Keynes’ General Theory: A 75 Year Anniversary

This month – February, 2011 – marks the 75th anniversary of the publication of Keynes’ classic The General Theory of Employment, Interest and Money (1936), which Keynes published when he was 52.

While others have celebrated the anniversary of his work more eloquently than I ever could (see Jesper Jespersen’s lecture on the 75th anniversary of the General Theory, Ann Pettifor and Victoria Chick, “Happy Anniversary, Mr. Keynes,” Bloomberg.com, February 4, 2011 and Robert Skidelsky, “The relevance of Keynes,” January 17, 2011), I cannot resist making a few comments.

Keynes once wrote a letter in reply to George Bernard Shaw. This letter concerned Keynes’ view of Marxism and the writing of the General Theory:

“Thank you for your letter. I will try to take your words to heart. There must be something in what you say, because there generally is. But I’ve made another shot at old K.[arl] M.[arx] last week, reading the Marx-Engels correspondence just published, without making much progress. I prefer Engels of the two. I can see that they invented a certain method of carrying on and a vile manner of writing, both of which their successors have maintained with fidelity. But if you tell me that they discovered a clue to the economic riddle, still I am beaten – I can discover nothing but out-of-date controversialising.

To understand my state of mind, however, you have to know that I believe myself to be writing a book on economic theory which will largely revolutionalise – not, I suppose, at once but in the course of the next ten years – the way the world thinks about economic problems. When my new theory has been duly assimilated and mixed with politics and feelings and passions, I can’t predict what the final upshot will be in its effect on action and affairs. But there will be a great change, and, in particular, the Ricardian foundations of Marxism will be knocked away.

I can’t expect you, or anyone else, to believe this at the present stage. But for myself I don’t merely hope what I say, – in my own mind I’m quite sure.”
(Keynes to Shaw, 1 January, 1935, quoted in Skidelsky 1992: 520–521).

Here is the key to one of the greatest achievements of Keynes. He overthrew the foundations of both Classical and neoclassical economics, and avoided the errors and flaws of Marxism. Keynes in fact despised both communism and fascism (Skidelsky 1992: 485–489), and saw himself firmly in the British liberal tradition.

While detractors of Keynes – whether Marxists, Austrians, and other neoclassicals – accuse of him of being a defender of capitalism, fascism, or communism (take your pick!), in reality his destruction of neoclassical economics and the subsequent development of his ideas in Post Keynesian economics are the starting point for a democratic socialist/social democratic system that is independent of Marxism.

In some ways, the full promise of Keynes’ revolution was aborted by neoclassical synthesis Keynesianism (see “Neoclassical Synthesis Keynesianism, New Keynesianism and Post Keynesianism: A Review,” July 7, 2010), but that “revolution” has been kept alive by the Cambridge Keynesians, their successors the Post Keynesians, and now by Modern Monetary Theory (which, in many ways, also owes a fundamental debt to Keynes’ thought, as well as to the work of Abba Lerner).

I also suspect that a good deal of the insights of Post Keynesian economics would apply even to libertarian socialist economies where production would be conducted by worker-run enterprises.

BIBLIOGRAPHY

Minsky, H. P. 2008. John Maynard Keynes, McGraw-Hill, New York and London.

Skidelsky, R. J. A. 1992. John Maynard Keynes: The Economist as Saviour 1920–1937, Macmillan, London.