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Keynes on national self-sufficiency

One of the emerging discussions is what will the post-coronavirus world look like both within nations and across nations. There is a growing thread about the worries of increased state authoritarianism as governments have imposed an array of restrictions. There is also an increasing debate about the need for nations to return to enhanced national self-sufficiency to avoid the disruptions in the global supply chain that the pandemic has created. In 1933, John Maynard Keynes gave a very interesting lecture on this topic in Dublin. In this blog post, I consider that lecture and assess its currency in the contemporary setting.

The challenges ahead

There is a growing thread about the worries of increased state authoritarianism as governments have imposed an array of restrictions.

There are valid questions to be answered in that context and I haven’t much to add by way of my expertise on that topic.

As a citizen, we want the smallest state footprint that is consistent with a functioning society.

But, equally, the reality is that the capitalist system is now on state life support systems and will remain that way for some time.

Further, the challenges ahead, in part, have to address the pre-pandemic exposures that four or more decades of neoliberalism have left us with.

I refer to the rising and unsustainable inequalities in society.

I refer to the chronic wastage of labour resources as governments deployed the unemployed and the underemployed in a quest to limit the capacity of workers to organise so they could pursue reasonable rates of wages growth.

The result has been an indecent redistribution of national income towards profits, which has forced households to take on unsustainable levels of debt to maintain material standards of living.

I refer to the growing casualisation of labour and lifestyles that exploit the vulnerability of the ‘gig’ economy workers which will, ultimately, if not reversed, will lead to one of the largest intergenerational rip-offs in human history.

And in terms of material standards of living, I refer to the challenges of climate change, which is another of the large intergenerational rip-offs that neoliberalism has left us with.

And, if the scientific evidence is robust (and I think it is), then the climate challenge may not even be an intergenerational issue – it affects us now in visible and damaging ways.

Fires raging all around the world.

I read over the weekend this Reuters report (August 21, 2021) – Rain falls at Greenland ice summit for first time on record.

The ice sheet is melting and the ocean levels are rising.

I refer to the dysfunctional nature of our essential services – telecommunications, water, energy, transport, banking – which have failed to meet the claims that were made when the privatisation vandals started to sack public assets and transfer massive wealth stores to the top-end-of-town.

They will have to be brought back into public ownership and control.

In various ways, we have been ripped-off by these privatisations and outsourcings.

All of these challenges will not be resolved by the so-called ‘market’, which was a code word that the neoliberals used to condition us into believing that the great solutions of world problems lay in the pursuit of private profit and the radical reduction in state intervention.

But as I have noted previously neoliberalism did not do away with the state – rather, it reconfigured the state to work as an agent for capital rather than a mediator in the conflict between capital and labour.

The point is that all of the challenges above and those that I have not mentioned that are also beckoning will require larger not smaller government.

The climate challenge, alone, will require new government ventures, massive spending and significant tax and other impositions on our use of disposable income to ensure that there is non-inflationary space to accommodate that increase in public spending.

We have to come to terms with that shift in society, which will force a fundamental transformation in our production and consumption patterns.

And then there is the pandemic and the challenges our health and public security systems have to meet.

There is a large network of related systems that make up that aspect of our lives – the hospitals, the quarantine systems, the food distribution systems, transportation systems and rules, housing and building designs, borders, medical research, bio-security, land clearance policies, and the rest.

All will be dependent on increased state intervention.

So when the lockdown protests march around during a raging pandemic that is largely impacting negatively on the lowest income citizens, the most vulnerable citizens – chanting freedom, I only hear ‘freedumb’.

We do have to be mindful and attentive to authoritarian governments who might, under the veil of dealing with the pandemic, seek to impose unnecessary limits on our individual freedoms.

But we also have to get used to the fact that the neoliberal agenda, which tried to convince us that the state was no longer an integral institution in our well being and outsourcing welfare concerns to private, profit-seeking capitalist firms was the way to maximise our well-being, is dead.

Dead and there is no return for that failed ideology.

That is one place where our activist pressure has to be focused on – constantly rejecting that myth.

Which is one reason why we should be becoming cogniscant of Modern Monetary Theory (MMT) as a basis for understanding the economics that underpin the discussions surrounding these great challenges that are ahead.

National self-sufficiency

One of the themes that the pandemic has provoked is the idea of national self sufficiency.

In dealing with the pandemic, nations have found themselves highly exposed to global supply chains and punitive trade arrangements.

We have heard about relative minor issues relating to supply of protective medical clothing and masks etc, which are relatively easy to resolve in a relatively short time.

Australia is now in chaos as the Delta variant spreads among a largely unvaccinated population.

Why unvaccinated given we are one of the wealthiest nations?

Well, become our stupid federal government decided to ‘save money’ (yes, that again) by not buying a diverse stock of available vaccines last year and now we have found ourselves dramatically short of vaccines and the supply will not be resolved until later this year.

Other nations, without the same capacity to buy unlimited quantities of vaccines, sold under prohibitive intellectual property rights held by gouging international firms, have very little access to vaccine stores.

There are many other cases where global supply chains have become compromised.

It seems that the ‘free trade’ mantra, where we were led to believe that it didn’t matter if we had become reliant on other nations for essential goods and services, because that reliance would be ‘efficient’ and lead to the lowest cost supply has not exactly worked as plans.

Australia has also faced a changing geopolitical environment (hostility between the US and China), which has led the Chinese to stop importing many Australian exports.

So much for ‘free trade’.

We also know that ‘free trade’ leads to transfers of real wealth from poorer nations to richer nations, aided and abetted by punitive IMF and World Bank practices in the poorer nations.

The pandemic has also emphasised that localism provides advantages to nations, which resonates also with some of the environmental challenges ahead – for example, making our food supplies more locally produced again – in neighbourhood gardens etc.

While there are still advantages in working in tandem with other nations and exchanging our talents and innovations to ensure that we have a shared sense of equality, the pandemic has heightened our sense of self-sufficiency.

We need to share with others, which makes the decisions of pharmaceutical companies to profit enormously from the vaccine production and distribution reprehensible.

But we also need to think local and look after the citizens in our countries.

We need to develop capacities to produce more locally – to ensure high-paid and high productivity jobs are supported – and to ensure we are not reliant on international supply chains that increase our exposure to calamities like the pandemic.

At the onset of the pandemic in Europe, various leaders started to echo these sentiments.

Le Figaro article (April 2, 2020) – Thierry Breton estime nécessaire l’émission d’obligations pour faire face à la crise – reported on statements made by the European Commissioner for the Internal Market, Thierry Breton about the way in which the EU could meet the challenges of the pandemic.

It said:

Thierry Breton a par ailleurs reconnu que “la question que nous pose cette crise c’est qu’on est peut-être allé trop loin dans la mondialisation et la globalisation”.

La question, a-t-il ajouté, se pose notamment sur la santé (médicaments et matériels médicaux) mais aussi sur les “domaines industriels stratégiques” et sur l’agriculture.

“Je suis convaincu que notre relation au monde après cette crise sera différente.

So “the question posed to us by this crisis is that we have perhaps gone too far in globalization and globalization”.

And the question arises no only in relation to health supplies, but also in the strategic industrial fields and in agriculture.

Around the same time, the German Chancellor was talking about this issue in relation to medical supplies (Source):

In view of the fact that this market is currently based in Asia, I think it is also important that we learn as an experience from this pandemic that we need a certain amount of sovereignty or at least a pillar of domestic production here too.

National self-sufficiency.

It is not the first time these debates have arisen.

As I noted last week, in April 1933, John Maynard Keynes delivered a notable address at the University College Dublin on the idea national self-sufficiency, which in the context of the times and political developments in the Irish Free State, gave support to the increasingly nationalist emphasis of the new Prime Minister – Éamon de Valera .

When the Fianna Fail (The Warriors of Destiny) party was elected in 1932 in the Free State, the new President of the Executive Council (that is, Prime Minister) – Éamon de Valera – ramped up the nationalist economic approach, as part of a strategy to reduce the dependence on Britain.

He adopted a protectionist approach, which Keynes approved of in his UCD address.

The full text of the Lecture – National Self-Sufficiency – was subsequently published in The Yale Review (Vol.22, No.4, June, 1933, pp.755-769).

It was a very prescient lecture and resonates still today, in the light of the issues I have raised above.

It is worth reflecting on.

He started by observing that:

I was brought up, like most Englishmen, to respect free trade not only as an economic doctrine which a rational and instructed person could not doubt, but almost as a part of the moral law. I regarded ordinary departures from it as being at the same time an imbecility and an outrage. I thought England’s unshakable free trade convictions, maintained for nearly a hundred years, to be both the explanation before man and the justification before Heaven of her economic supremacy. As lately as 1923 I was writing that free trade was based on fundamental “truths” which, stated with their due qualifications, no one can dispute who is capable of understanding the meaning of the words.”

So hardly an equivocal position.

He then indicated that he had changed his mind somewhat towards protectionism – “the orientation of my mind is changed”.

This was, in part, because he had evolved his “background of economic theory”.

But, mainly, his change was due the passage of history – that is was necessary ” to shuffle out of the mental habits of the prewar nineteenth-century world” and “that our habits of mind and what we care about will be as different from nineteenth-century methods and values as each other century’s has been from its predecessor’s.”

So when new sentiments, new knowledge, new challenges, and the experience of history are recognised, then it is time to abandon old shibboleths and adopt new approaches.

That couldn’t be more true today.

He considered the free traders from the C19th thought they were “solving the problem of poverty” by developing efficient production and trading systems that put resources to “their best uses”.

Keynes noted that the free traders thought they were underpinning world peace:

… the penetration of a country’s economic structure by the resources and the influence of foreign capitalists, and that a close dependence of our own economic life on the fluctuating economic policies of foreign countries are safeguards and assurances of international peace.

However, he argued in Dublin that:

It is easier, in the light of experience and foresight, to argue quite the contrary …

I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel–these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national. Yet, at the same time, those who seek to disembarrass a country of its entanglements should be very slow and wary. It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction.

For these strong reasons, therefore, I am inclined to the belief that, after the transition is accomplished, a greater measure of national self-sufficiency and economic isolation among countries than existed in 1914 may tend to serve the cause of peace, rather than otherwise. At any rate, the age of economic internationalism was not particularly successful in avoiding war; and if its friends retort, that the imperfection of its success never gave it a fair chance, it is reasonable to point out that a greater success is scarcely probable in the coming years.

Quite a statement, especially in the context and time he made it.

On the question of poverty, he also demurred.

He noted that while policy choices may have advantages, they also can bring disadvantages that have to be weighed up against the benefits.

In terms of free trade in the C19th, the advantages of “economic internationalism” probably outweighed the “disadvantages”, among which were the speculative investments that foreign capital made in developing nations.

In assessing whether the net benefits continued to exist, he said:

But I am not persuaded that the economic advantages of the international division of labor to-day are at all comparable with what they were.

Some international specialisation was “necessary” because of ” wide differences of climate, natural resources, native aptitudes, level of culture and density of population”, but:

… over an increasingly wide range of industrial products, and perhaps of agricultural products also, I have become doubtful whether the economic loss of national self-sufficiency is great enough to outweigh the other advantages of gradually bringing the product and the consumer within the ambit of the same national, economic, and financial organization …

National self-sufficiency, in short, though it costs something, may be becoming a luxury which we can afford, if we happen to want it.

He railed against “decadent international but individualistic capitalism” and called it a failure:

It is not intelligent, it is not beautiful, it is not just, it is not virtuous–and it doesn’t deliver the goods

At the time, he was mostly thinking of industrial capital given the rise of the financial speculator was in nascent form.

Today, he would be horrified with the way international financial capital has been allowed to ‘run’ amok by governments around the world.

Even in 1933, Keynes was firmly of the view that leaving private markets to allocate resources was:

… incompatible with that degree of material well-being to which our technical advancement entitles us …

Unless, profits are controlled.

He noted that while the free trade and deregulation approach had delivered massive profits and was driven by a narrow focus on “the financial results”, the reality was that for all the innovations:

Instead of using their vastly increased material and technical resources to build a wonder city, the men of the nineteenth century built slums; and they thought it right and advisable to build slums because slums, on the test of private enterprise, “paid,” whereas the wonder city would, they thought, have been an act of foolish extravagance, which would, in the imbecile idiom of the financial fashion, have “mortgaged the future”–though how the construction to-day of great and glorious works can impoverish the future, no man can see until his mind is beset by false analogies from an irrelevant accountancy.

This is a view that has so much resonance today.

We have been hoodwinked by mainstream economists to believe that fiscal austerity is the way we avoid undermining the future well-being of our children and their children, when in fact, all we are doing is building ‘slums’ and depriving the future generations of a better future.

For Keynes, “We have to remain poor because it does not ‘pay’ to be rich”.

And:

We have to live in hovels, not because we cannot build palaces but because we cannot “afford” them.

Resonating.

He also talked about environmental matters:

We destroy the beauty of the countryside because the unappropriated splendors of nature have no economic value.

In a world where private capital and the private profit motive rules allocative decisions.

Remember he was talking in 1933 as the Great Depression raged on and workers were forced onto the dole by the mass unemployment.

Keynes could see the solution so clearly:

If I had the power to-day, I should most deliberately set out to endow our capital cities with all the appurtenances of art and civilization on the highest standards of which the citizens of each were individually capable, convinced that what I could create, I could afford–and believing that money thus spent not only would be better than any dole but would make unnecessary any dole. For with what we have spent on the dole in England since the war we could have made our cities the greatest works of man in the world.

To deal with the challenges I outlined at the beginning (for starters), we have to stop being making decisions that satisfy the “test of an accountant’s profit”.

That is the sound finance approach that underpins neoliberalism and has created many contemporary problems.

By investing in public goods and people, the government not only makes the dole redundant (through the increased spending) but also creates splendour to enhance our lives.

And that leads Keynes to consider the “proper purposes of the state”, which is another topic again.

Conclusion

Sometimes learning from history is important.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

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    This Post Has 17 Comments
    1. A curious side note…
      Keynes and national self-sufficiency, Prof. Helen O’Neill, Irish Times (letter), 2013-04-24

      Keynes published two versions of his lecture, one in the Irish journal ‘Studies’ and the other in the Yale Review. In the former – which reproduces the lecture – Keynes is encouraging, but cautious, in advising the Irish government to pursue self-sufficiency explaining that he knows “so little about Ireland” and that he would have to be satisfied that the Free State “is a large enough unit geographically, with sufficiently diversified natural resources, for more than a very modest measure of national self-sufficiency to be feasible without a disastrous reduction in a standard of life which is already none too high”.

      In the Yale Review version, Keynes shows no such caution: “The Irish Free State” is “a unit much too small for a high degree of national self-sufficiency except at great economic cost and is discussing plans which might, if they were carried out, be ruinous”.

      … which came first – the encouraging if somewhat cautious endorsement of self-sufficiency delivered to the Irish government (De Valera and his entire cabinet were present in the front row of the theatre in UCD at the Finlay lecture) or the dismissal of self-sufficiency for a small country like Ireland published in the American journal? And what does it say about Keynes?

      https://www.irishtimes.com/opinion/letters/keynes-and-national-self-sufficiency-1.1369914

      Studies: An Irish Quarterly Review https://www.studiesirishreview.ie/
      [Published by the Jesuits since 1912, seems to be still going strong]

    2. I have an article on my own peterbrooke.org website which discusses Keynes’s (magnificent) national self sufficiency speech in the light of the balance of trade policies developed in Germany by Hjalmar Schacht and Walther Funk, and the proposals Keynes made in his wartime negotiations with the USA that led to Bretton Woods. Harry Dexter White for the USA was arguing for the maximum possible degree of multilateral free trade while Keynes had proposed a method for maintaining trade equilibrium. Given the economic strength of the USA and weakness of the UK, White won, though because of the immediate problems of the post war European economy, it wasn’t until later that the full malevolence of the Bretton Woods system revealed itself.

    3. So true. Perhaps Covid and Climate Change will enable the people to see and understand our need for good government and how government is necessary to create the public good for all its people. We have been so lacking in good leaders. I do think Jacinda Ardern is a good leader here in New Zealand when there is strife but good governance is a different thing. There is a long way to go before we can get rid of the God of the Market. And that is what it is – Another God.

    4. There’s a point of control in this debate which is rarely mentioned.

      You cannot ultimately trust another nation because there is no operational mechanism to enforce against them. That runs true even within pseudo nations like the European Union – as we have seen with vaccines and free movement during the pandemic where the true nature of the relationship came to the fore very quickly.

      What that means is that you have to have diversity of supply internationally. And that doesn’t just mean having multiple other nations supplying your imports. It means that the non-allied nations within that supplier base have to have *sufficient excess capacity* to supply you entirely if some of the other nations pull the plug on you. Again see vaccines for details.

      Yet it makes no sense for any individual nation to operate with such spare excess capacity, nor to make capacity available externally when internal needs are not met.

      This resilience paradox of international dealing is rarely mentioned. That’s because neoliberalism is obsessed with efficiency and tries to ignore the perennial trade off with resilience. Hence it prefers a cloned monoculture that can be wiped out by a single disease or systemic failure – and a very large insurance industry. As if you can eat compensation dollars.

      Nature doesn’t operate like this and neither should nations.

    5. China, Japan, Germany and South Korea for example have been standout successes with making and exporting manufactured goods and economic development in general. None really practice free trade and all have stacked the economic playing field in favour of local suppliers especially during the embryonic development phase.

      More efficient foreign suppliers have routinely been blocked from accessing local markets up to the present day when that was deemed beneficial to an important local industry.

      The approach adopted by Japan’s Ministry of Economy Trade and Industry to economic development in the post-war period faced with then tough competition from an advanced, huge and wealthy United States, was particularly successful and continues to be so as global competition intensifies and new major challenges such as global warming and pandemics arise. The other Asian Tigers of South Korea, Taiwan, Singapore and most recently China have followed similar economic development strategies where economic conditions are stacked in favour of local suppliers, except in general those areas that are clearly not feasible to compete due to local constraints.

      Singapore and Hong Kong were clearly successful under British rule but became much more successful when the local nationalists including local oligarchs gained decisive control.

      These Asian Tigers have also in general avoided the scourge of an overwhelmingly powerful self serving and parasitic financial sector and have usually pursued national goals rather than the narrow self interests of powerful vested interests. Political corruption has perhaps proven to be much worse in the Anglo West than in East Asia?

      In Australia the foreign owned car industry was forced into insolvency by late 2013 through the removal of all tariffs on imports and threats to further reduce the equivalent in government subsidies. The Australian dollar was also at record levels at the time due to a major mining industry investment boom.

      Toyota Australia had shown that even with the most up to date manufacturing facilities that a tariff of no less than 15% was required to compensate for the higher labour and government imposed costs in Australia when compared to imports from high tech and low wage nations such as Thailand and China. The then new Toyota plant in Thailand and the new Toyota plant in the Melbourne suburb of Altona were almost identical. The Toyota Altona plant had nevertheless attained cost and quality equivalence with near identical Toyota plants in Japan, the UK and the US but could not otherwise match the Thailand plant’s cost of production.

      General Motors Holden in late 2013 was denied an extra A$80 million p.a. by the newly elected Conservative federal government, totalling A$160 p.a. for ten years so as to update their manufacturing plants, as Toyota had already done, and to replace the two locally assembled models with all new models one of which was likely to be a hybrid or electric car. This led to the decision by GM to cease all Australian car manufacturing and this then triggered Toyota’s exit as well due to the expected worse economies of scale with many key parts suppliers.

      Total Australian car industry subsidies would have been less than A$300 million p.a. but this was deemed too much by the federal government and by a gullible electorate subjected to a relentless false narrative by the neoliberal – free trade mainstream media for decades. The industry problems of excessive market fragmentation and low exports by GM Holden and Ford could have been solved through the replacement of most subsidies with a 15% tariff on imports, a ‘METI’ style restructuring plan to locally manufacture at least 50% of local demand (500,000 units per annum to sustain 3 manufacturers) and a planned transition to 100% New Energy Vehicles (EV’s, H2 fuel cell or plug-in hybrid) local production by 2025 for example.

      The fact that the Australian superannuation sector of the financial services sector alone was/is receiving over A$35 billion in largely unnoticed management fees p.a. in exchange for delivering in general lesser rates of return than the applicable market indices; which in magnitude was over 100 times the total yearly car industry subsidy, was ignored by the political class and the electorate. A similar scale of unearned income has been extracted by the real estate speculation industry and the major banks that arose from lobbied for government incentives and legislation making housing largely unaffordable for younger people.

      For the Asian Tigers the national and societal self interest has in general been prioritised over the ‘free market’, and governments take a leading economic development role. For the US however, the aerospace, defence, health and pharmaceutical sectors for example do however follow a similar strategy to the ‘state interventionists’ of Asia and Europe but usually at the expense of the best interests of citizens through the near total corporate capture of the federal political system and the legislative process.

      Unlike the OECD’s manufacturing last place holder – Australia, the US despite excessive levels of industry off shoring for decades has still managed to retain a substantial manufacturing sector in some areas but mostly has abandoned labour intensive manufacturing and has also in general been on a downward slide except for the Silicon Valley centred Tech sector.

      Australia has been the standout bad performer when it comes to making things and the US and Canada have been somewhere in the middle. The UK is somewhere in between these ‘colonies’ but is showing some signs of a return to making at least some things again.

      I bet Keynes would have been an MMT proponent if he were alive today and also be shocked by the political ineptitude and corruption of the West and especially the Anglo West during the 50 year neoliberal era.

      It appears Keynes was a trade protectionist up to a point. In other words when ‘near’ competitiveness was attainable after application of a period of industry development support and trade protection. I doubt he would have recommended that Ireland be as self sufficient in manufactured goods as England but that some segments that were more within reach be developed over time and a more balanced and equitable economy be attained.

    6. Bill says “All will be dependent on increased state intervention.”
      In this context, Keir Starmer’s interview with the FT on August 5th is particularly relevant.
      In calling on the Labour Party to embrace the legacy of Tony Blair, Starmer is effectively calling for a return to the idea of minimal state involvement in controlling a country’s economy. We see this clearly in sections of his interview with the FT. For instance, he states, in the FT interview, that “Labour would develop an economic message based on reprioritising government spending — rather than making big additional commitments — and developing a “partnership” between business and an “active government”.
      I take this to mean that an increase in spending in one area will be matched by a reduction in another area. Starmer believes this will make him seem economically responsible.

      So at precisely the time that Biden, in the US, is trying to inject an extra $4 trillion of spending into the US economy and the EU is proposing to inject some 1 trillion euros into the European economies, Starmer lacks the courage to call for extra spending into the UK economy. Instead he calls for ‘reprioritising government spending.’
      If Starmer’s lack of vision dominates the Labour Party, it will follow the German SPD into oblivion.

    7. Another problem with leaving it to the multinational companies to manipulate our needs for their global profit, is that we get products unsuited to our domestic circumstances, or the infrastructure that our government is prepared or able to to deliver. I am reminded of this every time I ride a bicyle in England, and have frequent but up to now fortunately, non-lethal close passes by wide wheeled, wide bodied, heavy, speeding, polluting and environmentally awful cars, totally unsuited to and doing greater damage to England’s narrow ill-maintained roads.

    8. “So when the lockdown protests march around during a raging pandemic that is largely impacting negatively on the lowest income citizens, the most vulnerable citizens – chanting freedom, I only hear ‘freedumb’.” One of the greatest shocks and disappointments I’ve experienced was to see how many on the LEFT, after Covid began to rage around the world, stand in staunch opposition to the VERY IDEA of a Great Reset…even when some in the Davos crowd were calling for the redefinition of a corporation to include protection of people and planet…even when every thinking person knew, PRE-COVID, that a complete restructuring of global civilization was absolutely necessary to avoid ecocide. The only conclusion I could draw was that decades of neoliberalism had degenerated human reason and imagination even more than it had the middle class and the ecosystem.

    9. Dufa Wira,

      Thanks for pointing out the existence of the two versions.

      I don’t know how the “Studies” version reads but the Yale version has a strange tone to it.

      It seems it is Keynes at his most acerbic.

    10. For eg.
      Sorry you couldn’t find my piece on Keynes, the Dublin speech and the wartime negotiations. When I tried to post my message with the url I was told my message was suspected of being spam so I assumed urls weren’t allowed. But I see urls in other peoples messages. I will try again – Nope. The same thing happened. If you’ve got to the peterbrooke.org website you have to scroll down to the Politics and Theology Section then click on the link to ‘Economics and the European Union’. The article in question is part Three – Fighting for Britain (against the US).
      Re the very interesting observation of Dufa Wira, I concluded that Keynes was saying things in Ireland he wouldn’t dare say in England. His strategy for full employment was that government puts money in peoples pockets so that they can support the nation’s industry. But it’s no good if they spend it on imports. So one solution is to stop imports. But that’s not entirely practical. In the General Theory he has little to say on trade until you reach the appendix on mercantilism, when he discusses the possibilities of trying to maintain a balance of exports and imports. A method for doing this was developed in Germany by Schacht. Keynes was impressed and it influenced his thinking in the wartime negotiations with White.

    11. As a citizen, I’d disagree that we want the smallest government consistent with a functioning society

      “A functioning society” would seem to be the minimum acceptable achievement. Surely we could do better. I’d like to have a government that has a goal of regulating society such that every citizen can participate to the greatest possible extent in those traditions and institutions that have served humanity well over time. These would include families and communities, full and open dissemination of ideas, free and fair markets for goods and services including labor, and democracy and the rule of law.

      Whatever size government that takes.

    12. I know some say Keynes is a terrible writer, but in these passages he expresses his ideas so beautifully. Full of hope and optimism for humanity and what it could achieve if it embraced good ideas. He seems to me a man who knew what life was for and how to live it well.

    13. Thanks Bill. I love reading Keynes. There’s a passage I like to quote from the same period. Indeed I quoted it in a piece I wrote about globalisation posted on John Menadue’s Pearls and irritations, 26 October, 2018. This is from a BBC radio broadcast by J.M. Keynes published in The Listener on 30 November, 1932.

      “Why then did I begin by saying that I sympathise with both sides? I will tell you. In spite of all that I have just said, there are some important respects in which those who are not afraid to use tariffs have a broader conception of the national economic life and truer feelings for the quality of it.

      ” Free traders, fortified into presumptions by the essential truths, one might say truisms of their cause, have greatly over-valued the social advantages of mere market cheapness and have attributed excellences which do not exist to the mere operations of the methods of laissez-faire.

      The protectionist has often used bad economic arguments but he has sometimes had a truer sense of the complicated balances and harmonies and quality of a social economic life and the wisdom of not unduly sacrificing any part even to the whole.”

    14. Wow, heavy comments today. I’ll just pitch in my 2 cents worth:
      Bill writes:
      “The climate challenge, alone, will require new government ventures, massive spending and significant tax and other impositions on our use of disposable income to ensure that there is non-inflationary space to accommodate that increase in public spending.”

      I write:
      Let the inflation happen. But support the low wage worker so their real wage goes up. The inflation is the best wealth tax ever. Inflation space it not real. Inflation is not a real resource. This is what Prof Kelton also gets wrong all the time. Inflation is not a real constraint, it is a purely political/psychological constraint. Material and energy resources and rate of waste heat generation are the real constraints, economists do not measure these, and fraudulently use money inflation as a proxy, but it is not a correct proxy.

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