Anyone who wants to keep the spirit of Keynes alive has to face the failures of Keynesianism honestly, without always trying to shield the Master from the mistakes of the disciples. In essence, the Keynesian revolution was ruined by over- ambition – hubris might be a better word -driven by impatience and backed by unwarranted claims to both theoretical and practical knowledge. The monetarist counter-revolution was a plea for more modesty, and greater trust in the spontaneous forces of the market… Keynesian policies come to us today wrapped up in a history of rising inflation, unsound public finance, expanding statism, collapsing corporatism, and general ungovernability, all of which have seemed inseparable from the Keynesian cure for the afflictions of industrial society…. By
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Anyone who wants to keep the spirit of Keynes alive has to face the failures of Keynesianism honestly, without always trying to shield the Master from the mistakes of the disciples. In essence, the Keynesian revolution was ruined by over- ambition – hubris might be a better word -driven by impatience and backed by unwarranted claims to both theoretical and practical knowledge. The monetarist counter-revolution was a plea for more modesty, and greater trust in the spontaneous forces of the market…
Keynesian policies come to us today wrapped up in a history of rising inflation, unsound public finance, expanding statism, collapsing corporatism, and general ungovernability, all of which have seemed inseparable from the Keynesian cure for the afflictions of industrial society…. By the 1980s, Keynes… had joined Marx as the God that failed…
Keynes’s star was fading…. The Keynesian age had collapsed in theoretical disarray and policy disorder, victim of simultaneous inflation and unemployment which Keynesian economists could not explain and Keynesian policy-makers could not control. It was in this situation that classical economics… [that] Keynes had apparently overthrown… made a big comeback, and governments reverted to a modified pre-Keynesian policy stance. Markets were deemed to be optimally self-regulating; the macroeconomic task of government was restricted to to maintaining ‘sound money’; government’s task in the micro-economy was to free up markets in order to lower the ‘natural rate of unemployment’. The revival of classical economics and its theory of economic policy…
Eichengreen: Globalizing Capital 5-7 https://github.com/braddelong/public-files/blob/master/readings/chapters-eichengreen-globalizing-5-6-7.pdf tells the same story as Skidelsky ch 6 at much greater length, and with much more focus on the international side. It, too, broadly approves of the neoliberal turn—or at least regards it as inevitable. In Eichengreen’s view, countries could not simultaneously (a) reap the benefits of market allocation of investment capital and incentivization of savings, (b) stabilize their domestic economies, and (c) stabilize exchange rates so that they would not be massively vulnerable to international currency and financial markets. They could not control, but had to submit to the market: the question was how best to do so.
Eichengreen when writing this version of GC (there is a later one) saw European countries as giving up their individual abilities to stabilize their economies (betting that recessions would be small, short, and infrequent) and other countries as giving up exchange rate stability (in large part because half a century had taught that countries could not keep their promises to forever peg their currency to the dollar.)
I thought of making this Eichengreen reading optional—indeed, I would recommend you skip it now, and read it during R&R week as review as an alternative to rereading Skidelsky ch 6.
In fact, let me make that recommendation stronger. The other outside reading is Eichengreen: Populist ch 8 https://github.com/braddelong/public-files/blob/master/readings/chapter-eichengreen-populist-8.pdf. It, too, goes over the same ground—things falling apart, although Barry’s chapter title only echoes and does not copy Achebe https://github.com/braddelong/public-files/blob/master/readings/book-achebe-things.pdf and Yeats https://github.com/braddelong/public-files/blob/master/readings/poem-yeats-1919-second-coming.pdf https://en.wikipedia.org/wiki/The_Second_Coming_(poem). One thing worth noting is where Barry quotes economist Sidney Weintraub on the Carter years 1977-1981 that Carter had “succeeded … where all Democrats—and Republicans—have failed— namely, in making his own name a synonym for economic mismanagement and expunging memories of Herbert Hoover dawdling at the onset of the Great Depression”. The extraordinary thing is that growth was faster in the Carter years than it was to be later—the only thing wrong was moderate inflation. And yet: “AS BAD AS OR WROSE THAN HERBERT HOOVER!!” was the then-public reaction. The Trente Glorieuses had really raised the bar. (But then, somehow, the bar was immediately lowered again—for the new neoliberal order persisted.) This chapter is worth reading closely, as Barry gives a masterful summary of how, in the global north, neoliberal policies failed to deliver any notably good results, and few results at all except for an enormous rise in income and wealth inequality, the creation of plutocracy, and the illusion of stability and low risk—an illusion that was going to be brutally shattered in 2008.
And then there are the three DeLong chapters. Usually you would be well-advised to pay close attention to what I have written. Perhaps not here. I am less confident that I have the right interpretation of these historical processes than of the rest of this history. And I am less satisfied with the arrangement I have made of things. Chapter 19 https://github.com/braddelong/public-files/blob/master/slouching-19-neoliberal-%23tceh.pdf is worth studying. Chapter 21 is worth skimming—I am far from sure I have gotten the argument right here https://github.com/braddelong/public-files/blob/master/slouching-21-cold-war-end-%23tceh.pdf. And chapter 22 https://github.com/braddelong/public-files/blob/master/slouching-22-hyperglobalization-%23tceh.pdf is both repetitious and unfinished—I had hoped to have another draft for you by now, but I do not. I regret this.
Skidelsky: Keynes ch 6 https://github.com/braddelong/public-files/blob/master/readings/chapter-skidelsky-keynes-6.pdf Barry Eichengreen: The Populist Temptation ch 8 https://github.com/braddelong/public-files/blob/master/readings/chapter-eichengreen-populist-8.pdf
Barry Eichengreen: Globalizing chs 5-7 https://github.com/braddelong/public-files/blob/master/readings/chapters-eichengreen-globalizing-5-6-7.pdf
DeLong chs 19, 21, & 22 https://github.com/braddelong/public-files/blob/master/slouching-19-neoliberal-%23tceh.pdf https://github.com/braddelong/public-files/blob/master/slouching-21-cold-war-end-%23tceh.pdf https://github.com/braddelong/public-files/blob/master/slouching-22-hyperglobalization-%23tceh.pdf
Optional Reading: Richard Baldwin: The Great Convergence https://github.com/braddelong/public-files/blob/master/readings/book-baldwin-great-convergence.pdf
.#berkeley #economicgrowth #globalization #highighted #neoliberalism #neoliberalturn #politicaleconomy #tceh #teaching #slouchingtowardsutopia #2020-11-23