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Michael Hiltzik: The return of Keynes

Few outside university economics departments may have noticed that the dramatic trend in recent decades toward the concentration of wealth in ever fewer hands coincided with the ouster of Keynesian economics from policymaking in the U.S., and the substitution of the so-called New Classicism.

The theme of my column for today is that the trend shouldn't have come as a surprise. Classical economics, with its lionization of the market as the guiding mechanism of everyday life, is tuned to the needs of the ownership class. It rationalizes hands-off government, a free market in labor (that is, union-free) and the steering of profits toward shareholders, who are supposed to know best how to deploy capital.

The harvest of this concentration should be clear by now: tapped-out, debt-ridden consumers, and what looks like an enduring slump.

John Maynard Keynes was perhaps the most incisive analyst of capitalism since Karl Marx, and an immeasurably better judge of human nature. He understood that no economy can thrive by impoverishing its consuming class, and had he been alive he no doubt would have warned against the trend developing in the U.S. and other Western economies after 1975. My column, based on an interview with Keynes scholar Robert Skidelsky, starts below.

Great crises have a way of reminding us that acting as though we know perfectly well what the future holds almost always leads to disaster.

That’s especially true in economics, which tends to underscore the murkiness of the real world by dealing out surprises one after another — booms, crashes, bubbles, you name it.

It’s fitting, therefore, that the recent economic meltdown has begun to restore that great apostle of uncertainty, John Maynard Keynes, to his rightful position of influence in economic thought.

“Keynes asked why financial markets are inherently unstable,” Robert Skidelsky told me the other day. “His answer was that we don’t know what the future will bring. He talked about the inherent precariousness of knowledge, that when we estimate the future we’re only disguising our ignorance.”

If that sounds obvious, keep in mind that the financial disaster of recent times was born in the hubris that the financial markets are nearly flawless machines for assessing risk and that government regulation would make them inefficient.

Read the whole column.

-- Michael Hiltzik

 
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