We are all Keynesians now, it seems. Last week chancellor Alistair Darling proclaimed, “Much of what Keynes wrote still makes sense.” Not so long ago this would have been heresy.
John Maynard Keynes was an Eton and Cambridge educated economist who won a peerage for services to the establishment, and whose main purpose was to save capitalism from itself.
His central idea was to revitalise the national economy by boosting demand through government spending.
Keynes understood that it was fluctuations in investment that were crucial to the rise and fall of the economy – but he had no answer as to why capitalists stop investing. He could only fall back on “mood swings” between optimism and pessimism in the boardrooms.
But corporations will not borrow and banks will not lend, even if interest rates are at rock bottom, if there is no chance of making a profit.
When Gordon Brown and Darling invoke Keynes they are talking of state intervention to bail out capitalism. Left wing supporters of Keynes welcome any public spending to boost employment, provide homes and services.
Activists must work together for immediate steps to alleviate the impact of the crisis on ordinary people.
This crisis, however, is systemic and can’t just be solved by more state spending. Underlying the current financial problems is a crisis in the rate of profitability. The most recent fluctuations have been caused by the real economy, notably in China.
For Marx there is a contradiction between the capitalist’s need for profit and the needs of humanity. In simple terms the main difference between Marx and Keynes is that Keynes wanted to regulate capitalism – Marx wanted to abolish it.