Keynes vs Von
Hayek
(and much more)
the
blog below is written as continuous prose
Ben
Bernake:
''I
spent my life studying the Great Depression........it was not the
failure of the stock market but the lack of credit which caused the
Great Depression. Credit has the ability to build an economy but
lack of it most certainly has the ability to destroy it.... and very
rapidly....''
There
were no two more influential economists in the world I grew up in
than both Keynes and Von Hayek. J.M. Keynes I studied at school.
Friedrich Hayek I encountered later on in life.
Perhaps
it was first impressions or maybe my family circumstances (a very
poor middle class background, where money was almost non-existent as
most which Mom earned was spent paying bills – including school
fees.)
Thankfully
I grew up in a political environment where the priorities of health,
education and basic social services-as extreme nets for those really
impoverished (but most, alas, not for ourselves!) were provided by
the State. A great emphasis was placed on investment in a national
public library system and, by any standards, libraries were in
relative abundance and well stocked with materials.
Some of
the health services, I can recall, were provided (or subsidized) by
American charities such as The Rockerfeller and Getty Foundations,
WHO and UNICEF.
As I
recall these would include things such as basic polio inoculations
for children (in a country where polio and tuberculosis were
scourges.)
It's
important to put my background into a perspective when discussing Von
Hayek and Keynes because I probably grew up in the almost ideal
economic model of society which Von Hayek would applaud (as being on
the right road) and Keynes would despair as not providing sufficient
government intervention (in terms of work programs and benefits for
those less fortunate.)
Enough
about me.
When I
first read the works of J.M. Keynes it was almost like a spiritual
revelation.
His model
aptly described both why the Great Depression of 1929 had occurred
and how it was resolved.
Keynes
was a believer in the intervention of the State, not just as provider
of basic services, but as a core defender and strategic planner of
public services. A public service would include Water, Electricity.
Gas, Oil, telecommunications, Health, Education, Steel, Coal and any
other critical strategic industry vital for providing for the needs
of the individual or as a strategic asset.
Education
was also a key service but Keynes was never opposed to 'competition'
in this field but was of the view that State education services
should eventually break the monopoly of elitist educational
providers.
Von
Hayek, on the other hand, identified a ridiculous over-abundance of
credit (with nothing to back up paper money) as the chief villain.
Von Hayek
saw the actions of the Federal Reserve (buying up debt to stimulate
growth) as just exacerbating and accelerating the financial meltdown.
Thankfully
Von Hayek was ignored and the great FDR (I always refer to him as
'the great' FDR because he put America back to work – public works
programs, roads, railways, telecommunications, even dams (The Hoover
Dam) were all testaments to public spending at a time when private
capital had either retreated or was culling industry - as private
entrepreneurs (industrialists) attempted to recoup their stock market
and other financial losses by shedding their workforces - pushing
even more ordinary people onto the breadlines and into the soup
kitchens.
As far as
Von Hayek was concerned, this was a normal 'corrective' process best
left to market forces.
It did
not matter that millions of children and their parents were starving,
their parents pushed into
impoverishment
by the loss of income from work, that families en masse packed all
their possessionsonto
trucks to head across the Dust Bowls to eke out an existence wherever
they could find it – the promised El Dorado of the golden West
Coast – if they and their family made it there alive (which many did
not.)
Apart
from suffering, this time gave rise to some of the greatest works of
literature which capture many of the tribulations of ordinary folk. I will just refer to two here:
John
Steinbeck's 'The Grapes Of Wrath' written by someone observing, May
Angelou, someone born just one year before the Great Depression and
who grew up as a Black child experiencing the worst of the worst
effects of the Depression, racism and no opportunities.
That
despair and hopelessness which was was blind to color is apt in the
choice of both Steinbeck and Angelou. White folk likewise did what
they had to in order to survive – and, if you were poor or
unemployed, it was survival of the fittest which determined whether
you would live or die. Hence my choice of Steinbeck and Angelou.
Von Hayek (were he alive today) would argue that Angelou's survival
of economic and social adversity was exactly what he would have
expected – and ignore the tens of thousands who perished because
they were 'not fit enough' to survive.
I might
be being a little unkind to Von Hayek but the essence of his argument
was that the Great Depression was a 'corrective' process and, when
the private sector was again confident that investment would yield
the rewards it expected, it would again invest in profitable sectors
– putting people back into employment – this time in a more
robust, more efficient, slimmer and better adapted industrial working
environment than had existed before the 'correction took place.
I would
like to again turn this argument on it's head by saying that Von
Hayek, seeing Stephen Hawking as a child quadriplegic (which he was
not, but I am taking this suggestion to illustrate a point) (with
nothing else as a guideline as to his intellectual potential) would
dismiss as nonsensical the idea that keeping him alive would be of
any benefit to society. The idea of providing him with advanced
technology to, say, progress in 3rd Grade or beyond would
have been dismissed as lunacy by Von Hayek. Von Hayek would add, no
doubt that if Hawkings' parents were financially well-to-do, then how
they choose to spend their money was entirely up to them but would
emphatically dismiss the State as any source of provider for the
value-added care required across many disciplines to keep both the
child alive and provide him with opportunity to progress.
I am
bringing Hawking into the debate because at a time of austerity and
financial crises the first cuts always take place to services being
provided to those most vulnerable who cannot protest - the elderly,
the disabled and the very young. With an ageing population in the
developed world cutbacks on services for those in the upper (aged)
and disability categories are the most attractive.
Relaxations
on euthanasia and 'exit strategies' for the terminally ill and infirm
are presented as
'fashionable'
or 'worthy' options for the 'good' of society. Indeed the processes
could be made as easy as walking into a Candy Store (except, of
course, that you won't be walking out!)
Some are
even receiving Christian Church endorsements.
So
Americans were saved from mass starvation and utter despair (and
possible revolution) by FDR adopting Keynes' monetary theory of
government intervention to save the economy from going down the
toilet. Huge public works programs were undertaken across America
as the government both initiated projects and took stake holding
shares in private enterprises to boost employment and inject
purchasing power back into the hands of ordinary people.
It was
FDR who saved the American economy from total collapse and started
the process of America's ascendency as a world economic super giant.
The key
strategies which both President Obama and FDR have both followed were
that, in the event of a major economic crises, the taxpayer bails out
the private sector where such is necessary to prevent dominoes
effects which would otherwise collapse and shatter the entire
economic system.
I believe
that history will be kinder to Obama than the present pundits.
President
Obama, history will conclude, not only saved the American but the
world economic order from either total collapse or a transfer of
global economic dominance to one (or both) of two other superpowers –
in-waiting.
In my
opinion there are two reasons why he has not been able to deliver the
FDR syndrome for kick-starting the economy.
The first
is ignorance and dogma. Republicans lack both education in the real sense and are too
dogmatic to allow a Democratic President to provide deliverance to
the American people at this time of crisis.
The
second is the misguided belief that in Ayn Rand, Von Hayaek and
Friedman economics (and their acolytes) lie the only road to economic
salvation for the free market economic world. Other paths therein
lies 'The Road To Serfdom'.
You
may well ask why even bring in Rand when the title of the article is
Keynes v Von Hayek.
Ayn
Rand is 'the dark horse' in the room. Neither economist nor
mathematician but a writer and philosopher with strong views about
existence, the state, capitalism, communism and individuality.
There
are many influential (and of course rich and privileged) Republicans
who susbcribe to her ideals and philosophies.
It is
these misguided beliefs which, in my opinion, are ensuring the
economic system in America stays stagnant.
Don't
think that such ideas are confined to the U.S. The above are giants
in the sphere of philosophical, existential and economic thought,
have huge followings amongst Conservatives (and even Liberals and
Libertarians) in Western Europe and in the United Kingdom.
Western
Europe is, however, a little more educated, mature and more
circumspect to be too over-engrossed with Ayn Rand. It has already
gone through it's own more recent 'love affair' era of neo-Nazism and
is wary of bourgeois existential philosophies such as Rand's which
usually (ultimately) lead to the gas chambers or servitude for
peoples (the helpless masses who through circumstance of birth cannot
help themselves) in their millions. Nonetheless her continued
appeal is similar to that of Adolf Hitler to this very day. I am
not comparing Rand with Hitler but her 'acolyte' following and
adoration by an elite of very rich, well-educated influential and
well-placed individuals in the United States cannot be easily
dismissed. Undoubtedly far more people read Rand as her philosophy
for life appears to be, what I would call the 'Valhalla' or final
destination of the gods of the philosopher Friedrich
Nietzsche, national socialism and unbridled
capitalism all combined - but without saying (spelling out in the
crudest of terms) exactly what is required to arrive at this 'laissez
faire' 'paradise' of governance by the chosen elite in a 'free'
'open' 'democratic' society.
It's
almost as if the privileged pine for a 'golden age' where the serfs
(sic. everyone else) live in blissful servitude totally ignorant of
the forces which control and rule their lives and with no desire for
freedom nor progress but continued toil from birth to the grave.
That's Ayn Rand in a nutshell.
I mention
Rand's books in the reference section just in case you want to
experience this journey for yourself.
Those
captivated by her philosophies are usually very rich or privileged
individuals and some who are very out of touch with, what I call,
the reality of 'ordinary' man and woman in the street. Don't
misunderstand me here. Rand understands ordinary day-to-day people
struggling to get by from week to week but only from a sense of how
to control and manipulate their thoughts and feelings to the
betterment of her own elite and privileged class. It is in this
regard that I compare her 'vision' with that of Nazism. (Indeed, in
my opinion, Stalinism is also very much related to this same
thinking.)
In a
nutshell, Ayn Rand represents the 'holy sanctum' of unbridled
capitalism – if only it could break free of it's 'chains'. Her
work is a 'cry' or lament of the privileged who have seen some (they
would argue by saying many) of their 'rights' eroded through
successive 'communistic' (mainly Democratic) administrations and
legislation over decades and is an exhortation to return to the 'source'
of freedom and individual liberty.
Social welfare nets,as a part of Federal State services, provide for a more balanced social framework than otherwise exists without them. Such concepts, with the State as provider, are abhorrent to Ayn Rand's core beliefs. Such 'communistic' frameworks undermine free enterprise. [Those most affected by the absence or lack of such welfare programs are poor White, Black and other minorities already existing at the bottom of the wage or poverty scale as the most available vulnerable individuals for exploitation.]
At it's
essence (the core of Rands' beliefs) is a 'Herrenvolk' destined to
rule the 'ignorant' masses of the world.
If you
appreciate ''Der Ring des
Nibelungen'' then Rand becomes easier to digest. Big
government always stands in the way of the quest for 'The Golden
Fleece'. It has 'stolen' individual liberty and personal freedom
which must be reclaimed by the bold and fearless.
Such philosophies, as
ever, more often than not, ultimately, end up not with the promised
salvation and freedom, but conflict on a global scale, enslavement to fossilized ideologies
condemning conscientious objectors to places such as with Belsen,
Theresienstadt and
Sobibór concentration and death camps in Europe
or, more recently, be they in Rwanda, in Bosnia, in Cambodia and, in
today's world, in ISIL-style Caliphate concentration death States –
where the only tolerable (and tolerated) viewpoint is that of their
Waffen SS-style mind-control twisted
interpretation of Islam to their prisoners - the ''untermenschen''
who must first be 'cleansed' of the Devil then, if allowed to live
beyond this ritual, be 're-educated' into the true version of the
Koran according to ISIL.
My analysis is no more aptly illustrated than in ISIL's most recent issue of it's magazine where one of it's female members praises the use of mass (even group) rape of non-believers to 'cleanse' them (their victims) of the 'evil' within. It is only after 'cleansing' and their disposal (murder of the mothers after giving birth - after a child with less of the 'stain' of 'sin' than it's 'demonic' mother) that a new generation (or new world) giving praise to Allah according to the real version of the Koran (sic. ISIL's version) can be brought into existence*.
What followers or acolytes of Rand fail to appreciate is that within the global desire of the elite objectivist subscribers to exercise total control over the exploited masses, as with ISIL, therein itself lies the seeds of its own ultimate destruction as, for example, in its exhortation to undermine or weaken the social net of the State towards withdrawal of care for the weak and vulnerable in favor of private sector philosophy (provision) ultimately results in world-wide rebellion and the development of totalitarian and extremist secular and religious ideologies 360 degrees juxtaposed to Rands' values and ideals.
When
you appreciate that the true essence of Ayan Rand's economic model is
eternal slavery of the masses to the bourgeois or privileged, then it
becomes unviable as a working model for the world – since it
creates exactly those conditions which are the genesis of and
breeding ground for the chaos, anarchy and revolution by the
dispossessed and disenfranchised against their 'masters' which we see
magnified in the strife played out through religion, tribe, race,
ethnicity and class wars worldwide this very day.
Unlike
a member of the British Royal family, none of Rands' elite supporters
have ever spent a night homeless in the freezing cold to experience
what those millions of impoverished Americans without proper heating
have no opportunity but to accept nor how those without adequate
money from their low pay minimum-wage jobs live on the fringes of
existence, nor what those people too poor to buy food and (new)
clothes for their families require to live in dignity, nor what the
60000* Americans living on the streets every night have to do to
survive without food nor money. It is these individuals who live
in insular microcosmic social 'bubbles' shared with people like
themselves, who churn out clichés
by the dozen such
as 'these bums [or hobos] should get themselves jobs' 'they just don't
have what it takes'; 'they are all social outcasts criminals and drug
addicts'; 'I've succeeded without help from anyone' ...who subscribe
to Rands' economic models for human existence and even view Von Hayek
as 'too liberal'.
[I
was very fortunate to have worked, as an unpaid volunteer, with
someone who was from a much more privileged background than Rand but
her total antithesis.
She
too had traveled in Eastern Europe both before World War II and in
its aftermath.
She
was instrumental in the creation of a body dedicated to the
trans-Atlantic alliance (U.S.-Europe) but she never lost sight of the
needs of ordinary people – despite her privileged background.
So
when I discuss Rand, I talk about someone I can understand as I
personally knew contemporaries of similar background but ones who
never 'lost touch' with 'reality' – even into their nineties.
I
am deliberately omitting Rand's 'appeal' to libertarians as it is too
complicated an issue for discussion in this short blog. Suffice to
say, I believe that they are misguided and their concept of 'laissez
faire' and 'the free market' are uniquely American in this regard.
]
To
conclude this introductory blog, the world is facing very stark roads
to follow for economic deliverance. Three competing philosophies
are being resurrected in the hope of salvation.
The
three are as different as day, night and twilight. Whichever
succeeds could well determine as to whether the world stays in global
recession for decades or whether there is daylight at the end of the
recession tunnel. Clearly I do not believe that Rand or Von Hayek
have the answer to a U.S. or world economic crash. But many
influential Republican decision makers in the United States most
certainly do. If they get their way after the next general
election, expect communism, fascism and national socialism (or their
equivalent inheritors) to be making spectacular comebacks as
individual countries worldwide seek to assert their own nationalistic
(or theocratic or neo-nationalist) agendas - as perceived opposition
to imperial hubris.
©Patrick
Emek, 2015
*The West has created this monster, ISIL, so when it looks into the mirror, ISIL is simply a reflection of failed political and ideological policies over decades and a failure of its own desire for control over affairs and destiny of peoples in the Islamic world.
This it will never recognise because to so do would raise too many troubling existential questions.
Some will say that ISIL is a deliberate creation of the West but I see it more as a byproduct or unintended consequential entity which now, unplanned, has an entire momentum all of it's very own.
*very
conservative estimate – numbers have been given by other
organisations of between 300000 to half a million homeless
individuals for any one year in the United States
You may well be
asking yourself: 'surely Rand cannot be take more seriously that
Krugman or Friedman?' In today's U.S. political world, dogma (or
faith) supersedes all else.
Ecomomic models and
policies are calibrated to fit the dogma and not the other way
around.
(remind you of
somewhere else?)
[similar programs are being today
undertaken by newer and more recent foundations such as
