Future of World Capitalism

The Marxists have hitherto only changed Marx. The point is to interpret him - or indeed, as the German publishers of Marx's famous magnum opus noted, to read him. Sales of Capital have skyrocketed since the credit crunch, as the Sunday Times reports 48 per cent of its readers say 'Marx was right' in response to a poll last December

Dostaler's is one of the rare books about Keynes that tells you what his actual theories were. Does this matter? Yes: nowadays, when 'everyone is a Keynesian' once again, it's very easy to dismiss Keynes's valid insights. Here's how you do it: you take some policy you don't like and call it 'Keynesian'. This might be running up intractable government deficits (if you're on the right) or fiddling with aggregate demand instead of tackling investment (if you're on the left). Actually, Keynes himself advocated neither of these. Lot's of 'Keynesians' did, and lots of recent 'converts' still do. So what happens? People decide whether or not they agree with Keynes, based on the actions of the Keynesians. Mostly, they don't even bother reading Keynes - and therefore, they miss out on all the profound and important ideas he actually brought into this world, many of which are coming back to haunt us with startling relevance.

For example, a year ago it was unheard of to suppose that central bank interest rates could be cut to near zero. It was against all orthodoxy. It's still practically unheard of to engage in so-called 'quantitative easing' which is what governments have to do when cutting the interest rate to rock bottom doesn't work - basically, they have to print money and inject it into the system. Novel idea? No, it was Keynes's idea and is encapsulated in the theory of 'liquidity preference', which mainstream economics conveniently buried twenty years ago by 'proving' it would lead to inflation. Or consider the 'novel' idea that it's really not a good idea for the dollar - the currency of a single country - to act as the world's money. Who said that first? Keynes, in 1946, when the UK government sent him as their representative to negotiate with the Americans about the future of the world system. Keynes proposed a much more sophisticated system, in which the sovereignty of nations over the management of their own currencies would be combined with an international currency for settlements, which would be managed by everyone. It's taken sixty years for the idea to come around again.

Does this mean that 'Keynes was right?' Not at all. Like any thinker, some of his ideas will probably be wrong, and some are startlingly right. That's not what matters: what counts is understanding what was actually said, in order to make our own judgement about it. That's what we will have to do, in order to put together the right policies for the future.

Those writers who dismiss policies they don't like by labelling them. 'Keynesian' commit the same primary logical error - known as 'ad hominem' argumentation - as those who dismiss everything Marx said because - they claim - 'Marxism' has been discredited. Ad hominem - which in Latin means 'from the man' is an argument which tries to deduce a policy from who said it, instead of what was said. By labelling policies as 'Keynesian' without discussing a single word of what Keynes actually said, the journalists and economists of today are doing a grave disservice. They are seeking to close the minds of a new generation of readers to valuable ideas which will be needed - alongside those of Marx, Schumpeter, and many others who have provided profound insights into the workings of capitalism - to understand the full gravity of the present crisis and the measures needed to get out of it.

Whether 'Keynesianism' is right or wrong, books like Dostaler's, and Geoff Tily's recent Keynes's General Theory, the Rate of Interest and 'Keynesian' Economics are essential reading for anyone who wants to get to grips with the present crisis.