While writing The General Theory of Employment, Interest, and Money, Keynes had an argument with George Bernard Shaw about Marx. Keynes wrote to Shaw on 1 January 1935:
"...To understand my state of mind, however, you have to know that I believe myself to be writing a book on economic theory, which will largely revolutionise - not, I suppose, at once but in the course of the next ten years - the way the world thinks about economic problems. When my new theory has been duly assimilated and mixed with politics and feelings and passions, I can't predict what the upshot will be in its effects on actions and affairs. But there will be a great change, and, in particular, the Ricardian foundations of Marxism will be knocked away.I don't accept that Marx built on Say's Law, which is what Keynes refuted.
I can't expect you, or anyone else, to believe this at the present stage. But for myself I don't merely hope what I say, - in my own mind I'm quite sure."
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Keynes was of the view that he knocked aside far more than Say's Law.
Clearly, if he had a valid General Theory about those dimensions of a Monetary Production Economy that it is possible to have a General Theory about, then Capitalist Economies, being a species of Monetary Production Economies, would necessarily fall within the scope of the theory, and so any Marxian theory in conflict would have to give way.
Now, just as the Bastard-Keynesians, in Robinson's trenchant phrase, understated the differences between the General Theory and neoclassical economics, and failed to understand how dramatically the General Theory undermined the Neoclassical vision as a model of an entire economy ...
... I think that Keynes probably understated the differences between the classicals and the neoclassicals, just as Marshall was wont to do, and overestimated the impact of the General Theory on classical theory as such, in distinction to classically influenced Marshallian neoclassicals.
Keynes is reputed to have said he never read Marx. Leaving that to the side I think what Keynes was saying was that he was going to undermine the basic story of distributional conflict central to the Ricardian macro-model. Keynes takes this to be the central message of Marx: irreconcilable class conflict. Keynes thinks he will show the way to resolve class conflict and thus undo Marxists main political weapon. The Thirty Glorious post war years would seemingly have proven Keynes right.
"The Thirty Glorious post war years would seemingly have proven Keynes right."
Actually, they proved Kalecki right (from "Political Aspects of Full Employment"):
"Under a regime of permanent full employment, the sack would cease to play its role as a disciplinary measure. The social position of the boss would be undermined and the self-assurance of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension . . . 'discipline in the factories' and 'political stability' are more appreciated by business leaders than profits. Their class interest tells them that lasting full employment is unsound from their point of view and that unemployment is an integral part of the normal capitalist system."
All of which happened, of course.
Kalecki also correctly predicted the rise of "a powerful bloc" between "big business and the rentier interests" against full employment and that "they would probably find more than one economist to declare that the situation was manifestly unsound."
NAIRU, anyone? Monetarism? Milton Friedman?
The resulting "pressure of all these forces, and in particular big business" would "induce the Government to return to. . . orthodox policy."
Hence neo-liberalism...
"The assumption that a government will maintain full employment in a capitalist economy if it only knows how to do it is fallacious."
The period from 1980 to now would suggest that Keynes was wrong and Marx and Kalecki were right.
Iain
An Anarchist FAQ
I knew I should not have relied on the modifier *seemingly* to indicate my POV. Point is how often did we here the refrain during the late 70s and eighties: "unions were once necessary but not any more." Keynes' theory and I might add Kalecki's theory hinged on unions. At least Kalecki was decent enough to indicate the degree to which the Keynesian solution relied on a precarious political economy. And that is what makes Kalecki more Marxist than Keynes: the class conflict can be mediated (for a time perhaps) but never transcended. Gives sober second thought to third way social democrats no?
What would be exactly the "Ricardian foundations of Marxism"? The theory of value and distribution based on class conflit or a supposed adherence by Marx to Say´s Law?
Keynes misinterpreted Ricardo (and Marx) in the same way as his mentor Marshall. They saw the Ricardian school as a pre-marginalist approach that dealed only with the supply side of an economy but hadn´t much to say about the demand side. It was the "official" interpretation of the Classical School before Sraffa. He wrongly associated Say´s Law with full-employment - something that doesn´t belong to Ricardo´s analysis. Summing up, Keynes saw Ricardo as the major father of marginalism. Say´s Law doesn´t mean full-employment of labour - this is the point - because there´s no such a thing as substitution effects in the ricardian approach to ensure a full employment equilibrium.
I´m not sure about what i´m going to say but i think Marx didn´t follow Say´s Law. His ricardian root is only the theory of value and distribution.
Thanks for the comments. I do not trust Keynes as a historian ideas, especially on Classical economics, either.
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