new theories after they are twenty-five or
    thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to
    current events are not likely to be the newest.  But, soon or late, it is ideas, not vested interests,
    which are dangerous for good or evil.

While his theories proved to be catastrophic, this paragraph is not only accurate, it proved to be prophetic.  The real nadir, the West's point of greatest danger, came about twenty five or thirty years into the Revolution, when Richard Nixon abandoned the fight against Keynes and embraced the welfare state.  With the last line of defense nearly routed, Goldwater, Reagan and the like were lonely voices crying in the wilderness, the final crack up came & by the late 70's people were talking about malaise and the failure of democracy and all kinds of defeatist twaddle.  We were fortunate that folks were desperate enough to finally take a chance on the Iron Lady and the Gipper.  Likewise, we are living through the first generation of the return to markets.  Clinton could have been a significant historical figure had he had the courage of his supposed convictions and dragged the New Democrats over to the side of individual freedom and limited government.  As it is, the idea is still being fought by the Left and we will see if the eventual result is a return to big government, or the kind of stasis we've achieved now, with government growing, but slowly, or whether there is a Democrat on the horizon who has the stature and vision to lead the party back to the future.

Hopefully, Keynes was right and the power of the idea of freedom ensures its eventual victory.  But, it must be acknowledged, Keynes General Theory was one of the greatest threats to our freedom that we have ever weathered.  This book was a source of great evil in this century and Keynes must shoulder a significant portion of the blame for the sorry state of the West circa 1978-79.

(Reviewed:)

Grade: (F)

  

Websites:

Book-related and General Links:
    -John Maynard Keynes (June 5, 1883-April 21, 1946)
    -Keynes:  John Maynard Keynes deserves a webpage of his own
    -The London School: John Maynard Keynes
    -ETEXT: FOREWORD TO GENERAL THEORY
    -REVIEW: of  The General Theory of Employment, Interest and Money by John Maynard Keynes Revaluations II: Keynes's General Theory (Robert Lekachman, NY Review of Books)
    -ETEXT: The Economic Consequences of the Peace (1919) by John Maynard Keynes
    -Review: of The Economic Consequences of the Peace (Thorstein Veblen, Political Science Quarterly)
    -BIO:  John Maynard Keynes (The Jobs Letter)
    -ESSAY: GLOBAL KEYNESIANISM IN THE WINGS (James K. Galbraith, World Policy Journal)
     -CLASSICAL LIBERALISM  Online Primer  By Noah Nissani  Chapter III  POLITICAL ECONOMY
    -Global Economy: John Maynard Keynes
    -John Maynard Keynes by Carl Johnson
    -BIO: Lord, John Maynard Keynes (1883-1946)(Bluepete)
     -REVIEW: of  JOHN MAYNARD KEYNES Volume One: Hopes Betrayed 1883-1920. By Robert Skidelsky (Robert L. Heilbroner, NY Times Book Review)
     -REVIEW: of   JOHN MAYNARD KEYNES. Volume One: Hopes Betrayed 1883-1920. By Robert Skidelsky (Christopher Lehmann-Haupt, NY Times Book Review)
     -REVIEW: of John Maynard Keynes Volume II: The Economist as Savior, 1920-1937 By Robert Skidelsky (CHRISTOPHER LEHMANN-HAUPT, NY Times Book Review)
     -REVIEW: of   JOHN MAYNARD KEYNES Volume 2: The Economist as Saviour 1920-1937. By Robert Skidelsky (Arthur Schlesinger Jr, NY Times Book Review)
     -REVIEW: of John Maynard Keynes, Vol. II: The Economist as Saviour 1920-1937 by Robert Skidelsky (Robert Heilbroner, NY Review of Books)
     -REVIEW: of The Age of Keynes by Robert Lekachman (Joan Robinson, NY Review of Books)
     -ESSAY: Geoffrey Barraclough: The End of an Era (NY Review of Books)
                         BOOKS DISCUSSED:
                            The New Economics: One Decade Older by James Tobin
                            The Unstable Economy: Booms and Recessions in the US by Victor Perlo
                            Death of the Dollar by William F. Rickenbacker
                            The World in Depression, 1929-1939 by Charles P. Kindleberger
                            The Kondratieff Wave by James B. Shuman and David Rosenau
                            The Great Wheel: The World Monetary System by Sidney Rolfe and James Burtle
                            The Management of Interdependence: A Preliminary View by Miriam Camps
                            The Retreat of American Power by Henry Brandon
                            An Inquiry Into the Human Prospect by Robert L. Heilbroner
      -ESSAY: Joan Robinson: Michal Kalecki: A Neglected Prophet (NY Review of Books)
                            WORKS REFERRED TO IN THIS ESSAY
                            The Intellectual Capital of Michal Kalecki  by George R. Feiwel
                            Selected Essays on the Dynamics of the Capitalist Economy by Michal Kalecki
                            "Political Aspects of Full Employment" by Michal Kalecki, in Political Quarterly
                            Collected Economic Papers, Volume 4 by Joan Robinson
                            The General Theory of Employment, Interest and Money by J.M. Keynes
    -REVIEW: of  Beyond Boom and Crash by Robert Heilbroner (Joan Robinson, NY Review of Books)
    -REVIEW: of A Guide to Post-Keynesian Economics edited by Alfred S. Eichner (Robert L. Heilbroner, NY Review of Books)
    -ESSAY:  John Kenneth Galbraith: The Conservative Onslaught  (NY Review of Books)
    -ESSAY:  Noel Annan: Portrait of a Genius as a Young Man
        John Maynard Keynes: 'New Wisdom for a New Age' by John Kenneth Galbraith, Roy Jenkins, Richard Wainwright, and edited by Andrew Duff
        John Maynard Keynes Vol. I: Hopes Betrayed, 1883-1920 (To be published in the US, with the second volume, by Viking in 1986) by Robert Skidelsky
        John Maynard Keynes: A Personal Biography of the Man Who Revolutionized Capitalism and the Way We Live by Charles H. Hession
        Lydia Lopokova edited by Milo Keynes
    -ESSAY: John Kenneth Galbraith: General Keynes
        The Collected Writings of John Maynard Keynes
        The General Theory of Employment, Interest and Money edited by Elizabeth Johnson
    -REVIEW: of Economics in Perspective: A Critical History by John Kenneth Galbraith (Robert Heilbroner, NY Review of Books)
    -REVIEW:  of Opening Doors: The Life and Work of Joseph Schumpeter (Robert Heilbroner, NY Review of Books)
    -Online Edition: A Glossary of Political Economy Terms (Dr. Paul M. Johnson, Auburn University)
    -ESSAY: Bring Back Keynes.  Keynesianism has learned from its mistakes. The case for a revival of Keynesian analysis and policy is now strong. By Robert Skidelsky (Prospect)
    -ESSAY: A Keynesian Mea Culpa?  Perhaps, but they haven't figured the economy out yet. (Victor A. Canto of La Jolla Economics, National Review)
    -REVIEW : of John Maynard Keynes: Fighting for Britain 1937-46 by Robert Skidelsky (Hywel Williams, books unlimited)
    -REVIEW : of John Maynard Keynes: Fighting for Britain 1937-1946 by Robert Skidelsky (Kenneth O Morgan, Independent uk)
    -REVIEW : Leonard Martin on John Cochran's and Fred Glahe's The Hayek-Keynes Debate: Lessons for Current Business Cycle Research (Journal of Markets and Morality)
    -REVIEW : of JOHN MAYNARD KEYNES : Volume Three: Fighting for Freedom, 1937-1946 By Robert Skidelsky (Sylvia Nasar, NY Times Book Review)

Comments:

No matter what economic theory was followed the years following the end of the Great Depression were destined to seem exceptional. Dig the trough deep enough and the climb out seems like reaching the mountaintop. Rather the period from 1983 to today is the most remarkable in economic history--twenty plus years without a recession, no inflation, low interest rates, etc..

- oj

- Aug-31-2005, 07:07

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It's too bad Orrin didn't read the General Theory of Employment, Interest, and Money. If he had actually read the book, he would know that the General Theory has very little to do with redistribution of wealth (mostly to the extent of which the marginal propensity to consume of the poor is greater than the rich) and is not hostile to markets or entrepreneurship.

In fact, the main points of GT deal with how a capitalist economy can settle into a long-run equilibrium at less-than-full employment, the ineffectiveness of price flexibility to cure unemployment, a theory of money based on "liquidity preference", uncertainty and expectations, the marginal efficiency of investment schedule, etc. The policy implications are only discussed in the last chapter of the GT, and even there the discussion is is in very general terms.

Orrin may not like the policies advocated by the Keynesian Revolution, but the fact is that the period between 1945 to 1973, when the Keynesian Revolution was at is peak, is known as the "Golden Age" of Economic Development, an era of unprecedented sustained economic growth in both developed and developing countries. A "terrifying period" indeed! Moreover, meither the experiences of Ronald Reagan (who ran up massive deficits) nor of Margaret Thatcher (who was forced to abandon Monetarism in the mid-1980's after record unemployment) demonstrates that the ideas of Keynes have been discredited.

The GT is not an easy book to read or understand (in fact, many of Keynes' contempoaries, like Joan Robinson and Nicholas Kaldor, claim that what is popularly known as "Keynesianism" is very different from what Keynes actually wrote), but that is no excuse to write a nasty review of a book without reading it.

- Peter

- Aug-31-2005, 02:36

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