The Precious Legacy that Keynes Left to Us  

     2013-12-29 02:00:40|  分类： Frank'sWritings

             Frank  Dec. 28 2013  in Canada

     http://www.kwcg.ca/bbs/home.php?mod=space&uid=61910&do=blog&id=3861

 

    This is an excerpt from my article To Make Possible from Impossible by Breaking the Shackles of Dogmatic.  

    The motivation for separating this part out as special discussion for the legacy of Keynes is from the consideration for some writings recently, which relating serious social issues, such as, Free Trade is damaging Agriculture, It is High Time to Prevent Shinzo Abe becaming Adolf Hitler II, etc.  

    Facing current complicated international situation - economic, military, etc., I think that, world widely, the rational people are all worrying about. How to resolve the thorny issues that human society are facing? What kind of future does human need?  

    Such issues that involve in the vital interests of anybody are easily to cause people worrying about, to induce people questioning about, but difficult to answer.

    These wild flights of fancy made me think of Keynes who was the pioneer in the fieldof economic to have broken the ingrained superstition and worship of people for the outdated doctrines that hinders the progress of human civilization.

    Talking about Keynes, most people respect his The General Theory of Employment, Interest and Money 1936. For instance, in 1999, Time magazine included Keynes in their list of the 100 most important and influential people of the 20th century with commenting that; "His radical idea that governments should spend money they don't have may have saved capitalism.”   

    But, I prefer the end of laissez-faire 1926, by which Keynes tries to reverse the ideological confusion.

    "These many elements have contributed to the current intellectual bias, the mental make-up, the orthodoxy of the day. The compelling force of many of the original reasons has disappeared but, as usual, the vitality of the conclusions outlasts them.”

    "To suggest social action for the public good to the City of London is like discussing the Origin of Species with a bishop sixty years ago. The first reaction is not intellectual, but moral. An orthodoxy is in question, and the more persuasive the arguments the graver the offence. Nevertheless, venturing into the den of the lethargic monster, at any rate I have traced his claims and pedigree so as to show that he has ruled over us rather by hereditary right than by personal merit.”

    He knew that people accustomed to conservative in ideological is the major resistance for impacting on the progress of human society, so he continued: 

    "The next step forward must come, not from political agitation or premature experiments, but from thought. We need by an effort of the mind to elucidate our own feelings. At present our sympathy and our judgement are liable to be on different sides, which is a painful and paralysing state of mind. In the field of action reformers will not be successful until they can steadily pursue a clear and definite object with their intellects and their feelings in tune."

    The way of his bold but sensible questioning about orthodoxy with advancing ideological could help us to advance the way of our thinking, and avoid to fall into the trap of dogmatism, it is the prerequisite to do anything correctly.

    This the Precious Legacy that John Maynard Keynes Left to Us. 

    Then, how to practice it in current reallty? 

    Free Trade is damaging Agriculture: 

    "The operation of agriculture is facing difficulties in most countries world widely. The Governments have to provide subsidies to ensure their agriculture survival. This positive agricultural policy is undoubted wise and essential. " 

    "In developing countries like China, the younger generation has been reluctant to engage in strenuous agricultural life, especially, in the mountainous area that can not mechanize cultivation." "Even in developed countries, such as Canada, the younger farmer’s generation is also fleeing from farming land toward industrialized areas to enjoy colorful modern life."  

    "The negotiations of WTO, TPP and TTIP are all taking the elimination of agricultural subsidies as the prerequisite of the fair of the free trade." 

    "It is time that we should ask that, under the guise of impartial, for ensuring the fair, for maximizing the justice, to mindlessly cut agricultural subsidies,  whether,  that is creating greater unfair, greater injustice. Whether we are destroying the agriculture that human surviving is depending on."  

    Dec. 7 2013, the www.theguardian.com  reports that WTO agreement condemned as deal for corporations, not world's poor.

    It is High Time to Prevent Shinzo Abe becaming Adolf Hitler II:  

    "Now, many leaders of major countries and organizations have come forward to condemn Abe for his visiting the Yasukuni Shrine and his series absurd words and deeds. However, we should also reflect on that what we has done to help Japan? especially, the United States." 

    "The Plaza Accord has made Japan's economy into a long term downturn, and recently, U.S. pressures Japan to open its domestic market of the farm and auto under the negotiations of TPP, Whether it is the new turn economic plunder for Japan." "Also, the burden caused by U.S. military stations in Japan, especially those U.S. soldiers who commit in Japan could not be punished due to the protection of the U.S. force." 

    "When we are hatred and condemnation of Japan, also, we must reflect on ourselves, whether we have made some unfair for Japan." 

     Such realistic way of thinking, free from the shackles of dogma, getting rid of extreme, to look at and solve the problems from the public or global perspective rather than that of any personal or individual organization, or country, to avoid the intensification of conflicts, it will easily find proper solutions to easily settle down the thorny problems. 

                        --- Frank    Dec. 28 2013 in Canad

Follow is the excerpt:

In The General Theory of Employment, Interest and Money (General Theory), John Maynard Keynes (Keynes) has introduced the planned economy into the free market economy of Adam Smith.

Keynesian theory helped the United States to have gotten out of the Great Depressionand refreshed the economic strength, thereby to accelerate the end of World War II. But after decades of development, there some new economic problems were emerged and accumulated up again. Then United States and Britain took the new reforms by reducing the share of planned economy under the lead of Ronald Reagan and Margaret Thatcher.

In Britain, the home county of Keynes and Adam Smith has suffered the processes from original private ownership to be nationalized, and then from state-owned ownership to be privatized again. As a veteran of the capitalist countries, although, in the stage of nationalized, the United Kingdom should belong to the socialist country, however, it seemed no one to doubt its nature of capitalism until now.

They have early established a social welfare system that seems a part of the communist society. However, things will develop in the opposite direction when they become extreme. Abundant social welfare seems to have bred people to love ease and detest work; idleness can deplete any amount of fortune. Once to be envied social welfare now is developed too heavy to burden. Current Prime Minister David Cameronis wisely ongoing new reforms to save Britain by cutting down the public expenditure, including the social welfare.

Many facts have showed that some of politicians were acting as dogmatists, only follow outdated doctrine or the old ruts from one extreme to another, and can not flexibly adjust the direction according to the practical circumstances.

Here, there is necessary to talk a little more about Keynes because he was less dogmatic thinking with the spirit of bold questioning - why and how to fight against outdated doctrines, it could help us to advance the way of thinking, and avoid to fall into the trap of dogmatism, it is the prerequisite to do any thing correctly.

“Keynes is widely considered to be the father of modern macroeconomics.”

“In 1999, Time magazine included Keynes in their list of the 100 most important and influential people of the 20th century, commenting that; "His radical idea that governments should spend money they don't have may have saved capitalism.”

In the annual American Economic Association meetings 1999, Keynes won the greatest economist of the 20th century. Because that he “revolutionized the economics profession by contending that the free-market economy is inherently unstable and requires government intervention (through deficit spending, progressive taxation and monetary inflation) to keep it on the path of full employment.”

There is a comment in Mandarin on a Website of China, said that, Western capitalist countries have taken Keynesian macro economics as a general policy. The history has stepped into the Keynesian era. The macroeconomics created by Keynes has developed into an independent discipline. Moreover, Keynes also contributed to the establishment of the International Monetary Fund and the World Bank.

However, many people have questioned that Keynes did not contribute to the Roosevelt’s New Deal, because of his <General Theory> published in 1936, at that time, the New Deal has primarily saved the economy already. If we go on this way of thinking, it was that seems the achievements of New Deal to have fully contributed to the <General Theory>. Therefore, Keynes was certainly a copycat that is not only lack of talent, but also lack of moral.

This phenomenon also shows that people are accustomed going into the dogmatic trap. They can only see the surface of things, but can not make deep research into the substances.

I firmly believed that although Keynes had no direct suggestion for New Deal, however, he was the father of New Deal actually. The reason is that long before the New Deal put into practice, he had put forward the recommendations that Government should intervene in economy. Such as:

In 1919 in <Economic Consequences of the Peace> he started to publish his theories.

In 1924 in <Monetary Reform> he advocated the Government to control the economy by currency, which was through suitable inflation to stabilize prices and production levels.

In 1926 he published <The end of laissez-faire> to have publicly rejected the Laissez-faire principle for the free market. His view should be considered as theoretical foundation of New Deal in some extent, especially ideological preparation.

In 1929 he suggested British Liberal Party to run the election campaign by advocating the government-run public works (such as, roads, residential construction, the implementation of electrification, land reclamation, etc.) to overcome the problem in unemployment.

In 1930, in <Treatise on money> he proposed to control the economy by regulating the interest rates.

His above ideas were partially appeared in New Deal.

In my view, the greatest contribution of Keynes was not the <General Theory> but <The end of laissez-faire> (<The End>), because it was the ideological foundation for <General Theory>. Although his former recommendations were far away from detailed steps that applied in the New Deal, however they acted as the pharos to show the correct direction that Government must intervene of the economy directly rather than let it unbridled free developing.

In past 154 yeas before New Deal, the market was controlled by Invisible Hand that advocated by Adam Smith in his famous book <The Wealth of Nations> published in 1776 firstly. This doctrine has been strongly advocated by some interest groups under greedy purpose, the government had to have abandoned the effective regulation on market. Laissez-faire market has led to many insurmountable economical problems. In this context, Keynes wrote <The End>.

Now, let us join with the Keynes to experience his anxious concern that happened in so far away but feel as happened in yesterday by reading some of his comments in <The End>.

“These many elements have contributed to the current intellectual bias, the mental make-up, the orthodoxy of the day. The compelling force of many of the original reasons has disappeared but, as usual, the vitality of the conclusions outlasts them. To suggest social action for the public good to the City of London is like discussing the Origin of Species with a bishop sixty years ago. The first reaction is not intellectual, but moral. An orthodoxy is in question, and the more persuasive the arguments the graver the offence. Nevertheless, venturing into the den of the lethargic monster, at any rate I have traced his claims and pedigree so as to show that he has ruled over us rather by hereditary right than by personal merit.”

"The average man averts his attention from the problem, and has no clear idea what he really thinks and feels about the whole confounded matter.” “Confusion of thought and feeling leads to confusion of speech.”

Above, Keynes pointed out the absurd phenomena in 80 years ago, the public were being impacted by something without reasonable ground or something that legitimacy have been lost long time ago.

Clearly, the intention of Keynes was toward broad scope beyond economics. In fact, it still is the common phenomenon even more severe in today, in the 80 years later. Please look around, there are many things have lost the real reasons of existence, the reasons have solemnly entered their graves after completed their missions in long time ago, but they are still alive and still a strong influence on our daily life, or even determine our destiny. For example, today, the original motivations of some constitutions’ establishing were gone away for a long time, and the objective circumstances for making those constitutions have entirely changed already, however, those constitutions have still been used to suppress public will and even harm public interest without any modification.

We should question that whether we are too ignorant or stupid, so that we honestly accepts the control of some thing died already. Why do those dead doctrines not rot and still alive triumphantly? How do their vitality being well maintained? The only reason is that some people need them and continue to make them in fancy-dressing to deceive us believing those doctrines still alive. All in all, although the lives of those doctrines had long been ended, but they can not sleep in their grave as they should be. They are being used to control public, both spiritual and material with achieving the conspiring objectives of the small group people

Although the <General Theory> has been guiding our economic life and to have greatly contributed to human material civilization since it was born, however, some of economic problems we are facing today seem to be out of Keynes’ foreseen, so that we can not find pre-designed formula for solving all of today’s economical problems, which is being expected by the people who could only follow in a old rut rigidly because they are neither the talent nor the courage to deviate from a road that is increasingly narrowing, such as, an economic formula that could help us to control the fiscal deficit into a reasonable level in the process of stimulating the economic growth by increasing the budget deficit endlessly. It has reached terrible level in many countries not only in U.S... Facing the Financial Crisis of 2007–2010, it said that it was only next to Great Depression in severity, the economic tools that Keynes left to us seem to have all been used, but the effect seems less obvious than that of in solving the Great Depression. So, some people may ask that, is the brilliant of Keynes’ thought fading?

It is absolutely not. Today, the development of economy has far exceeded the expectations of Keynes. Compared with that of in 1930, the volume of world economy and stock market has increased great many times with many uncontrollable and although are controllable but not well controlled factors are acting as terrible specter in harming with the economy.

On the other hand, the instruments of Government intervention in the economy proposed by Keynes was mainly by guidance and stimulus without the restrictions, it is not enough for the unreasonable components in nowadays market, such as, huge amount of international hot money that was considered to had triggered 1997 Asian financial crisis, and the newly developed irrational financial instruments – derivativesthat was considered to be an important trigger of the Financial Crisis of 2007–2010. They are the terrible threats to trigger more economic disaster and are what we must properly regulate but hardly strive in today.

Although Keynes did not left formulas that are suitable for solving the problems in today’s economy, but he left us with a universal formula that is his most shining part of his thought – the shining core, a core that implied but clearly being indicated in <The End>, that is to play to the score by boldly questioning the old orthodoxy and doctrines to explore new effective solution. Therefore, the most precious legacy he left to us is <The End> rather than the <General Theory> or any of others, because that in the <The End> he presented us a most significant thought with the potential of Golden touch, or the Midas touch.

Keynes’ spirit of doubt and question against old doctrines possesses universal significance. Only after breaking the shackles of traditional, the wings of imagination could be expanded to fly freely in the expanse of the sky. Only after breaking the constraint of dogmatism, the gate of free thinking could be opened; the effective solutions would be produced and any thorny problems could be solved at present and in future.

The progress of human civilization in the wealth of ideological and spiritual is important than that of in the wealth of material. Without the guidance of the correct philosophy, human being would never be able to enjoy true material civilization. Human would never get rid of the fatuity or the nature of the beast, looting and killing, endlessly making the disasters with advanced skill to do these indirectly in bloodless but more powerful. Therefore, in <The End>, Keynes was concentrating on the ideology rather than the material

Keynes is very different with us ordinary people. He is sober and methodical when most of us are drowsy or panic. He has seemed to stand on the height of three-dimensional with the eyes as eagle’s to observe us who like ants to strive for essential daily livings, even fighting each other in a two-dimensional world. His main concern was how to protect us to be able to long-term enjoy life without disturbing.

Compared with Keynes, we would be aware the reason, the reasons that we are just blindly being believed rather than brainy self-convinced, the reason that we always blindly follow others and being manipulated, the reason that we can not control self destiny, and always act as a victim exposed to the front of any disasters that most of them were man-made.

Keynes might have foreseen that the market running under entirely free does not work, sooner or later would make trouble. When people are still scheming, with a variety of sounds reasonable grounds to maintain the free market economy, Keynes had prepared ahead. He was doing preparation in public ideology. Perhaps because of his early thoughts on the government intervention of the economy was not being ideally implemented, or there are necessary to intensify. Because he was clearly aware that, in the most of cases, for doing some things, the greatest resistance comes from the public conservative consciousness, from the shackles of traditional，blind faith, blind worship, blind superstition and some dogmatic bias. The most difficult task firstly is to break down those bondages. Therefore, it is the choice that should do or should not do? Dared do or dared not do? It is the why rather than the how. It is just like Keynes indicated in the last paragraph, “The next step forward must come, not from political agitation or premature experiments, but from thought.”

The review for Keynes will stop here. You may ask that what the contribution of President Roosevelt is? So next I must clarify the relationship between him and Keynes.