Hits and Mises (click for the joke)
I have been rereading again Rod O'Donnell's work on Keynes' political and social philosophy. I had not read his 1989 book, Keynes: Philosophy, Economics and Politics, in a long while. The occasion is the forthcoming 7th Workshop on Demand-led Growth in Rio, organized by Ricardo Summa, where I will discuss an extension my discussion of Keynes' political views, and in particular of the question of whether Keynes should be understood as a liberal or as a socialist. I had already discussed James Crotty's important contribution to this debate in my paper for Tom Palley's forthcoming Festschrift, available here. Crotty, in Keynes Against Capitalism, argues that Keynes wanted to replace the capitalism of his time with what Keynes himself called "liberal socialism." O'Donnell's case is in some ways older and, in my view, more careful, but it moves in the same direction.
O'Donnell's interpretation is that Keynes' economics cannot be separated from his ethical and political philosophy. Keynes was not merely trying to fix some technical problem in the theory of employment. His economics was part of a broader project concerned with the conditions for a civilized life. Keynes' social philosophy was about much more than the level of output and employment. It was about the possibility of reducing insecurity, limiting the power of the money motive, preserving individual freedom, and creating the material conditions for the good life.
In the two chapters on political philosophy in the 1989 book, O'Donnell presents Keynes as a liberal, but not as an old laissez-faire liberal. Keynes was not committed to the idea that private interest automatically promoted the public good. He believed that capitalism had to be managed, that the state had to take responsibility for investment, employment, public works, education, health, the arts, and the broader conditions of civilization. According to him, Keynes was also deeply critical of the moral foundations of capitalism, especially of the acquisitive mentality and the social prestige attached to money-making.
That is why O'Donnell sees Keynes as moving beyond capitalism in the long run. For him, Keynes did not admire capitalism. He thought it was ugly, unstable, and morally corrupting. For O'Donnell, the instability is deeply connected to Keynes' views on probability and uncertainty. O'Donnell sees Keynes as believing capitalism is not self-stabilizing, largely because investment and economic life are organized around uncertain expectations, money, and private profit rather than social purpose. In this view, Keynes preferred capitalism to the alternatives available in his own time, above all Soviet central planning and fascism, but not because he regarded capitalism as an ideal social order.
O'Donnell is right to insist that Keynes' defense of capitalism was qualified. But I am less sure that Keynes wanted to transition to an alternative social arrangement. His disregard for some aspects of capitalism seems more aesthetic, at least based on his several bios, including Skidelsky's one, and in his writings like 'My Early Beliefs.' He might have thought that the pursue of profit was vulgar, and that the good life resided in the arts and the pursuit of beauty. But beauty and arts were defined in an avant-garde, elitist way. I doubt he saw beauty in a football game (or soccer as people calls it in the US). As I noted in the paper linked above, following Skidelsky, Keynes wanted to preserve the social arrangements in which he was brought up, the presuppositions of Harvey Road, as Harrod would have called them.
In his later 1999 essay on Keynes and socialism, O'Donnell pushes this further. Keynes, he argues, should be taken seriously as a "liberal socialist." The term, of course, was used by Keynes himself. O'Donnell's point is that socialism should not be reduced to Marxism, public ownership, class struggle, or revolutionary transformation. If socialism is understood more broadly as the use of social control for public purposes, then Keynes can be understood as a socialist of a particular kind.
There is something to this. Many of Keynes' views would now be seen as social democratic. Full employment policy, redistribution, social security, public works, capital controls, the euthanasia of the rentier, the socialization of investment, and the rejection of laissez-faire all became part of the language of the postwar welfare state. In that sense, Keynes does not fit the later caricature of liberalism as simply market liberalism. He is closer to the use of the term in the United States. But he belongs to a different tradition, the New Liberal tradition.
Peter Clarke's Liberals and Social Democrats shows that there was a group of left Liberals before Keynes, figures such as L. T. Hobhouse, J. A. Hobson, Graham Wallas, and the Hammonds, who moved British liberalism beyond the Gladstonian night-watchman state. They were all close to the Fabian Socialists, the Webbs, and Shaw, in varying degrees, and they all had a break with Fabianism. They accepted that formal liberty was not enough in a society marked by poverty, unemployment, inherited privilege, and social destitution. In that respect, they were close to what would later be called social democracy. That's Clarke's point to some extent, they were liberals and social democrats.
Indeed, one could say that they were among the intellectual ancestors of Keynes' liberalism. They were certainly moving away from liberalism, but, in my view, they fell short of social democracy, certainly as it was defined at that time, since they were averse to class conflict politics, and detached from any conception of the working class as the agent of political change. They were not Fabian Socialists (who mostly accepted marginalist economics), let alone Marxists, and certainly did not join Labour. They felt well represented by the Liberal Party under Asquith, and Lloyd George's People's Budget. In fact, Clarke suggests that Hobson's theories could be seen as shaping the policies of the Liberal administration.
Keynes' own political position is easier to understand in that context. He was not a socialist or a social democrat. He was a New Liberal, or perhaps a late heir to New Liberalism, who thought that liberal civilization could survive only if laissez-faire was abandoned. His political project was not to replace capitalism with working-class power, but to preserve a civilized, decentralized, liberal society by reforming capitalism from above. Managed by an educated elite, and not workers themselves. What distinguished him from the earlier New Liberals was that he developed a theory of why capitalism, although stable in purely economic terms, could settle into persistent unemployment and fail to resolve social conflicts harmoniously, thereby becoming politically unstable. But his theory was far more radical than his politics. He remained, as noted by Palley here, deeply antagonistic to the politics of class antagonism.
This does not mean that Keynes was against workers, at least not in any simple sense. On the contrary, his policies were favorable to workers. Full employment strengthens workers. Redistribution improves the bargaining position of workers. Public works reduce unemployment and insecurity. Low interest rates and the euthanasia of the rentier weaken capital. But none of this makes Keynes a socialist if socialism has anything to do with the working class as a political subject.
He was elitists and paternalistic when it came to workers. Keynes did not ground his politics in labor. He did not regard trade unions, class struggle, or workers' control as the foundations of a new social order. He certainly did not call for the abolition of private property or the collective ownership of the means of production (well duh!). Indeed, it is not even clear that he would have accepted the more moderate Labourite objective of bringing the commanding heights of the economy under public ownership as desirable in itself.
This is why the distinction between policies favorable to workers and working-class politics matters. Keynes wanted full employment, but not because he had adopted a socialist theory of class power, and the need for alternative ways of arranging productive forces. He wanted to prevent capitalism from producing the social conditions that could lead to revolutionary politics, authoritarianism, or collapse. In that sense, the old claim that Keynes wanted to save capitalism remains broadly correct, but it must be qualified. He wanted to save capitalism from laissez-faire capitalism. The educated bourgeoisie, people like him, would be in charge. That was illustrated by his remarks on Bretton Woods conference as a "monkey house" because of the presence of delegates from the dominions and other lesser countries.
This is also why the New Liberal connection is more useful than the socialist label. The New Liberals were reformers who understood that liberty required social conditions. They were critical of poverty and unearned income. They supported social reform and the early welfare state. But they were not socialists in the sense of grounding politics in class struggle, collective ownership or an alternative to the capitalist system. Keynes radicalized this tradition in the context of the interwar crisis, the collapse of the gold standard, mass unemployment, and the failure of orthodox economics. But he did not abandon its basic political orientation.
This is the crucial point. O'Donnell is right that Keynes was not a laissez-faire liberal. He is also right that Keynes used the term liberal socialism, and that Keynes' policies moved far beyond orthodox Liberal Party economics. But the problem is that O'Donnell can call Keynes a socialist only by expanding the meaning of socialism so much that it begins to cover what is more precisely called New Liberalism.
The paradox, then, is that Keynes' economics was more radical than the economics of many socialists of his time. Labour politicians were often trapped in sound finance and Treasury orthodoxy, while Keynes was willing to experiment with public works, managed investment, and the abandonment of old rules. But Keynes remained, in political terms, closer to the liberal tradition to which he repeatedly declared his allegiance. The confusion comes from the fact, as I emphasized in the paper linked above, that Keynes was never a socialist, but socialists eventually converted to Keynesianism. However, post-war socialists and social democrats used Keynesian tools in the fight to promote labor power. Keynesian means, but not Keynesian ends.
