In June, I determined the the most important album for the COVID-19-era to be Green by Hiroshi Yoshimura. In July, I determined the best COVID-19-era TV show to be TNT's Snowpiercer, particularly its final four episodes. (A post about the TV show is still in the near future.) This weekend, which transitioned from July to August, I finished the most important book of our COVID-19 moment. It is by Zachary D. Carter, a senior reporter at HuffPost, and it is about a mostly forgotten economist who dominated the first half of the 20th century, John Maynard Keynes. The book's title: The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes.
Now, before I lose you, I want you to understand two things. One, Carter's writing is clear, avoids technical definitions and obscure words, and moves at the pace of an HBO political drama. In short, Carter wrote the book like a journalist, not an academic. Two, you live in a Keynesian world, you have only lived in such a world, and you are likely to die in it. There is not a single major politician alive today who is not a Keynesian: Trump, Biden, Sanders, you name them. Sawant's Fight for $15 movement is not socialist but Keynesian (it generates effective demand). And there would be no capitalism today without a Keynesian foundation. (Which brings up the all-important question: What is capitalism? Let's leave that, again, for another post.)
Now that I have not lost you, let's make your Keynesian mind and mode as plain to you as a glass of water by quickly reviewing Carter's new book.
Before getting into The Price of Peace, let's read Karl Marx's definition of a capitalist:
Use-values must therefore never be looked upon as the real aim of the capitalist; neither must the profit on any single transaction. The restless never-ending process of profit-making alone is what he aims at. This boundless greed after riches, this passionate chase after exchange-value, is common to the capitalist and the miser; but while the miser is merely a capitalist gone mad, the capitalist is a rational miser. The never-ending augmentation of exchange-value, which the miser strives after, by seeking to save his money from circulation, is attained by the more acute capitalist, by constantly throwing it afresh into circulation.This memorable passage, which is in Capital. Volume I: The Process of Production of Capital, a book published in 1867, no longer describes the capitalists of our day. This figure of business and the kind of competition that was imposed on them went into decline in the last quarter of the 19th century. (Many American business owners who see themselves as heroic entrepreneurs will certainly be shocked to learn this.) But by the 1910s, the name of the game became monopoly capitalism (massive firms socialized by banks and stock markets) that found themselves increasingly in competition not so much with other firms but directly with the growing power of trade unions.
After the crash of 1929, the Red Decade began. This moment presented many dangers for capitalism in all of its forms—old and new. What those in power could no longer avoid confronting was a working class that had reached and seized upon a world-historical "switching point," to use an expression in Thomas Piketty's new book Capital and Ideology.
At this switching point, there was no going back to monopoly capitalism as is, let alone the competitive capitalism of Marx's time. But this is exactly what capitalists wanted to do ("liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system... enterprising people will pick up the wrecks from less competent people"). But the 100-year expansion of democratic rights in market-based societies made the solutions capitalists had for the slump (do nothing) and working-class power (brutally repress) political madness.
Here is where things stood in the 1930s when Keynes, already a celebrity, began working on the book that would save capitalists by basically transforming workers (mostly white) into the huge middle-class that defined the second-half of the 20th century. This book is called The General Theory of Employment, Interest and Money.
Carter does not delve too deeply into this work, and with good reason. It is a dense and—to be honest—messy book. But he does explain its main point, which is simply this: the state will have to manage capitalism if capitalism is to survive. If you can memorize that point, then a torchlight will lead you from the 1930s to wherever you are in the world today: from flipping burgers to flipping houses.
The function of the state, according to Keynes, whose policy prescriptions were repeatedly rejected during much of his "time 'pon eart'," but were never far from the truth, is to intervene when markets are in trouble, to maintain full employment for the preservation of political stability, to reject the superstition of balanced budgets; and to be a major source of demand for private enterprises. This governance program defined Franklin Delano Roosevelt's presidency (1933 to 1945), which Carter claims was influenced directly by the ideas of Keynes.
Not all Keynesian commentators, however, agree with this assessment, this image of a close relationship between Keynes and Roosevelt. The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order by Benn Steil, for example, is very uncharitable when it comes to Keynes, who is portrayed as being distant from events in the White House and the Treasury. In Steil's view, Keynes's role in history was not to save capitalism but the crumbling British Empire. Also in this other view, the US was much more interested in the Soviet Union than a bankrupt UK and a Europe that could not stop slaughtering itself. Steil's Keynes looks a like mosquito when compared with Carter's. But the ideas of an expanded government role in the management of all levels of capitalist society was definitely in the air (in Sweden, in Germany, in Poland, in the US) and what Keynes did was distill these ambient ideas and mood into the most famous economic text of his day.
The main part of Carter's book is really about the ambiance that absorbs and permanently changes Keynes, a man raised in a British family whose class believed in the improving powers of free trade. Often, Carter leaves his subject at some place in time, and for several pages explores developments occurring in the US. We are in the White House for an important decision to be made; or we are listening to a fireside chat on the radio; or we are in some meeting in a US government department; or we are in a classroom with a student at an Ivy League university.
In this atmosphere of happenings, unexpected figures pop into the story, such as Paul Sweezy, the US's leading post-war Marxist economist. And T.S. Eliot, a poet and banker who Keynes considers for a literary job at a newspaper he owns and runs. Or we are watching a gay man fucking a woman who loves gay men on a couch during one of those London parties that generates clouds of rumors. And whenever Carter is back to his subject, his subject is never far from a key writer of the Bloomsbury circle, Virginia Woolf.
For Keynes, the only pleasure greater than the joy of being right was being right when everyone of respectability was wrong. And the most politically shocking turn in his thought after the Wall Street crash wasn’t his theory of money or his case for public works or even his vision of unlimited prosperity a few decades around the corner; it was his call for a tariff. His friends were among the first to learn of his conversion. 'Maynard has become Protectionist,' Virginia [Woolf] wrote to a friend in September 1930. 'Which horrified me so that I promptly fainted.'
Soon after Keynes dies in 1946 of a heart attack, the world described in his masterpiece, General Theory, becomes, in structural terms (but not always in content), pretty much the political and economic reality for all advanced capitalist societies for the rest of the century and for the first two decades of the 21st century. If the first part of Carter's biography is about the ambiance of Keynes and his times, the last part is about his ghost.
Capitalists initially hate Keynes's ghost, but they can't get rid of it. It haunts textbooks. It haunts the suburbs of America. It haunts the Eisenhower administration (the vast expansion of the military-industrial complex, which is also known as military Keynesianism). It haunts the Kennedy administration, which initiated the first of many major tax cuts for the rich (these cuts are Keynesian because they result in massive government deficits that are justified on the grounds of Keynes' multiplier effect—they will pay for themselves). It haunts Johnson's administration (the hope of the War on Poverty turned sour by massive war spending), and Nixon (price controls and the monetary management of the economy). Carter, Reagan, Bush, Clinton, Bush, Obama, and Trump are Keynesian one way or another. Indeed, the reason why Trump is freaking out right now is because COVID-19, its economic hit, has deprived him of a Keynesian must-do for the maintenance of power under a democracy: full employment.
Structurally, there is nothing about Trump that is not Keynesian. Even his wall is related to Keynes' buried bottles filled with cash.
If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of repercussions, the real income of the community, and its capital wealth, would probably become a good deal greater than it actually is.
And this is where Carter's sorrow comes through in the book. He admires the pre-war economist's work, he sees him as a true visionary, but he also knows that the Keynesianism as presented by Keynes is not the Keynesianism we have today. The government is running huge deficits not for the poor or working classes but for Wall Street. Obama did not bail out homeowners when he could. The military budget is bloated beyond belief. The ghost of Keynes is no longer haunting the capitalists but their enemy, the wage-earning classes.