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Keynes And The Cult Of Economic Doom

Economics / Economic Theory Jun 23, 2013 - 05:26 AM GMT

By: Andrew_McKillop

Economics

FERGUSON APOLOGIZES
Iconic history don and bestselling author Niall Ferguson apologised "unreservedly" for "stupid and tactless" remarks in which he implied that John Maynard Keynes did not care about future generations – “in the long run we are all dead” - because Keynes was a childless homosexual. As we know to our present and future cost, Keynes was more concerned about ultra low short-term interest rates and vast government handouts, financed by borrowing. Ferguson claims his disagreement with Keynes, his opposition to deficit spending and the economic philosophy called “Keynesianism” was nothing to do with Keynes' sexual orientation. Ferguson said his real point was: “The point I had made in my presentation was that in the long run our children, grandchildren and great-grandchildren are alive and will have to deal with the consequences of our economic actions." On that score we can only agree.


In a very hostile review for the London Review of Books of a 2011 book by Ferguson 'Civilisation: The West and the Rest', Pankaj Mishra comes close to accusing Ferguson of racism and misanthropy because Ferguson draws on the F. Scott Fitzgerald classic 'The Great Gatsby' to illustrate how he saw the degenerate, defeatist, live for today (and to hell with tomorrow) atmosphere of thought that inhabited a lot of western intellectuals – like Keynes – in the 1930s. Ferguson's latest book, published by Penguin USA this month,  'The Great Degeneration: How Institutions Decay and Economies Die' pursues and develops this theme.

In Mishra's hostile review of Ferguson's 2011 book, he cites what Ferguson says is a key explanation of the “doom eagerness” of white Western intellectuals in the 1930s, illustrated by 'The Great Gatsby' .

Scott Fitzgerald based the ideas of Gatsby, at least partly, on Theodore Lothrop Stoddard the author of the 1920 US bestseller 'The Rising Tide of Color against White World Supremacy'. Stoddard’s book sales, Mishra says, were a sign of the times, of the overheated racist climate of the early 20th century in which the Yellow Peril seemed real, the Ku Klux Klan was powerful and Theodore Roosevelt worried openly and loudly about ‘race-suicide’. In 1917, justifying his reluctance to involve the United States in the European war, Woodrow Wilson told his secretary of state that ‘White civilisation and its domination over the world rests largely on our ability to keep this country intact.’ The European war was fratricidal, racist – and degenerate. After it, Europe would lose its colonies.

KEYNES AND HIS TIMES
One thing is ultra sure and certain – Keynes was a reflection of his times, his nationality, education and class, the exact same way that one of Keynes' favourite straw men – the almost unheard of French economist of the early 19th century Frederic Bastiat heavily reflected his own times and upbringing.

Following World War I the UK, to an extent comparable with the Kaiser's Germany but more slowly and insidiously, was doomed to lose all its previous Imperial glory.  Ferguson became known to the general public with 'The Pity of War' (1998), a long polemic blaming Britain as the root cause of the First World War.  According to Ferguson, Prussia's threat was deliberately exaggerated and misrepresented by Britain’s Liberal government. This deliberate miscalculation not only made what was rightly called “The Great War” inevitable, but also made the even more terrible Second World War inevitable – which is exactly where Keynes came in. As any European knows today, these cataclysmic wars only postponed the creation of an equally inevitable, sure and certain German-dominated European Union, while it beggared the previous Great Imperial power that was called Great Britain. The Bloomsbury Set of 1920s London reveled in the chic bisexual decadence and doomy atmosphere this produced, almost the same way global warming hysterics of today revel in doom-eager images of drowned cities and mass migrations to flee the rising tides unleashed by the pitiless burning Sun.

In a process that by its twists and turns, and its fits of national angst and jealousy reflects the so-called “hand-over of global economic power” from the US to China today, the immediate geopolitical and economic sequel to the First World War was Britain's hand-over of its globalising economic power, to the USA. The British phase of what preceded it, when Britain set the scene for its own later downfall, was given the nickname “Anglobalisation” by Niall Ferguson.

Keynes, as we know, “modernised economics” in the 1920s and 1930s, and surely supplied plentiful economic spice to American ‘modernisation theory’ which was used with increasing stridency as the alternative to Communism ever since 1945 and the start of the Cold War. The so-called “War on Terror”, a degenerate and downsized remake of the anti-Communist crusade, which itself has heavily mutated and further degenerated since it started in the 1990s, is easily interpreted as including Keynesian rationales, or more precisely notions. At its most stark, spending probably much more than $2 trillion on the Afghan and Iraq wars must have had “an economic goal” or rationale. Keynesian hocus-pocus about multipliers and downstream opportunities arising from generous upfront spending, are certainly “embedded” here and there in the Powerpoint presentations flashed around at Pentagon and State Dept. policy talkshows, mostly in private. At the end of the day however, Obama has no option but to get out of Afghanistan as fast as he can – and cut his losses.

DEFICIT SPENDING AND WAR
History shows with no possible error that deficit spending began as finding the means to wage war. When a war was won, the winners could feast off whatever they found in the losers' territory and cover their “upfront investment” based on borrowing – so the theory goes. Niall Ferguson, like many others was convinced that America had no intention and was not up to the ‘labour-intensive task' of occupying and governing Iraq. The same applies to Afghanistan. The potential economic benefit – called “peace dividend” in neoliberal newspeak – can only be zero in Afghanistan and low in Iraq, although New Iraq does have oil, the US domestic production of which is growing at an epic pace.

The recent decades of “Keynesian-type” public financing, and especially since 2008 have generated such gargantuan extremes of debt and deficits that no conceivable Great War, let alone small designer wars in dusty resource-free corners of the world, can firstly be financed and executed, before the peace dividend pillage could theoretically begin. The real legacy of Keynes is to have poisoned present government finances and left totally impossible-to-pay future debts – not only in the West. We can however thank him for one thing: making war too expensive or more precisely impossible to finance!

Ferguson and others bemoan the “portents of decline and fall of Western civilisation”, these days, by pointing out America’s dependence on “Asian central banks and Middle Eastern petroprince treasuries” and then move on to unwind their prayer wheel of doleances, ranging from feminism and declining birthrates, to lazyminded herd thinking, the welfare state, and the cult of idleness. This is surely a nice mix-and-mingle for cobbling up books to thrill remaining book buyers, but deflects serious attention away from the fundamental link between Keynesianism and degeneracy.

Whether Keynes' homosexuality and later bisexuality had any overshadowing role on his economic notions is literally too stupid and trivial to consider. Much more basically, he threw together a slick and superficially logical excuse for governments to spend money they haven't got. Side dishes from Keynes at the very peak of his power and influence – just before his death (Apr 1946) – included the future IMF, World Bank and GATT, now WTO.

All of these institutions, whether they admit it or not, are Keynesian. All of them can be blamed for every economic, financial and monetary crisis since 1945, especially the 2008 crisis and its sequels. The blame can be direct and total, or sometimes only partial, but the blame sticks. The IMF, for example, is merely a state-ized or formalized version of the BIS (Bank for International Settlements). The IMF-BIS seamless union of state-owned central banks, and crony capitalist-owned private banks is total, and we can blame Keynes for this.

However, as Ferguson certainly doesn't say but we can repeat, we can thank Keynes although he certainly did not intend this to happen, for making wars of the Great War type totally impossible. We can't afford them because we are strangled with debt. Ferguson almost openly says this is a pity – not having earthy, meaty and heroic old time Indiana Jones wars – but in some ways we have a much more lethal hangover from “the Keynesian era”. We have a ruined economy that is going to take decades to put back together again – if that is indeed possible.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2013 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

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