In 2012, Barack Obama warned that the United States would fall into a depression if Ron Paul's plan to cut $1 trillion from the federal budget were enacted.
Wait, I beg your pardon. It wasn't Obama who warned that budget cuts would lead to a depression.
It was Mitt Romney.
Romney went on to become the nominee of the self-described free-market party.
An ideological rout is complete when both sides of respectable opinion take its basic ideas for granted. That's how complete the Keynesian victory has been.
In fact, Keynesianism had swept the boards a decade before Romney was even born.
The General Theory of Employment, Interest and Money, the seminal treatise by John Maynard Keynes, appeared during the Great Depression, a time when a great many people were beginning to doubt the merits and resilience of capitalism. It was a work of economic theory, but its boosters insisted that it also offered practical answers to urgent, contemporary questions like: how had the Depression occurred, and why was it lasting so long?
The answer to both questions, according to Keynes and his followers, was the same: not enough government intervention.
Now as Murray N. Rothbard showed in his 1963 book America's Great Depression, and as Lionel Robbins and others had written at the time, the Depression had certainly not been caused by too little government intervention. It was caused by the world's government-privileged central banks, and it was prolonged by the various quack remedies that governments kept trotting out.
But that wasn't a thesis governments were eager to hear. Government officials were rather more attracted to the message Keynes was sending them: the free market can lead to depressions, and prosperity requires more government spending and intervention.
Let's say a brief word about the book that launched this ideological revolution. If I may put it kindly, the General Theory was not the kind of text one might expect to sweep the boards.
Paul Samuelson, who went on to become one of the most notable American popularizers of Keynesianism, admitted in a candid moment that when he first read the book, he "did not at all understand what it was about." "I think I am giving away no secrets," he went on, "when I solemnly aver -- upon the basis of vivid personal recollection -- that no one else in Cambridge, Massachusetts, really knew what it was all about for some twelve to eighteen months after publication."
The General Theory, he said,
is a badly written book, poorly organized; any layman who, beguiled by the author's previous reputation bought the book, was cheated of his five shillings. It is not well suited for classroom use. It is arrogant, bad-tempered, polemical, and not overly generous in its acknowledgments. It abounds in mares' nests and confusions.… In short, it is a work of genius.
Murray N. Rothbard, who after the death of Ludwig von Mises was considered the dean of the Austrian School of economics, wrote several major economic critiques of Keynes, along with a lengthy and revealing biographical essay about the man. The first of these critiques came in the form of an essay written when Murray was just 21 years old: "Spotlight on Keynesian Economics." The second appeared in his 1962 treatise Man, Economy and State, and the third as a chapter in his book For a New Liberty.
Murray minced no words, referring to Keynesianism as "the most successful and pernicious hoax in the history of economic thought." "All of the Keynesian thinking," he added, "is a tissue of distortions, fallacies, and drastically unrealistic assumptions."
Beyond the problems with the Keynesian system were the unfortunate traits of Keynes himself. I will let Murray describe them to you:
The first was his overweening egotism, which assured him that he could handle all intellectual problems quickly and accurately and led him to scorn any general principles that might curb his unbridled ego. The second was his strong sense that he was born into, and destined to be a leader of, Great Britain's ruling elite….The third element was his deep hatred and contempt for the values and virtues of the bourgeoisie, for conventional morality, for savings and thrift, and for the basic institutions of family life.
While a student at Cambridge University, Keynes belonged to an exclusive and secretive group called the Apostles. This membership fed his egotism and his contempt for others. He wrote in a private letter, "Is it monomania -- this colossal moral superiority that we feel? I get the feeling that most of the rest [of the world outside the Apostles] never see anything at all -- too stupid or too wicked."
As a young man, Keynes and his friends became what he himself described as "immoralists." In a 1938 paper called "My Early Beliefs," he wrote:
We entirely repudiated a personal liability on us to obey general rules. We claimed the right to judge every individual case on its merits, and the wisdom to do so successfully. This was a very important part of our faith, violently and aggressively held, and for the outer world it was our most obvious and dangerous characteristic. We repudiated entirely customary morals, conventions and traditional wisdom. We were, that is to say, in the strict sense of the term, immoralists.
Keynes was 55 years old when he delivered that paper. And even at that advanced stage of his life he could affirm that immoralism is "still my religion under the surface.… I remain and always will remain an immoralist."
In economics, Keynes exhibited the same kind of approach he had taken toward philosophy and life in general. "I am afraid of 'principle,'" he told a parliamentary committee in 1930. That, of course, is the attitude of anyone who craves influence and the exercise of power; principle would only get in the way of these things.
Thus, Keynes supported free trade, then turned on a dime in 1931 and became a protectionist, then during World War II favored free trade again. As Murray puts it, "Never did any soul-searching or even hesitation hobble his lightning-fast changes."
The General Theory broke down the world's population into several groups, each with its own characteristics. Here Keynes was able to vent his lifelong hatreds.
First, there was the great mass of consumers, dumb and robotic, whose consumption decisions were fixed and determined by outside forces, such that Keynes could reduce them to a "consumption function."
Then there was a subset of consumers, the bourgeois savers, whom Keynes especially despised. In the past, such people had been praised for their thrift, which made possible the investment that raised living standards. But the Keynesian system severed the link between savings and investment, claiming that the two had nothing to do with each other. Savings were, in fact, a drag on the system, Keynes said, and could generate recessions and depressions.
Thus, did Keynes dethrone the bourgeoisie and their traditional claim to moral respectability. Thrift was foolishness, not wisdom.
The third group was the investors. Here Keynes was somewhat more favorable. The activities of these people could not be reduced to a mathematical function. They were dynamic and free. Unfortunately, they were also given to wild, irrational swings in behavior and outlook. These irrational swings set the economy on a roller coaster.
And now we arrive at a fourth and final group. This group is supremely rational, economically knowledgeable, and indispensable to economic stability. This group can override the foolish decisions of the others and keep the economy from falling into depressions or inflationary excess.
You probably won't be shocked to learn that the far-seeing wizards who comprise Keynes's fourth group are government officials.
For the rest of the article, click here:https://www.lewrockwell.com/2016/05/lew-rockwell/keynes-must-die
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