From Henry Hazlitt’s recent The Failure of the New Economics, the reputation of the late John Maynard Keynes emerged in a sorry state of disarray. Professor David McCord Wright does not directly take issue with Mr. Hazlitt’s estimate of Keynes in his The Keynesian System (Fordham University Press, $3.00). But unlike Mr. Hazlitt, Professor Wright insists, by implication at least, that in spite of all his faults Keynes remains one of the towering figures of economics. It is the "Keynesians" to whom Professor Wright objects. Lord Keynes, in his view, was not a "Keynesian."
The "Keynesians," says Professor Wright, have been guilty of selecting that portion of the famous General Theory of Employment, Interest, and Money that was elaborated to fit the peculiar condition of England in the twenties and thirties and making it do duty as an "explanation" to fit any time and place under conditions of advanced capitalist machine production. For this aberration on the part of his many disciples Keynes himself was admittedly to blame. In the first place, says Professor Wright, the "general theory" which the title of the book is supposed to cover is not general, it is a particular theory designed to fit a special instance. Keynes, however, corrected himself in the course of writing his book. His own actual "general theory" is larger than the theory that is indicated by the title.
Professor Wright arrives at his conclusions by taking careful note of Keynes’s qualifying phrases. The General Theory is spangled with sentences that have a tentative flavor. Thus Keynes says, "In contemporary conditions the growth of wealth, so far from being dependent on the abstinence of the rich… is more likely to be impeded by it." Or : "Interest today rewards no genuine sacrifice, any more than does the rent of land." The italics have been added by Professor Wright.
To clear the long-term elements of the Keynesian system from the misunderstandings that have been cultivated by those who have failed to note the sort of thing that Professor Wright chooses to italicize, one must first take Keynes as a man of the twenties and thirties who was interested in immediately practical solutions. The
The restoration of the gold standard, which was undertaken to save the third of England’s balance of payments abroad that were met by the "export" of banking and insurance services, did not help to revive the export market for British manufactured goods. Picking the story up "in the middle," Lord Keynes took the decline of the "marginal efficiency" of British capital for granted. Since there seemed to be no expectation of profit in a stagnant world where savings were not flowing into investment, Lord Keynes started elaborating a "general theory" for a "frozen" economic system.
There followed all the famous “Keynesian" proposals: let wages remain where they were, let the government "tax and spend" to spread purchasing power to the unemployed, let deficit finance create "government investment," let everyone have his bit of Beveridgean social insurance. The "euthanasia of the rentier" would be rendered painless of letting the impoverished capitalist come under the general welfare provisions along with the rest of the country. The nation, in Wright’s words, could "become happily stagnant."
A Very Special Situation
Professor Wright thinks Keynes’s proposals might have made sense on their own rather craven terms for a
Sooner or later, Keynes would have had to confront the need for thoroughgoing capitalist innovation in the English economic system. But the war came and "government investment" took over temporarily.
That Keynes himself was not a "Keynesian" for all times and places was proved during the war. Foreseeing that the war might create both scarcity and inflation (in other words, bring about a condition that was a negation of the twenties and thirties), Keynes went back on his prewar proposals for the establishment of indiscriminate credit. His How To Pay for the War was a scheme for drastic taxation of consumption "coupled with certificates which could be cashed when (or if) unemployment returned." In other words, Keynes had "set upon a more orthodox track in his thinking." Professor Wright doesn’t think Keynes was guilty of inconsistency in stressing the need to face different times with different economic policy. For Keynesian analysis, even on the basis of suggestions in the General Theory, recognizes that when full employment is a fact, a government "would want to be able to ‘pull in its horns’ without having created too much extra credit."
This being the case, "we see that Keynes and Keynesianism becomes no longer a revolutionary bogey but a very moderate and respectable school of thought." If Keynes had lived, so Professor Wright says in a quietly malicious footnote directed at the "Keynesians," he "would have tried to balance stability versus pressure groups about where the Eisenhower administration did—except that Keynes would probably have tried to be more conservative!"
A Fundamental Error
What particularly annoys Professor Wright about Keynes’s American and Canadian "disciples" is that they are thinking of present-day
Keynes died before he could see where the "Keynesians" were headed. On the basis of his correspondence with Keynes, Professor Wright undertakes to "broaden the model" left by the dead master. He notes that Keynes himself actually used two models of the economic system, one a mechanical one with mechanical outlook, and the other a "dynamic, subjective model." If Keynes had lived, he would almost certainly have stressed the need for savings, for innovation, for profits, and for lower prices in a world that is in dire need of an expanding economic system to feed the "exploding" millions of
Much of the middle part of Professor Wright’s book consists of a technical analysis of the Keynesian "tool box." Unlike Henry Hazlitt, Professor Wright is willing to grant logical value to the Keynes system, provided the postulate of a "frozen" economic world is accepted. In Keynes’s General Theory the "apparent" contradictions disappear, according to Professor Wright, as soon as one realizes the points at which Keynes has tacitly "unfrozen" the system. It is the continual switching of assumptions that "forms a continual trap for the careless or biased reader."
Out of step–The Autobiography of an Individualist, by Frank Chodorov (New York: DevinAdair Company, 1962). 261 pp. $4.50.
Reviewed by Robert M. Thornton
No ONE today takes his life in his hands when he expounds the concepts of individual liberty, limited government, and free enterprise. His audience may be small but its growth rate is sufficient to warrant publication of more and more conservative or libertarian books and magazines. Fifteen, twenty years ago this was not the case.
In the forties little was heard from fellows who held to such beliefs. One of the few who did speak up for the good cause in those dark days for liberty was one Frank Chodorov. Untroubled by the odds against him Mr. Chodorov started publishing a monthly broadsheet, analysis, which was destined to last over a half-dozen years, thanks to a few thousand faithful subscribers. We can, I think, understand the spirit underlying Mr. Chodorov’s grand efforts by a careful reading of his statement in the first issue, November 1944:
"It’s fun to fight—when what you are fighting for stirs your imagination. Fondly adhering to the ideal of individual dignity, striving to keep alive the embers of that hope which was fired by the American Declaration of Independence, those who are making this paper possible expect only a measure of enjoyment in return. It is in that spirit that I, while I manage to rub along by other means, assume my editorial duties.
"For, to point up the state’s encroachment upon social power, to expose the insidious economic forces which are robbing the individual of his will to resist the trend, to suggest a way by which this degradation of man might be stopped short of state-slavery, seems, in the light of what is happening, a fatuous undertaking. What of it? There is a lot of spiritual profit in being true to one’s self.
"In carrying on for principle, self-respect at least is preserved. The loser is he who quits; what material advantages or conveniences he might gain by compromise is paid for with the currency of manhood. A pig accommodates himself to the environment imposed on him, and that is why we ascribe to the pig no soul worth speaking about.
"There is further ‘profit’ which this voice-of-individualism hopes to render its supporters. It is that imponderable value which is derived from communion with kindred spirits. Every reader of this highly opinionated journal becomes ipso facto a member of a fraternity of individualists, held together by the greatest of human bonds—a common ideal, a common hope. To know that one has the moral support of a host who, in their hearts at least, protest and proclaim with him, is a real comfort."
Some of analysis has rubbed off on this book, and it is radical stuff. It will make delicious reading for the libertarians among us, but some right-wingers—not to mention so-called "liberals"—will find it pretty powerful medicine, much too strong to take under any circumstances. For Mr. Chodorov, being a consistent individualist, does not advocate sacrificing individual liberty in order to do battle with those who would destroy freedom. Nor is he concerned with telling people how they should live. His aim is to establish the context of freedom—a society in which men may do as they see fit as long as they do not prohibit others from doing the same.
Mr. Chodorov does not champion the cause of businessmen. Nor does he speak for labor unions, or farmers, or intellectuals, or veterans, or elderly people, or any other group, large or small. He is one hundred per cent for ending all privileges—to all individuals or organizations! He is as strongly opposed to subsidies for businessmen as he is to government-bestowed privileges for labor unions.
Frank Chodorov is a practicing individualist, it should be noted, and as such he has been willing throughout a long life to accept—nay, demand—personal responsibility. Unlike so many who merely talk about freedom, Mr. Chodorov has actually lived by his principles as well as any fallible being can—even when it hurt. He recognized early in his life that no true libertarian could look on security as anideal for it is, in a real sense, a false idol.
Mr. Chodorov devotes a full chapter of his "autobiography" to his good friend, Albert Jay Nock, who has recorded his own view of our author: "Mr. Chodorov has a social philosophy that is fundamental and his command of it is so complete that he can express his critical view of a large subject in the fewest and simplest terms. In his last issue, for example, he wrote one page on The Unimportance of Yalta and another on Mr. Wallace’s Competence. He took these subjects entirely away from the conventional line of approach, applied a new and competent measure to them in the simplest kind of language, and when he ended there was nothing left for anyone to say; he had said it all…. Mr. Chodorov has the kind of humor that keeps him always superior to his subject. If the aspiring pamphleteer hasn’t that, he had better sweat blood to cultivate it. Much of our controversial and hortatory literature is sound and good enough; but dear Lord, how dull, dogged, dreary it is, and how dismally it plods along on the dead-level of platitude!"
Mr. Chodorov is a colorful personality who could hardly write a dull line if he tried. The reader has a treat in store.