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A thread on my opinions on Keynesian economics, Marxism, the depression, and the future of capitalism, after some study and investigation.
It’s a mistake to think any one economic crisis, no matter how severe, will by itself be the end of capitalism. This is especially the case now with the general adaptation of Keynesian policy in the imperialist countries.
The bourgeois world is shaken to its core with every economic crisis. Investors are depressed and seek to protect against further loses. There is great social unrest and instability amid rising unemployment.
Malcontents on the political fringes have their moment. Far right fascist movements gain steam, scapegoating poor people and immigrants for the economic crisis and become a real menace to decent people everywhere.
Interest in Marxism and other left wing ideas also find fertile ground under these conditions. In the 1930’s the most unremarkable thing in the world was a Marxist economist, and they were a dime a dozen. Interest in Marx’s Capital spiked in 2008 with the financial crisis.
There was a lot of pessimism in the 30’s with the Great Depression, for good reason. Amid all the grim analysis of everything happening at the sunny optimism in the writings of John Maynard Keynes stands out.
“This is a nightmare, which will pass away with the morning. For the resources of nature and men's devices are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid.” -Keynes, The Great Slump of 1930
And just on what did Keynes lay his optimistic view of the future? On investor confidence, animal spirits. He allegedly said "The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelope our future.”
What does Keynesian policy consist of? One, the lowering of interest rates, which the Federal Reserve has put into effect with the onset of the current crisis. The other is direct fiscal stimulus, to raise aggregate demand.
An example of policy like this would be, perhaps, a public works program to restore the highways. This would benefit those lucky enough to land direct employment in the initiative itself and those that land contracts in it.
However, Keynesian fiscal stimulus is ultimately not all that effective in reducing unemployment directly, this being one of the objects of criticism by advocates of laisez faire economics as well as others. However, reducing unemployment directly is not the point.
Only so many people could be employed at a time from the vast pool of people wanting of work and wages. However, it’s not the point of the policy like that in the first place. It’s to make investors feel like they could make a profit by putting capital on the line.
It’s about perception, sentiment, confidence, animal spirits, to stimulate private investment, which would have the side effect of reducing unemployment. At least that’s the hope.
What about the debt, austerity, contractionary policy, the long run? As Keynes famously reportedly said, in the long run we all dead. All of that can be dealt with later, under more favorable economic conditions.
