Skidelsky’s Latest Keynesian Fantasies

This piece was originally posted at The Circle Bastiat.

In his current Bloomberg piece (link below). Keynes’s biographer Robert Skidelsky tells us that the famous economist’s “notion of satiety” has been buried by the “Darwinian capitalism” unleashed by Thatcher and Reagan in the 1980′s, with its “ideological faith in the market system” and glorification of “untrammeled self-interest” as expressed through the “profit motive.” He further tells us that Keynes and other sensible earlier economists believed that “people would, and should as rational agents, work less and enjoy life more.”

A reader on Bloomberg states that “Skidelsky inhabits the mental world of his hero, Mr Keynes.” But does he?

His three volume biography seemed reasonably balanced and accurate. Keynes’s many contradictions were noted. But in recent years, Skidelsky has presented Keynes more as the person Skidelsky wishes he had been, not the real person.

Consider Keynes’s own life for a moment. Did he ever stop or even decelerate his furious pursuit of ever greater personal wealth? No. Did he ever stop working so hard? No. Even when disabled by a serious heart condition, he refused to stop working himself to exhaustion and may have contributed to his early death by doing so.

Was it a case of “do as I say, not as I do” on Keynes’s part? Not entirely. He did think that society could and should reach a point of satiety in consumer goods, but he did not think society should then start loafing. He envisioned that hard work and the accompanying wealth would be directed to support the arts and what he considered the higher pursuits of life.

Would Keynes have agreed with Skidelsky that the “main challenge [now is] to ensure that the fruits of the new abundance [are] democratically distributed?” It is doubtful. Keynes said that in the class war, he would be on the side of the educated and cultured bourgeoisie. As a thorough-going elitist, he was often impatient with “democracy” but in any case was thinking of it in political, not fanciful economic terms. And of course any such discussion is puerile because wealth is not something that we pick up on the beach and share among ourselves. It has to be created through hard work and investment and insight. Most socialist schemes of redistribution just destroy it for everyone.

Skidelsky is also against what he, like many others, calls “trickle down.” This would be more persuasive if “trickle down” were not oxymoronic. When asset owners invest their assets in a business, the money flows immediately to workers and contractors, or indirectly to workers or contractors in other industries by buying or renting buildings and equipment. This money may or may not flow back eventually to the investor, but if it does, and better still if there is a profit, the asset owner is paid last. The party who is receiving payment last cannot logically be “trickling down” his or her wealth.

One point at least Skidelsky gets part right. He says that the “system of the past 30 years … has been retained for the benefit of a predatory plutocracy that creams off the riches.” This is indeed going on. But this is not a plutocracy of honest businessmen and women. It is a crony capitalist plutocracy linking politicians, bureaucrats, public union leaders, trial lawyers, Wall Street, and many other government dominated and directed industries. It is a crony capitalism that has been created and defended by the very economic policy ideas which Skidelsky espouses.

Click here for the article in Bloomberg.