“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.”And, of course, Keynes did not support totalitarian regimes, but rejected fascism and supported democracy and liberal political values.
Harold L. Wattel, The Policy Consequences of John Maynard Keynes, p. 119.
Daniel Kuehn also debunks the myths abut the passage here:
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.”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.
Mises, 1978 . Liberalism: A Socio-Economic Exposition (2nd edn; trans. R. Raico), Sheed Andrews and McMeel, Mission, Kansas. p. 51.
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.
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.