Let me start by saying that of course the space being afforded the Keynesian (or, more accurately, neo-Keynesian) ideas of the likes of Paul Krugman and Joseph Stiglitz is a welcome break in the mainstream media from the political sound-bites masquerading as economic analysis that we suffered before the crisis.

But neither Krugman nor Stiglitz, nor other similar economists, are left-wing; nor was Keynes. They promote policies to try to secure capitalism’s dominance globally and project a “better,” managed form of capitalism; and if this has some benefits for workers it is only of secondary importance to securing the accumulation process for capital and securing the survival and spread of capitalist social relations globally—imperialism.

The only reason the media moguls behind the New York Times, the Independent and the Irish Times are providing space for these ideas is that Krugman and Stiglitz want to save the system and quell the revolutionary motivations of workers’ organisations.

“Lord” Keynes believed that capitalism was the best form of social system. In a nutshell, and in his own words, he believed “that capitalism, wisely managed, can probably be made more efficient for attaining economic ends than any alternative system yet in sight, but that in itself it is in many ways extremely objectionable.”

So while Keynes was well aware of the “objectionable” features of the system—presumably war, poverty, inequality, oppression—he was still fundamentally committed to its maintenance.

In essence, he believed that through technocratic management, support, and direction, capitalism could be made to provide full employment but it does not naturally tend to that.

Keynes opposed class struggle and adopted a pro-establishment class position in his political actions, favouring trying to convince rather than replace the political establishment, something we are familiar with today. “I do not believe that class war or nationalisation are attractive,” Keynes states, and this led him to favour the liberal, non-class and individualistic approach to politics over the emerging Labour Party.

Without having studied Marx’s Capital, the arrogant Keynes was able to declare to his socialist friend George Bernard Shaw that “I am sure that its contemporary economic value (apart from occasional but inconstructive and discontinuous flashes of insight) is nil.”

Leaving aside those who are described as Keynesians today, what did Keynes actually argue for? Firstly, he criticised the “natural” functioning of the system and understood that, if left to itself, it did not tend towards an equilibrium between investment and demand, and consequently jobs.

Correctly, he tore up and tore apart classical thinking that said supply creates its own demand (Say’s Law), that if there isn’t full employment it’s because labour costs too much.

He also demolished the follow-on argument that savings create investment and showed that it was in fact the other way around, and so consequently disequilibrium occurred as a result of excess savings that could not or would not find an investment avenue as a result of a lack of return or confidence in a return (lack of demand).

He saw growing income inequality as a danger to consumer investment and demand, significant parts of economic growth, as those who have more spend proportionately less, and a small increase in the wages of workers has a massive effect on consumption.

So for Keynes, to counteract the tendencies within the system, state policy would have to champion demand and investment. He famously called for the “socialisation of investment” as a means of ensuring that investment would be productive rather than speculative and would be sufficient to provide employment to maintain demand and confidence for both the consumer and the investor.

He worked out the multiplier effect of what jobs produce in consumption and so demand and consequently in investment and more jobs. Through this state-led investment he believed we might ultimately achieve the “euthanasia of the rentier,” the disappearance of the class of unproductive speculators, and settle in a balance towards full employment.

Based on his analysis during crisis, which occurs as a result of insufficient investment, according to Keynes, the state should re-inflate economies through investment, and if needs be this could be deficit-funded, as the return in jobs, taxes and growth outweighed the cost of funding it. However, in normal times he also concluded that investment should be led by the state and could not be left to the whims and psychology of private owners.

This is all a far cry from so-called “policy solutions” today and from Keynes’s more famous followers today, who fill the pages of newspapers. But there are significant limitations to Keynes that must be recognised and that the left needs to move beyond.

Keynes had no worked-out theory of the system as a whole. He did not develop a complete analysis of stagnation or crisis. Most importantly, he did not develop an analysis of class. Exploitation is virtually missing from his writings. Consequently, he failed to understand the class nature of the system and the state and in whose interests it acts. This left him at the mercy of governments and periods of slumps and booms—fashionable during crisis, irrelevant during booms.

Keynesian policies had only a minimal effect on the recoveries after the Second World War. Growing military expenditure and war had a far greater economic impact. In a world economic system suffering over-production and increasingly cheap productive capacity, what multiplier job effect can really be expected from an increase in consumption? Certainly not what Keynes suggested.

If a state did in fact socialise private investment and directed it in a planned fashion, what guaranteed return would the state provide private capital? And is this not just a more direct form of exploitation by capital of labour?

Keynes did not connect in whose interests the accumulation system operates. So, if we are serious today about advancing socialism and socialist struggle, Keynes is actually harmful to the working-class movement.

Of course saying that Keynes, or Krugman or Stiglitz, is not radical is not a challenge to them. They don’t claim to be revolutionaries or interested in the building of socialism.

But trade unionists and political activists on the “left” who have a commitment to building socialism, or some broad concept of a state where labour dominates over capital, and the economy serves the people, and not the other way around, must move beyond a version of political economy whose interest is in maintaining and reproducing the economic system that is the source of the inequality, war, exploitation and alienation that are everywhere today.

It is no coincidence that the establishment embraces versions or parts of Keynesian investment-focused projects when capitalism is on its knees—after the 1929 depression and after the Second World War—because for these periods of crisis the Keynesian stimulus for the system offers something to big business.

But even these policy tools at capitalism’s disposal are having limited effect today where they are being tried. For all the hundreds of millions in “quantitative easing” in the United States, and the unbelievable lift on its budget deficit ceiling, no jobs have been created. Monopolies have used the funds to pay off debts and are even storing some away for their next disaster; but no jobs have been created.

In Europe the ECB and EU Commission are too scared to even contemplate a serious state-led investment programme, for fear of how moneylenders and big investors might perceive the increased public debt.

Instead they prefer to hand the millions over directly to the moneylenders and hope that their good will will be repaid with some private investment, or at best will consider using our money—pensions and taxes—to stimulate growth through handing it over to big business in some form of public-private partnerships.

But if the state was to invest where it is required by people and not just as a means of securing capitalist accumulation it would need to invest in health, education, infrastructural projects—such as broadband—child care, and renewable energy sources and technology; but to do this would take control of the system away from private capital, would strategically transform the system and build socialism. That is not Keynesian. That is revolutionary.

State policies to be espoused by the left must not be for stimulating the capitalist economy or encouraging growth in the private sector. They must be for building a planned public sector to serve the public; they must be for narrowing and isolating the private sector to the advantage of the state.

The left must move politically and economically beyond Keynes and must have the political courage to espouse an economic system that benefits all working people as its primary objective, not as, at best, a knock-on effect for some working people.

September 5, 2012