Keynesian economics and Totalitarianism

Keynes Was No Liberal

By Allen McDaniels

While reviewing the writings of the revisionist historian and former teacher of mine James J. Martin, I came upon a reference to John Maynard Keynes's German-language edition of his General Theory, published in 1936.[1][2] In this edition, Keynes wrote a special foreword for his German readers. This foreword has been largely overlooked by hagiographers, economists, historians, and journalists — definitely by sympathetic politicians and bureaucrats. At the time of the German foreword, September 1936, Adolf Hitler's National Socialists had been in power for nearly four years.

The kernel of Keynes's thought is summarized in a short passage within the foreword:

"The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory.[3]

Keynes called his theory "general" because he claimed it would work not only in a laissez-faire setting but also, and more easily, in a totalitarian one. This contrasts with classical Austrian economics, which recommends free men and laissez-faire.

In a letter to Sir Percival Liesching of the British Board of Trade dated October 8, 1943, Keynes also made the following clear and unequivocal declarations:

Thank you for your note on state trading. If in this matter you leave loop-holes in your scheme, it will not upset me. Indeed, the more loop-holes you leave the wiser you will be in my opinion.

As you know, I am afraid, a hopeless sceptic about this return to nineteenth century laissez faire, for which you and the U.S. State Department seem to have such a nostalgia.I believe the future lies with

1.   State trading for commodities;

2.   International cartels for necessary manufactures; and

3.   Quantitive import restrictions for nonessential manufactures.

Yet all these future instrumentalities for orderly economic life in the future you seek to outlaw.[4]

The Obama administration's brain trust of Keynesian economists and sympathizers continue massive government intervention in the economy, euphemistically referred to as stimuli, in a vain attempt to rescue it from the brink. Thus far, such intervention has made any recovery more remote.

Is the administration at the same time working to create a totalitarian state where Keynesian economics has a better chance of success?

Do Americans want to sacrifice their remaining freedom in order to prove Lord Keynes correct?

Who is confronting the administration with these questions?

Notes

[1] Keynes, J.M. Allgemeine Theorie der Beschaftigung des Zines und des Geldes (Berlin and Munich: Duncker & Humblot; 1936, 1952, 1955, 1967).

[2] In Martin, J.J. Revisionist Viewpoints: Essays in a Dissident Historical Tradition (Colorado Springs: Ralph Myles, 1971), pp. 197 ff.

[3] Idem, pp. 203–5.

[4] Idem, pp. 198–9.