We Were Wrong about Keynes [James Crotty]

well there's a historical case so in 1995 I was in residence at he taught sabishii university in tokyo in japan i touch the bus she means one bridge I was always confused because there was no bridges on the campus later found out that it was an original campus which had been shot it so I had little to do except to give a set of lectures to the faculty because the of the institute for economic studies which is the place I was nestled in did a lot of work on english language stuff it had a really good library in english so i spent a lot of time reading collected works of canes many many many of them i also spent a lot of time reading british political and economic history I say that with a kind of tear in my eye because now that I decided to do this book in the last couple of years I forgotten all that I learned about political British political economic history I'm serious it's really it's frustrating to me because this place is where I want to flesh it out and and so I discovered that the Kings that I had been taught was not the right canes historically I mean it just wasn't who Keynes was and this was interesting for a number of reasons one is that Keynes's maybe one of the two or three or whatever most famous economist most important economist in history I don't know Adam Smith marks gains Schumpeter maybe marshal and how could we have gotten all this that stuff so wrong about Cain so Cannes is I don't want to get into a discourse which is too long here because the book is long and it could take a while to do this but Cain's had decided certainly by this these the First World War that 19th century the 19th century was an incredibly prosperous period in British economic history written was like most in the you look at the long-run growth of the global economy I mean people do that for millennia and according to the the growth rates of the economy who based on really fragmentary information nothing happens from the year one to the year 1750 have you ever seen those graphs so throughout most of history is people are pretty poor I mean distribution is very unequal it's like you know and then you get somewhere around the 1770 whatever and it starts to come innocence to rock it up and so on so Britain was at the center of the rocket from the mid-1700s through the end of 19th century and this is what I had generates I presume I'm not an expert on these things the classical view of the British economy classical theory being the dominant view in these years for and the dominant view in Kansas writing and is antagonistic enemy but essentially there's a number of things that happen one is that the Industrial Revolution tends to happen in Britain very important Britain becomes the the center of the global trading the commercial center of the naval Center in the commercial center of the world Britain is becomes this main beneficiary fork for the production of cotton which is by far the most important product in the world in World Trade like why no one's nothing's close I don't know if you're familiar with the book reading whistle we recently written from a guy at Harvard called Empire cotton I think this a great book purchase a grid there you good for you this is a great book but so Britain is basically as has slave production forgot it has either slaves or it controls places like India which I chair great producers of cotton and whatever in in ways which are not always wore like but they are militaristic and power and sometimes were like and so on and they around the world they do this so they get this military capitalism which is called in that book built on the slave trade and slaves from Africa going to the new world especially at the United States after a while and produce all the cotton that minutes most of it going to Britain to be to be produced with the innovations that british-made and so on and Britain therefore has what King calls the glorious 19th century and he says that the economic theory of the day comes from that thinking that Britain is is that is the ideal place to theorize capitalism bono Cataclysm although it's unique in the world it's not the ideal place that being what did the slaves or the or labor in the in the in Britain which was which was almost like slave being a slave in the seventeen hundreds in 1800 until they you know got organized and that the reason that that people have classical theory or general equilibrium theory or whatever at least in Britain at the time was because of this unique glorious 19th century and Cain's then starts to right after the war that this was a unique experience he writes a book called the economic consequences of the war the economic on sensitive piece about the Versailles Treaty where he was a chief advisor to the economic advisor to the Treasury and says look this this this is not capitalism this is not first he says mythologically there's no such thing as capitalism there's all a concrete historical capitalism with different institutions psychologist behavioral none of this capitalism stuff it's just like this particular concrete forms of capitalism within it within the traditions that within the experience that Britain had with its dominant form of capitalism based on exploitation and slave trade and so on and so forth things were great in the 19th century don't work anymore that's dead for Britain no longer controls all the trade and if it doesn't no longer controls the cotton industry World War during World War one there were new sources of cotton that people couldn't get British cotton and people have caught up with them they there as we move forward through the 20s the the the Germans are advancing faster than the Brits the Americans are advancing phase two the protest in the Ritz but he says that the system the old system of that which laisser faire is a reflection is gone and and Britain can no longer get all its supplies and food sheep from other places and you needs the food to have feed the working class and it's this all the production and it's all gone it's it's a monopolies are all gone it's a new world and and and it's a bad world and it's it's such a bit and you know we had the terms of the Versailles peace treaty peace treaty we had global debts that couldn't be paid that Germans couldn't pay their debts the Germans people were resistant and so in the period after World War one we get the evolution of one who hit the Soviet revolt in 1917 we got you know the Germans beginning of Nazism in it 30 so we get all these things that mean that everything's different now and the natural state of capitalism at the moment at least at this concrete historical stage there on it's not like the 18th century we built the railroads anybody who builds the railroads has a boom for 35 40 years when it transforms everything that there's none of these transformative things and there's no reason to expect population growth isn't growing that that's always a stimulus with war not war the dead that's not a stimulus it ended in a in the in the interwar period there's no system transforming technical revolutions and so we're basically sinking into stagnation and as we sink into stagnation in the 20s and then more so in the 30s and we have the the financial boom and then the collapse and all the troubles after nineteen thirty that this is the natural state of capitalism so that this is this is what you get from capitalism week we if we want we're going to this is not only economically devastating it's politically devastating by the time we get to the 30s we've got the war drums booming everywhere in Europe country after country being then we have in sonant its political and social unrest he stresses he stresses the the fact that it this isn't just a bad thing this is a politically dangerous thing so when he exits in the general theory in chapter 24 he says the world would not much longer tolerate this form of individual is the capitalism and which is inevitable it won't tell tough tolerated much longer any means the working class won't tolerate it much longer so this political unrest everywhere he writes a piece called national self-sufficiency in 1933 in which he says we can't eat we have to figure out how to get out of this thing by without being integrated closely integrated in the financial markets and so on above all he says let finance be local we have to transform the economy to do it and we have to insulate ourselves for a while doesn't mean he wants to be at our kick or whatever it's just in the current conditions the only way you're going to get out is through domestic things well what he want to do well he writes in many many many many places first of all the rights he's a socialist I'm a socialist I'm a liberal socialist I was liberal socialism I believe in liberal socialism I would ever give speeches and whatever to socialist give speeches Labour Party saying I'm a socialist what does his socialism mean he thinks that the the ability of do you write unregulated markets in Britain to deliver a pace of capital investment strong enough to achieve and then sustain full employment in Britain is incredibly higher than it's possible for the current this capitalism to produce so what we need to do is organize all of the areas of which the public sector has now any control over capital investment decisions so he lists all of the capital investment decisions all the capital that's controlled by the state or that can be influenced by the state including the co-operative real estate housing authorities really huge and says we have to bring them all under one place under a board of national investment and we have to run that and we have to bring together all the sources of savings that are in the economy our most of them in one place and and in a book called Britain's industrial future the Labour Party put out he he goes through all of these incredible important things you can do with this capital if you will if you can control it and that in nineteen 42 or 43 he says if if the state can control two-thirds to three-quarters of large-scale capital investment and use this National Board of Investment to it to pursue and achieve sustained full employment will be fine now so that's it that's a huge intervention in the ok that's he's going to say you're going to have sustained there'll be no reserve army in terms of political power in order to do this you'll have to drive the interest rate down towards zero because as you as you accumulate all this capital its rate of return will be lower given no systemic transformations and so on itself with no population growth so the only way you can do this is if you drive the interest rate down towards zero and that's what you should do but you can't do that unless you have strict capital controls because otherwise people will take their money and bring it out so you have to have strict capital control the this the plan his socialist plan means he says the end of the rafi a class in Britain now Britain has been governed by its frontier class for several hundred years the landed runt and Atlantic gentry and the Bronte a class so he's basically saying we have to euthanasia as the rent yeah that's that's his terms and and and we do that we get rid of the oppressive nature of financial capital this is a incredibly radical thing to propose and Britain more than anyplace else in the world if we if we if we do this we're going to have to have capital we're going to have to have managed trade because we'll be growing faster than everybody else will run these big deficits you can't do that so we have to manage our trade we have to run managed trade which is something that he he thought capital controls and managed trade should have been built in today IMF system he thought we should have industrial policies we should have weighed polities we should have geographical location policies we should would ever and all of it was to to achieve full employment the growth of Britain the creation of Arts the building of cities the building of working-class housing and so on where the state has essentially got all of the of the controls of the the main activities in Britain they're still private markets distill whatever you can you know manufacturing he says manufacturing small relative to all the other things that we can do and he keeps saying this is socialism and if we don't have my liberal if we don't intervene and have liberal socialism we're going to have chaos we're going to have communism we're going to have revolution we're going to have whatever and that's what we should do and this seems to be a story untold

Channel: New Economic Thinking

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Id: wX_20yHx8Zc

Length: 15min 25sec (925 seconds)

Published: Tue Jan 10 2023