Collective Conscious

From Eco­nomic Phi­los­o­phy:

First of all, Keynes brought back some­thing of the hard-​​headedness of the Clas­sics. He saw the cap­i­tal­ist sys­tem as a sys­tem, a going con­cern, a phase in his­tor­i­cal devel­op­ment. Some­times it filled him with rage and despair but on the whole he approved of it or at any rate he felt it worth­while try­ing to patch it up and make it work tol­er­a­bly well. But like Adam Smith’s, his defence was based on expediency:

For my part, I think 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. Our prob­lem is to work out a social orga­ni­za­tion which shall be as effi­cient as pos­si­ble with­out offend­ing our notions of a sat­is­fac­tory way of life.

Sec­ondly, Keynes brought back the moral prob­lem that laisser-​​faire the­ory had abol­ished.… the ano­dyne of lasser faire had worked pretty thor­oughly even in Cam­bridge. Mar­shall, cer­tainly, was a great mor­al­izer, but some­how the moral always came out that what­ever is, is very nearly best.…

In the thir­ties a large part of [society’s] resources were not being used for any­thing at all; Keynes diag­nosed the cause as a deep-​​seated defect in the mech­a­nism, and thereby added an excep­tion to the com­fort­able rule that every man in bet­ter­ing him­self was doing good to the com­mon­wealth, so large as com­pletely to dis­rupt the rec­on­cil­i­a­tion of the pur­suit of pri­vate profit with pub­lic beneficence.

This is the cri­sis of cap­i­tal­ism that is being repeated today. As Keynes pointed out, there is sim­ply no mech­a­nism in free-​​market cap­i­tal­ism that ensures an accept­able level of employ­ment. In some con­ser­v­a­tive lines of thought the way around this is sim­ply to define what­ever level of employ­ment is pro­duced by the mar­ket as ‘full employ­ment’; hence con­tem­po­rary asser­tions about the ‘new nor­mal’ level of unem­ploy­ment fol­low­ing the Great Recession.

We don’t have to accept that. The whole moral of Keynes was that we can choose the level of employ­ment we want, guar­an­tee it, and go from there. This is what I con­sider ‘social­ism’, by the way — the sim­ple idea that we put employ­ment first, instead of prof­its. Every­thing else in my vision of the lib­eral pro­gramme is derived from that one idea. Keynes appar­ently under­stood this, and, like me, was happy to let mar­ket mech­a­nisms solve most of the other prob­lems of eco­nomic orga­ni­za­tion once we had guar­an­teed an accept­able level of employ­ment for the entire population:

‘The Social Phi­los­o­phy towards which the Gen­eral The­ory might lead’ is markedly less rad­i­cal than the argu­ment of the book has led the reader to expect:

Our crit­i­cism of the accepted clas­si­cal the­ory of eco­nom­ics has con­sisted not so much in find­ing log­i­cal flaws in its analy­sis as in point­ing out that its tacit assump­tions are sel­dom or never sat­is­fied, with the result that it can­not solve the eco­nomic prob­lems of the actual world. But if our cen­tral con­trols suc­ceed in estab­lish­ing an aggre­gate vol­ume of out­put cor­re­spond­ing to full employ­ment as nearly as is prac­ti­ca­ble, the clas­si­cal the­ory comes into its own again from this point onwards.… there is no objec­tion to be raised against the clas­si­cal analy­sis of the mater in which pri­vate self-​​interest will deter­mine what in par­tic­u­lar is pro­duced, in what pro­por­tions the fac­tors of pro­duc­tion will be com­bined to pro­duce it, and how the value of the final prod­uct will be dis­trib­uted between them.