Tuesday, June 7, 2011

Keynes’s Remarks in the German Edition of the General Theory

Rothbard accused Keynes of having a “strong fascist bent” (Rothbard, “Keynes, the Man”), but the only evidence for this consists in a passage he cites written in the introduction to the General Theory for German audiences in 1936. This passage in the foreword to the German edition of the General Theory has provoked hordes of rubbish about Keynes. Here is what Keynes actually said:
“The theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory. Since it is based on fewer hypotheses than the orthodox theory, it can accommodate itself all the easier to a wider field of varying conditions. Although I have, after all, worked it out with a view to the conditions prevailing in the Anglo-Saxon countries where a large degree of laissez-faire still prevails, nevertheless it remains applicable to situations in which state management is more pronounced. For the theory of psychological laws which bring consumption and saving into relationship with each other, the influence of loan expenditures on prices, and real wages, the role played by the rate of interest—all these basic ideas also remain under such conditions necessary parts of our plan of thought.”
This is in no sense (1) an endorsement of fascism, (2) support for fascism or (3) praise for fascism.

The real meaning of the passage is described by L. Wattel:
“In this statement Keynes does not say that his theory is more applicable to a totalitarian state than to a democratic state. What Keynes says is that his macroeconomic theory of output as a whole is more easily adapted to a totalitarian state than is classical microeconomic theory of the production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire. The distinction is an important one. Keynes is comparing the usefulness of micro and macro theory in a totalitarian state. He is not comparing the usefulness of his macro theory in a totalitarian state with its usefulness in a democratic state.”
Harold L. Wattel, The Policy Consequences of John Maynard Keynes, p. 119.
And, of course, Keynes did not support totalitarian regimes, but rejected fascism and supported democracy and liberal political values.

Daniel Kuehn also debunks the myths abut the passage here:
Daniel Kuehn, “Keynes’s Foreword to the German Edition of the General Theory,” July 2, 2010.
But suppose, for the sake of argument, that Keynes did praise fascism (even though he never did any such thing), that is still irrelevant to the question whether his economic theory in the General Theory is right, and it would be nothing but an ad hominem argument to dismiss the General Theory because of some remark or personal view of Keynes that was immoral.

In contrast, here is Mises actually praising fascism:
It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.”
Mises, 1978 [1927]. Liberalism: A Socio-Economic Exposition (2nd edn; trans. R. Raico), Sheed Andrews and McMeel, Mission, Kansas. p. 51.
Nor should we forget that before 1934 Mises had become an economic adviser to the Austrian fascist Engelbert Dollfuss, even a close adviser, according to Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997.

If anyone is a candidate for having (in Rothbard’s words) a “strong fascist bent,” then it would be Mises, not Keynes.

Moreover, is Mises’s praxeology and economics discredited because of his disgraceful views on fascism? Actually, no, his praxeological arguments will stand and fall on their own merits, irrespective of Mises’s idiotic views on fascism. The same can be said of Keynes’s General Theory, but the foreword of Keynes, contrary to Austrian polemic, is no endorsement of fascism at all.


BIBLIOGRAPHY

Dillard, D. 1985. “The Influence of Keynesian Thought on German Economic Policy,” in H. L. Wattel (ed.), The Policy Consequences of John Maynard Keynes, M.E. Sharpe, Armonk, N.Y. 116–

Rothbard, M. 1992. “Keynes, the Man,” in M. Skousen (ed.), Dissent on Keynes: A Critical Appraisal of Keynesian Economics, Praeger, New York and London. 171–198.

Schefold, B. 1983. “The General Theory for a Totalitarian State? A Note on Keynes’s Preface to the German Edition of 1936,” in J. C. Wood (ed.), John Maynard Keynes: Critical Assessments (vol. 3), Croom Helm, London.

Wattel, H. L. 1985. Policy Consequences of John Maynard Keynes, M.E. Sharpe, Armonk, N.Y.

20 comments:

  1. Keynes The Man was Rothbard's worst writing - a pure hit piece - hoping to aim at personal character rather than actual ideas. I was shocked to see it on LRC long time back, and I had really expected higher standards.

    Who could have thought that Americans libertarians - an ultra-marginal group - would lower their standards of debate rather than raise them? They have so much at stake and so much to lose at their level, that they presumably can not afford to use bad arguments.

    Indeed, in whatever brief time I spend on Mises.Org, I have seen posters rush to stop those in tracks who aim to focus on personal character of a thinker in order to refute him. I was told as much, when I said that Jefferson was a person who never lived up to his own ideals - several told me Jefferson's personal inconsistency would not be sufficient to refute his ideas, even though they agreed with me on the general nonsense of Tea Party's constitutional idolatry. So even the more casual, non-doctrinaire, and laymanlike libertarians have had higher standards than some of the more professional economist ones.

    Bad arguments and attacks on character can be afforded by those who are so high up in the mainstream and the establishment, that ridicule is sufficient for them to dismiss their opponents. This is done by columnists on international newspapers, TV talking heads, major statesmen, and so on. Those who have to fight for credibility, such as the dwindling minority of free traders today, have to put their best foot forward all the time, rather than be lazy (see Jagdish Bhagwati).

    The only other group I have seen with the same lack of balance are RevLeft posters and Naomi Klein-style polemics, who believe that if they target personal characters and associations of economists that they don't like, they will refute them. They too use somewhat similar language - "Those are just reactionaries, fighting for the plutocracy. Just a part of the movement of those times. Why discuss them?"

    ReplyDelete
  2. What's most amusing about this post is that you rightfully defend Keynes from gross misinterpretations of his writing, then you turn around and doexactly what you're criticizing by taking Mises completely out of context.

    ReplyDelete
  3. "Taking Mises completely out of context," my eye.

    The context is perfectly clear. I am careful to add his qualification too: "But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.”

    If you take that out of the quote, then that indeed would be dishonest. But I don't.

    Also, I have already dealt carefully with the overall context here:

    http://socialdemocracy21stcentury.blogspot.com/2010/10/mises-on-fascism-in-1927-embarrassment.html

    ReplyDelete
  4. And this the man who also supported Dolfuss' Austro-fascism as "a quick fix to safeguard Austria’s independence—unsuitable in the long run, especially if the general political mentality did not change" (Hülsmann, 2007. Mises: The Last Knight of Liberalism, Ludwig von Mises Institute, Auburn, Ala. pp. 683–684).

    Give us a break, Jonathan Catalán.

    I have been very fair minded to Mises, careful to say that his disgraceful view of fascism does not - repeat not - invalidate his praxeological theory or modern Austrian economics.

    ReplyDelete
  5. Not surprising.

    Rothbard was one of the most dishonest writers of all time. Quote mining seems to have been a specialty of his.

    ReplyDelete
  6. Mises saw fascism as a superior alternative to communism. In fact, he saw fascism as a counter-movement to communism in Europe. That's what he's referring to. Mises was not a fascist, nor did he support fascism in the general sense. What you are taking out of context is the historical context in which Mises was writing in.

    ReplyDelete
  7. "Mises saw fascism as a superior alternative to communism. In fact, he saw fascism as a counter-movement to communism in Europe."

    Yes, that is actually what what one can conclude from my statemnets above.

    "Mises was not a fascist,"

    Did I say he was??? I said he

    (1) praised fascism
    “It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization."

    (2) become an economic adviser to the Austrian fascist Engelbert Dollfuss, even a close adviser (Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997).

    Is that clear??

    nor did he support fascism in the general sense.

    That is something I already conceded in my original post:

    http://socialdemocracy21stcentury.blogspot.com/2010/10/mises-on-fascism-in-1927-embarrassment.html

    "What you are taking out of context is the historical context in which Mises was writing in. "

    He is NOT being taken out context. The statements above are true, accurate and fair to him.

    ReplyDelete
  8. We have to understand how exactly the Christian Corporativist Dolfuss was a fascist, given that he was also an enemy of the Austrian Nazi Party, the German Nazi Party, and (being Jewish) opposed to other fascist movements in Europe.

    ReplyDelete
  9. According to Wikipedia, "the term 'Austrofascism' was used by the proponents of the regime itself." Also "the Fatherland Front used fascist-like symbols" (which von Mises joined, incidentally). In addition:

    "Under the banner of Christian Social Party, he later on established a one-party dictatorship rule largely modeled after fascism in Italy"

    So perhaps THAT is why it was a fascist regime?

    The term itself appears to be disputed by some historians -- I can only assume it is the same kind of right-wing "historian" who disputes that Franco was a fascist...

    Iain
    An Anarchist FAQ

    ReplyDelete
  10. *shrugs*

    A whole world difference between Franco and the likes of Hitler and Mussolini.

    Franco (while a dangerous and brutal general of the likes of Cromwell) suppressed anarchist murderers and butchers who used to forcibly detain and execute Catholic priests, who used to burn down churches, who used to destroy religious schools and any religious establishment, who would kill anybody for the simple crime of having been religious, and then just about kill anybody else they didn't like, including communists. The same anarchists still murder cops in Catalonia, so their violent streak has not changed one bit. Had Spain been left to these insane, violent anarchists (who once had a chance to take over the entire country) it would have been scorched earth by now, at best akin to Liberia or any West African country after a civil war.

    Where Hitler and Mussolini had wanted to purge society into making it into utopias of their own making, Franco used abhorrent and objectionable means to save ordinary Spanish people from needless persecution and save something of the old way of Spanish life, instead of having it fall into a useless social experiment. A social experiment - the kind that Hitler and Mussolini implemented by violent force. Just like the anarchists. Franco's enemies were much closer to Hitler and Mussolini than he was.

    As it is, I don't understand what is a "right wing" historian, if it has any meaning at all. There has never been such a word as "right wing" in an actual original historical sense, but the word "left wing" used to refer to the Jacobins who sat on the left side of the French National Assembly. Given that you are discussing 20th century historians, we don't presume those historians sat on any side of the French National Assembly of the 18th century. And unless the 18th century French National Assembly's members time-travelled to the future in 20th century to give their critique of Franco, I don't know what in the blue hell a "right wing historian" means.

    ReplyDelete
  11. *sigh*

    "Franco... suppressed anarchist murderers"

    Yes, I'm sure a few anarchists did kill people. Just as conservatives did. Revenge for years of oppression can be bloody. After all, the Catalan bosses organised death squads in the late 1910s and early 1920s against anarchist unionists. Strangely, some people took the opportunity for revenge in 1936.

    Still, nothing compared to the systematic and well organised slaughter conducted by Franco -- with the full backing of the Catholic Church, the right and so on. It was, unlike the murders in the Republican zone, policy. According to historian Paul Preston, the minimum number of those executed by the rebels is 130,000, and is likely to be far higher.

    "who would kill anybody for the simple crime of having been religious"

    And the evidence for that is? Of course, Franco's forces killed people who had a union card, voted for the left and so on.

    And are you really suggesting very member of the Catholic church killed was killed by an anarchist? And that every anarchist killed believers?

    "and then just about kill anybody else they didn't like, including communists."

    Again, evidence? In reality, the communists were hardly touched -- so leaving them able to later seize power and slaughter the anarchists and the POUM.

    Still, I'm glad to see the propertarian defence of fascist murderers continues strong...

    Iain
    An Anarchist FAQ

    ReplyDelete
  12. Prateek's unsourced ramblings and allegations, attacks on "ideologues," and revisionist history shouldn't be taken too seriously. He occasionally makes good points but when you don't reference, who knows if he's referring to facts or myths. This is an enormous problem with Libertarian-minded people: failure to source claims, making things up on the fly, constant changing of the justification for their ideology, and terrible revisionist history (like claiming the govt. never played a huge role in computing even though it did). The fact is those anarchists had something of a society put together whereas anarcho-capitalism has led to the deaths of over a million people. If you think about it, anarcho-capitalism is probably the most insane theory ever devised in human history.

    I recommend Chomsky's "The Responsibility of Intellectuals," if I'm not mistaken, this is an essay where he deals with anarchism in Spain and how it was treated by intellectuals. A very good read (if I got the name of the essay wrong I'll return when I have access to the book).

    Fascism is fascism. It's a putrid, terrible ideology. Franco, Suharto (who also killed about a half a million, at least), had constructed some of the worst systems in history. The death rates in Latin America from fascist regimes are enormous, at least 200,000 people directly from the US interventions alone (and estimates range from 6 to 12 million unnecessary deaths -- Stockwell gives the number 6 million). These are far worse crimes than committed by the individuals. It provided some stability, yes, but I doubt it could have gone on for very long or the human race would be in a very bad position. Certainly far worse than we are under mild to advanced democracies.

    That anybody would defend fascism nowadays, over anything, even totalitarian socialism, is disgusting. Fascists systematically killed people; communists let people die due to their incompetence. There is a difference. Only the hell that is "anarcho"-capitalism in Somalia (which caused a brutal famine) could be considered as bad as fascism.

    ReplyDelete
  13. @:Prateek Sanjay

    Wow! I usually enjoy seeing your comments and think that you add an interesting perspective on this blog. However, your statement above reminds me of the trash I see on YouTube. As an anarchist and an avid reader of LK's blog, I am offended that you would accuse me and other anarchists of wishing to secretly pursue Cambodian style "scorched earth" policies. I'm also annoyed that you have provided ZERO evidence to expose anarchists secret conspiracy for genocide.

    It should be understood that individual "anarchist" (notice the quotes) did in fact take revenge when Franco attacked the country. Every anarchist I know of have condemned these atrocities. However, anarchists were a small minority (look at Marxist and supporters of the free market!) and these acts had nothing to do with anarchism itself. They were acts of oppressed people at the hands of the church (heavy supporters of fascism)and the authoritarian state. No organized anarchists groups carried out these revenge assassinations. Again, these were people taking revenge. Perhaps if you had your family members thrown in dungeons to be raped, tortured, mutilated, and then killed you might feel differently. These were acts supported by the clergy along with every dictator that took over Spain including Franco.

    Mark

    ReplyDelete
  14. Lord Keynes, you're basically doing what to von Mises what the Austrians did to Keynes here. This is a clear case where you're being an ideologue and don't try to rationalize this away. You're just taking an obvious shot here out of being annoyed by the other side.

    ReplyDelete
  15. I don't know what prompts the above two posters to first call me "Libertarian-minded people" or "propertarian". Let alone the bizzare tangent about "anarcho-capitalism". Any position that could be assigned to me is assigned, and the burden of proof is put on me to prove myself innocent of it. Whatever.

    Yes yes, I did not source claims, and I made an unscholarly rambling. On the internet. A not serious place. I'll go on and admit it - I was being snarky, because - again - this is the internet. And the reason I have been snarky is that ever since I saw this report, I have excused myself for behaving badly on occasion. http://www.consilium.europa.eu/uedocs/cmsUpload/TE-SAT%202010.pdf Yes, see page 12, there have been 40 times as many anarchist terror attacks in 2009 as fundamental Islamist terror attacks in 2009.

    I have let my bad instincts take over me occasionally, and whenever I see a self-professed anarchist on an internet message board, I do this sort of rambling. Done it before. Pretty much, because I am shocked with how anarchists still have sanction today, despite their still ongoing acts of violence. At worst, they are considered merely misguided but well-intentioned people, despite organizations such as the Fire Cells of Athens and Thessalonica still killing policemen, as that report shows.

    As for the pre-Spanish Civil War period, I admit that looking any particular group's violence is selective, and anarchists were definitely no worse than the rest. I was just trying to be nasty, obviously, but never mind.

    ReplyDelete
  16. "“The theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state..."

    Seems that the plain meaning of this statement needs to be analyzed. What does this say about the theory of aggregated production? What does it mean for an economy with free competition and a large degree of laissez-faire?

    It seems pretty obvious that the imposition of Keynes's theory of aggregated production would spell the end of free competition and laissez-faire. This is the point that Austrians make. A significant degree of top-down "investment" would lead to unsustainable bubbles and a general upsetting of the economic coordination that would prevail in a consumer-driven atmosphere of free competition and laissez-faire.

    Mises's comments are totally consistent and give at best faint praise to fascism as superior to communism. If he said being jailed for 10 years is better than being blinded and put in jail for 30 years but then said that he thinks neither is good, would you accuse him praising 10 years of imprisonment?

    ReplyDelete
    Replies
    1. "It seems pretty obvious that the imposition of Keynes's theory of aggregated production would spell the end of free competition and laissez-faire. "

      That is manifest nonsense, since an economy with Keynesian demand side management presupposes one with a large degree of private capital, private production of commodities, and private investment.

      "A significant degree of top-down "investment" would lead to unsustainable bubbles and a general upsetting of the economic coordination that would prevail in a consumer-driven atmosphere of free competition and laissez-faire."

      All evidence to the contrary.

      The age when Keynesianism was the norm - from 1945-1970s - saw the virtual eradication of serious asset bubbles and arguably the most prosperous period in human history, in terms of real (and per capita) output growth, productivity growth and high employment.

      "Mises's comments are totally consistent and give at best faint praise to fascism as superior to communism."

      You are wrong:

      “It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history.

      You would possibly win a prize for the understatement of the year with description of this passage as "faint praise [of] ... fascism as superior to communism."

      Delete
    2. "saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history.”"

      Saved it from communism...but fascism is itself civilization destroying, hence Mises's ultimate condemnation of fascism. It's not as if Nazis didn't chase him out Europe and confiscate his goods.

      "A significant degree of top-down "investment" would lead to unsustainable bubbles and a general upsetting of the economic coordination that would prevail in a consumer-driven atmosphere of free competition and laissez-faire."

      "All evidence to the contrary."

      "Experts warn 'battery bubble' could burst Michigan's dreams"
      http://www.mlive.com/business/west-michigan/index.ssf/2010/07/experts_warn_battery_bubble_co.html

      The age when Keynesianism was the norm - from 1945-1970s - saw the virtual eradication of serious asset bubbles and arguably the most prosperous period in human history, in terms of real (and per capita) output growth, productivity growth and high employment."

      Baloney. I'd like to see the "evidence". Correlation is not cause and effect, you must explain how Keynesian-style "investment" would work given perverse political incentives and the market distorting effect of having investment not linked to consumer satisfaction as evidenced by the choices of consumers in the market place.

      What actually happens is overbuilding of soon to be obsolete goods. Remember Clinton's initiative to have every school wired for the internet? Wired? Schools are mostly wireless today.

      Define "serious asset bubble". Gold price bubble of the 1970s not serious? You're generalizing 1945-1979 as "arguably the most prosperous period in human history". Whoa, even in the U.S. we had stagflation in the 1970s. The 1970s popularized the term "misery index".

      Why cherry pick 1945-1979 (which doesn't even support your position)? Keynesianism didn't end in 1979...even Reagan's advisors were Keynesians. We've had some serious asset bubbles since 1979.

      Clearly the promotion of a housing bubble by the government (easy Fed credit and policies directed at promoting home ownership) was a classic Keynesian top-down bubble.

      Fear the Boom and Bust

      http://www.youtube.com/watch?v=d0nERTFo-Sk

      Delete
    3. In terms of world wide use of Keynesian fiscal policy, 1945-1970s was the classic era.

      Although Keynesian polices did continue in some countries (e.g. under Reagan from 1982) by and large it was abandoned for the new revived neoclassical economics: monetarism, supply side economics, New Classical economics, and then the new consensus macroeconomics.

      Clearly the promotion of a housing bubble by the government (easy Fed credit and policies directed at promoting home ownership) was a classic Keynesian top-down bubble.

      You are plainly an ignoramus: asset price inflation has nothing whatsoever to do with Keynesianism. Keynes himself was for strong financial regulation to prevent asset bubbles, which what indeed was done down to the 1970s/1980s.

      Delete
  17. "I'd like to see the "evidence". "

    The evidence for the outstanding real GDP and real per capita GDP growth in classical Keynesian era is easily available for anyone who bothers to look.

    E.g., average real per capita GDP growth rates estimates across the whole OECD:

    1700–1820 – 0.2%
    1820–1913 – 1.2%
    1919–1940 – 1.9%
    1950–1973 – 4.9%
    1973–1990 – 2.5%
    Davidson, P. 1999. “Global Employment and Open Economy Macroeconomics,” in J. Deprez and J. T. Harvey (eds), Foundations of International Economics: Post-Keynesian Perspectives, Routledge, London and New York. 9–34.
    22).

    ReplyDelete