Keynes' Twentieth Century and the Devolution of Economics

I enjoyed the hell out of Zach Carter’s biography of John Maynard Keynes. It had to take a lot of guts to tackle this subject, in light of the three-volume Skidelsky opus. Skidelsky himself has a one-volume version. There is some value to a single book that crams the whole story into it. I don’t often buy new books or pay more than ten bucks, but for this one I did. A few of the things I learned and a few quibbles.

Carter credits Keynes with providing the intellectual support for the New Deal, if not for the entire Roosevelt Administration. I’m not quite sure I believe this, but it’s nice to imagine. What seems clear is that Keynes was a central figure in British high policy and international economic institutions for most of his life, for most of the first half of the 20th Century. The best argument for this is that Keynes’ prestige and his intellectual power provided a crucial, credible theoretical foundation for social-democratic economics. He did not invent deficit spending or inflation of the currency, but he provided a rational framework within which they could be considered.

Joan Robinson had much more to do with Keynes’ theoretical innovations than I had previously realized. In fact, Robinson very much deserves a biography of her own, or more of them. Like Keynes, her legacy has been disappeared. As a young women, she was also kinda free-spirited. Keynes’ economic theory was more collaborative than I had realized, including besides Robinson her boyfriend Richard Kahn, among others.

I hadn’t realized Keynes’ acolyte John Kenneth Galbraith, whom I have idolized for years, was such a hugely controversial member of the Roosevelt administration, labeled a pinko. Decades ago I took my wife to a speech by JKG and we met afterwards. He made a pass at her. His books are inspiring and very misleading as to what the study of economics these days might entail, much like Robert Heilbroner’s classic, “The Worldly Philosophers.” I read them and was duly misled. To really appreciate economics, stay away from elite academic economists, or stick to economic history.

One termite in the woodwork of Keynes’ reputation is his periodic anti-Semitism. It doesn’t seem to have affected his work, but it does pop up repeatedly in his private communications.

Carter is a little overwhelmed by Roosevelt’s “Four Freedoms” speech and ideology. I take the point of its impact inside the U.S., but its function in U.S. foreign policy, what I call imperialism, is seen by Carter through rose-colored glasses. I’m much more drawn to the heavily documented findings in Gabriel Kolko’s “The Politics of War: The World and United States Foreign Policy, 1943-1945,” though that book might be outdated or quaint. I don’t care. It works for me. “Four Freedoms” was an apologia for U.S.-British domination of the world, by any means necessary. Carter hints at this, but only just. The same could be said for endorsements of “free trade” coming from economic hegemons who stand to benefit the most from trading partners’ avoidance of self-interested modifications to trading regimes.

Keynes’ legacy among U.S. economists could take up an entire book. Carter takes a while to get around to the fact that in U.S. economics, Keynes has been buried. I say this not just in the theoretical sense, but ideologically as well. Spiritually. An interesting idea in the book is the depiction of Keynes’ logical heir in the U.S.: John Kenneth Galbraith. Neither is Galbraith in evidence at all in university instruction in economics. (The Richard Parker biography of JKG is well-regarded.)

Keynes’ lasting influence in the U.S. among economists is exaggerated. Paul Samuelson, for instance, is cited as an early adopter. In fact Samuelson, brilliant as he was, is typically regarded by true-blue Keynesians as the preeminent, original bowdlerizer of Keynes, a leading accessory to his intellectual assassination. Carter alludes to the distinction in his account of the suppression of the first avowedly Keynesian economics textbook by Lorie Tarshis, which benefitted the more orthodox treatment in Samuelson’s competing book. Later he is more emphatic about the split between U.S. economists and Keynes’ Cambridge colleagues, especially in light of the McCarthyite purges of U.S. Keynesians during the 1950s from government and academia.

Keynes dies in 1946, but Carter goes on to chronicle U.S. economic and economics history afterwards, marching right up to the Obama Administration. Bill Clinton was elected in 1992, close to the beginning of the second phase of my own professional career at the Economic Policy Institute (EPI). I followed developments then closely, and about Carter’s narrative I have . . . thoughts.

I don’t want to unpack too much, except to say that Carter’s review of Clinton’s trade policies is good on outcomes, but not great on causes. The free trade agreements are depicted as blunders, but they were really betrayals, both of Clinton’s promises and of his constituents. So too with Clinton’s 180 degree turn on deficit reduction, at the time one of my obsessions. Selling out the voters is not unusual for labor-oriented politicians, but it can be outrageous while one is experiencing it. I’m not over the Clintons myself.

A leading purveyor of Clinton’s trade demagogy was Robert Reich, who is dining out these days on his rep as a great liberal critic. I recall an odd meeting at EPI wherein Reich confessed to an intellectual journey away from trade skeptic to free trader. This journey also took him to a Cabinet position with Clinton. Clinton himself had clearly signaled to his labor supporters a reluctance to embrace trade deals crafted by the administration of George H.W. Bush. At EPI, our mantra was “NAFTA, we don’t hafta.”

Carter also delves into the financial meltdown of 2008 and Obama’s response to it. Here a key item was Obama’s betrayal of a commitment to support mortgage relief. That support proved to not be forthcoming. In the end more than nine million families lost their homes. And people wonder why the Democrats have lost the white working class.

The word “betrayal” is a little misleading. Perfectly lawful political factors cause leaders in capitalist societies to veer towards power. One cannot very well condemn as immoral or weak a bear who sees you as lunch. Truly great leaders are scarce.

As liberals go, getting back to Keynes, he could be seen as the best of them. The devolution of the Democratic Party makes his liberalism more conspicuous. Keynes pushed humane policy as far left as it could go, by his reckoning. Leading Democrats would rather hold or stay in power rather than trading political capital for ambitious, risky policy initiatives. Just like bears, they shit in the woods. In keeping with this avoidance of progressive reform, U.S. economics as practiced in elite universities has become a disgusting, politically ugly, theoretically bankrupt thing. If I could cancel it, I would. If I had it to do over, I wouldn’t.

Presently, the leading economic policy-maker in the U.S.A. is my old friend Jared Bernstein, head of Biden’s Council of Economic Advisers, whom I like to inform people has no degree in economics. He did grad school in social work, much the better for us all. That for me says everything about the state of big-time economic theory.

I know that grammatically, the proper possessive punctuation above is “Keynes’s,” but it looks weird so I ain’t doin’ it.