The Politics of Keynesianism

A Business Standard editorial today says “We just may have the makings of a painful trade-off between sustaining growth and fiscal discipline”. Essentially that we may have to “government spend” our way out of the economic crisis.

Keynesiansim is now rampant in the press, more often implicit than explicit. The doctrine however is not somehow “purely economic” (if there is such a thing), but manifests itself in society through politics of a particular kind. Here are some wise words from W H Hutt

Mises contention that “inflation is the fiscal complement of statism and arbitrary government…a cog in the complex of policies and institutions which gradually lead towards totalitarianism” has been recently confirmed by one who obviously welcomes this result.  In what is probably the most effective recent defense of Keynesianism, Bronfenbrenner has argued that the great virtue of the doctrine has been that, through its influence upon policy – through the consequent secular inflation – the “peaceful acceptance” of Marxian aims has been secured. Where the drastic measures which Marx himself contemplated would have failed, Keynesian methods have quietly succeeded. “Secular inflation” has, in fact, proved to be the “principal weapon for extortion of surplus value”, and has had “the net effect of permitting all active pressure groups to gain at the expense of the dead hands of the salaried, the rentier, and the pensioner”. Bronfenbrenner describes inflation as a “social mollifier” which permits the politically dominant groups, like the trade union movement and organized agriculture, to increase their share of national income “without decreasing money income of anyone else, and therefore without arousing the volume or vehemence of opposition which might be expected”.

This triumph of Marxian aims by more subtle methods than Marxs own, this gradual process which we are currently witnessing of the euthanasia of the politically weak classes is, according to Bronfenbrenner, to be preferred to what he apparently regards as the inevitable alternative, expropriation on orthodox Marxian lines.

- page 48, Keynesianism – Retrospect & Prospect, 1963

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