The Unemployment Bogey - And That ROOT Of All Current Evil, Lord Keynes

John Maynard, Lord Keynes, the Cambridge “economist” whose General Theory of Employment, Interest and Money has ruled “monetary policy,” the universities, as well as “public opinion” since WW2 – did NOT write about “market phenomena” at all; rather, he wrote a book on how governments could “manipulate” these, for whatever be their chosen ends.

In modern, western “democracies,” these ends are inevitably “political” – and the results are there for all to see today: massive governments debts, looming sovereign defaults, and “tax-parasitism” instead of the “self-help” that Capitalism and Liberty were always all about. That was “How the West was Won” – and this is “How the West got Lost.”

As a study in contrast, Ludwig von Mises’ Human Action: A Treatise on Economics – which runs into over 1000 pages – covers the “spontaneous” emergence of money in markets in a chapter on “Indirect Exchange”; there is a chapter on “Interest” that looks at how this arises naturally from the valuation of future goods over present goods, and how it is determined as a market phenomenon; and as for what Marxists call “Labour,” and what Keynes called “Employment,” Mises has a chapter titled “Wages.” Why this difference?

Well, because to a “real economist” like Ludwig von Mises, the subject matter of Economics is the “study of market phenomena.” It is NOT the “study of government policy.”

So, when we “sell labour” – the market phenomenon is “wages.” The question arises as to how these wages are determined – and this is traced back to the “subjective value” in the mind of the consumer. For, we do not really “sell labour”; what we sell is the “output of labour.” Thus, while employed with a newspaper, I considered myself a “worker in a word factory.” Of course, my wages were not very high – because few read pink newspapers. And any small-time Indian film actor or cricketer earned a thousand times more than I did – only because they had more “consumers” on their side.

Since Keynes, developed nations have been much bothered about “unemployment” – and huge amounts have been spent, and continue to be spent, by their cash-strapped governments, through borrowings, and through “monetary policy,” in order to provide “unemployment benefits” to those “without work.” This is the Welfare State – a variant of Socialism – and this is the direction in which Manmohan Singh as well as his guru, Amartya Sen – both from Cambridge, like Keynes himself – are trying to take India.

Today, it is welfarism that has collapsed all over Europe. So it might be pertinent to look closely at the reasons why Keynes’ ideas are not just wrong, they are positively EVIL.

Because of the dominance of Keynesian ideas – for the Nobel laureate Paul A Samuelson’s Economics has been the prime vehicle of Keynesian errors in classrooms worldwide – the planet has been divided into “nation-states,” each practicing “protectionism,” each with a central bank monopolistically issuing fiat paper money, and each practicing inflationism for “political ends.”

National Socialism – worldwide.

Everybody knows the war is over,

Everybody knows the good guys lost.
Everybody knows the fight is fixed,
The poor stay poor,
The rich get rich.
That's how it goes.
Everybody knows.

Leonard Cohen

Keynesianism is the reason why - for the poor save, while the rich borrow, and inflationism punishes savers, while rewarding borrowers. Evil!

Clive Bell wrote Civilisation because Allied soldiers were supposedly fighting in order to “save civilization.” And look what has happened: Nazism!

Incidentally, Clive Bell was part of Keynes' "Bloomsbury Group" - though he was an "art critic" essentially - and this remarkable essay on "civilisation," well worth the read, especially today, is dedicated to Virginia Woolf.

Like the "intellectuals" of England who popularised socialist ideas, those who stood by Keynes did not realise how very destructive to humanity his "general theory" was. Methinks General Musharraf and General Pinochet are preferable by far!

Keynesian “monetary policy” attempts to make “trade-offs” between unemployment and inflation – through “manipulation” of the interest rate and also the “money supply,” which includes the “creation of credit.”

Gradual fiat paper money inflationism – with intermittent booms and busts – only ends up “cheating the working classes,” by eroding the value of their savings.

It was heartening to watch a representative of British savers, Simon Rose, being interviewed on the “Keiser Report” on Russia Today this Sunday – for such interviews can wake people up. He said British savers have lost trillions over just the last decade, that inflation is crippling, that the economy is bust – all because the British State is too heavily in debt, all because of welfarism.

And Max Keiser reported that the IMF – which was established by Keynes shortly after WW2 had been “won” – has advised the British State to “lower interest rates”! They think this will “stimulate demand”! That’s what happens when you study Samuelson in college.

As I wrote yesterday, this is another of those DELUSIONS that political “visions” are all about. While listing out many such delusions, I wrote the following about the Keynesian one:

Or, how about the Keynesian “vision” of State budget deficits increasing “aggregate demand”? A deficit consumes capital. How can that ever raise demand? Further, the resulting inflation erodes savings. And that reduces investment. Which in turn lowers production. Unemployment is the natural consequence of this “vision.” Further deficits in order to pay doles to the unemployed only makes things worse.

But “budget-maximisation” continues – and things only get worser and worser.

Keynes and the Keynesians have always had “political ends” in mind: viz., the “vote motive,” as well as its corollary, which is “bureaucratic budget-maximisation.”

This is clearly evident in India today, with bureaucrats supporting welfarism, for their own, private gain – while the politicians think they can win votes by throwing around these freebies.

Today, with welfarism wrecking Europe and the Euro, and seeing what has happened to British savers – their “working classes” – let us clearly see Keynesianism for what it is: PURE EVIL.

These ideas support AUTHORITARIANISM in sheep’s disguise. The “welfare” is phoney. State budgets as well as powers are MAXIMISED. Tax parasitism becomes endemic – and this is the “political means” of survival. Democracy becomes meaningless – for it all began in order to “vote on taxation.” If governments can borrow and even print money at will – if budgets as well as powers are uncontrolled and even uncontrollable – we are NOT “ruling ourselves” at all. And our “elected representatives” are “above the law.”

Serfdom was better; far better. Merrie Olde England, remember? No Parliament. No legislation. Only the “common law.”

The Other Path of survival – the one that is “moral” – is through “economic means,” which is by exchanges in a FREE MARKET. The word “free” is very important – especially in India, where “economic repression” is widely practiced, and this is blatantly anti-poor while being pro-bureaucracy.

So, let us think – finally! – in the true interests of the poor, who are the vast majority in our sub-continent. Their savings must grow in value. This, they must invest themselves – in LIBERTY! Money must be allowed to emerge from “indirect exchange” – and NOT the State. Interest must be free – among competing private banks under private law, which means nothing more than Property and Contract.

The following quote is the last para of my column advocating a return to the Gold Standard:

Any nation can unilaterally revert to the gold standard whenever it chooses. If we do so, our rupee, now pegged to gold, will always appreciate against the rest of the world’s fiat papers. This will help us become big importers. And cheap imports, including of capital goods and components, will make our manufactured exports competitive in terms of technology, quality and price. Our banks will attract the world’s savings, and we will possess capital, the vital ingredient of “capitalism”. All prices will steadily fall and the consumption of the poor will rise in leaps and bounds. This is the power of “sound money”.

So, let us IMPORT – cheap. Let us raise consumption – of the poor. This will raise their “standard of living.” 

And all this will be good for the rest of the world as well.

India’s numberless poor are NOT the “industrial working class” that western Marxists and Keynesians have in mind. Trade unionism in India is nothing but a “privileged labour elite.” Trade unionism has wrecked British industry.

Anyway, Say’s Law of Markets indicates that artificially raising wages in one area to benefit certain sellers of labour hurts all the rest – who buy labour services. Eventually, overall demand falls. Everyone gets hurt. Free, competitive markets are what benefit all: this is one of the many, many lessons Say’s Law teaches. So, do go through all the posts under this “label” on the right-hand bar. And remember: Say’s Law of Markets is what all Keynesians HATE – and deliberately “misteach.”

Statisticians say, “70 per cent of our poor are engaged in agriculture.” But, as Bauer first reported, and as I have witnessed over the years, these “agricultural workers” do different things, in different places, at different points of time: sometimes, of course, they work their fields; at other times they might work as construction workers – in some city; at other times they might be traders – in some town market; and all this depends on the season of the year.

Trade unionism is NONSENSE for such people. Free contracts are the best. And free immigration as well.

With sound money, prices will be falling, including that of all imports, and consumption will rise – and this is the alternative to the EVIL of Keynesian-Welfarism-Inflationism.

In either case, the great gift of civilization is NOT work. Rather, it is LEISURE. This is how we get to enjoy culture, the arts, and even philosophy.

The Keynesian-Welfarists want to produce WORK FOR ALL – and in the process cause “de-civilisation.” Which is precisely what is happening today - worldwide - because Keynesians are causing "capital consumption" on a massive scale. That is what "savings of the poor are being eroded" means. EVIL!









Now, civilisation is what is in the picture below - and we can all enjoy it if we attain Capitalism. If we "accumulate capital" - ourselves. If our Capital is our own "private money."

Leisure!

That's what the "good life" is all about. 


[PS: The second and concluding part of this post is available here.]