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Great analysis, but I'm not sure I entirely buy it.  To explain the demise of Keynesianism  and the rise of monetarism through the rise in energy prices in the 1970's doesn't say much for Keynesianism - even though you do highlight its other flaws - a blindness to the cost of the externalities which fueled its growth.

Its most fundamental flaw, surely, was that it taught the rich that it was in their own interest to look after the poor.  When things got tighter the rich simply decided they could take it all for themselves - and let the devil take the hindmost.  Any ideology which depends on the enlightened self-interest of the rich ignores the begger-my-neighbour attitudes of the majority.

The failure of Keynesianism was not that it wasn't relatively enlightened compared to the monetarist fundamentalists, but that it depended on the continued enlightenment of society and polity to survive. The problem with being a middle-of the road centrist is that you get hit from all sides.

A more fundamentalist political analysis would conclude that only when the political systems empowers the less well off to ensure that social democrat or new deal policies are pursued which are in everybody's interests and when those policies and institutions cannot be hijacked by the rich for their own benefit.

The problem isn't simply, as Heller said, that Capitalism when left to its own devices doesn't work, but that it can't work so long as all political power is concentrated in the hands of the rich.  The crises of capitalism in the meantime - as Naomi Klein - has demonstrated, have not delegitimised such rule, but rather reinforced it - by progressively disempowering the middle classes.

Keynesian liberals are still dependent on the enlightenment of the rich to be allowed yto do their work, and will only ever be tolerated for so long as their non-zero-sum game also enriches the rich even further.  Anything less than that will result in a retrenchment into blatant class war, as fought by the monetarists.

The only solution is the building of democratic political movements strong enough to withstand the power of the "markets" i.e. the rich - in the media, academe, and in the political system itself.  That the new deal never achieved.  The US will need a much more fundamental political revolution this time around if it is to recover its leadership role - and middle-of -the-road Keynesians cannot make that happen.  They are ultimately beholden to the rich and their sense of enlightened self interest - a very barren field to plough in indeed.

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Mar 13th, 2008 at 10:28:15 AM EST
Frank Schnittger:
The failure of <insert utopian ideology here> was not that it wasn't relatively enlightened compared to the <insert dystopian idologue here> fundamentalists, but that it depended on the continued enlightenment of society and polity to survive.
Which political system is able to survive an unenlightened society and polity? That is the problem: enlightened self-interest.

The Federalist #51

If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.


It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Carrie (migeru at eurotrib dot com) on Thu Mar 13th, 2008 at 11:06:48 AM EST
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I think you ignore the class analysis - it is not so much a case moral probity or intellectual foresight - of people being angels - as of their objective interests being at variance.  Keynesians got away with bridging that divide so long as everybody could be a winner.  They could describe themselves as centrists then - whereas now, in the US, they are so far out liberals - you can't get a PhD in any University based on Keynesian ideas.

The political centre has moved so far to the right, that only the out and out class warriors are at the centre of it.  Basically the rich have been able to reverse the New Deal and re-assign the political system to themselves.  The problem is not with the economics, but with the realities of the political order, and only a political revolution can change that.

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Mar 13th, 2008 at 11:42:08 AM EST
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We've already had a political revolution. That's what the Right did when they dug up Friedman and waved him around like a decomposing scarecrow, and funded any number of think tanks to do the evangelial work needed to sell his reform message.

It was a very quiet revolution, but effective because - as Techno says - the Keynesians had weaknesses. In the middle of an energy crisis it was easy to throw out the Keynesian message and replace it with monetarist crankiness.

Now we've had twenty years of crank economics flopping around incontinently in the mainstream, with the inevitable hilarious results.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Mar 13th, 2008 at 10:56:41 PM EST
[ Parent ]
Its most fundamental flaw, surely, was that it taught the rich that it was in their own interest to look after the poor. When things got tighter the rich simply decided they could take it all for themselves - and let the devil take the hindmost. Any ideology which depends on the enlightened self-interest of the rich ignores the begger-my-neighbour attitudes of the majority.

I do not see Keynesianism emphatically teaching the rich to take care of the pour as own interest. If there was a progressive influence on the rich, it was more of neo-Darwinian flavor - the rich made the extra conscious conclusion that if you powerful, you have to use the power for yourself. Progressive politicians seem to believe in "invisible hand of self-interest" sincerely - just look at election campaigns, where the progressives expect the common quest to succeed while each taking care of yourself only; the conservatives (and the rich!) are much more cooperative among themselves (though it would be nice, of course, if they would believe in wider cooperations as well).

Any political system could be taken over by the rising power misbalance - running totalitarian within a democracy requires only an additional layer of monetary and media control; it is not much more fancy than running Windows on a Mac. Getting more power to divested classes is a good idea; but that cannot be settled on an automatic pilot; holding up the gentle power should be kept almost relentlessly. The idea that you can possibly do very little (if nothing) self-enforcing with power, and be happy with that, is very radical for these times. Keynesianism did not really play with that idea.

Not using education in modern times is akin to asking ancient humanoids not to use tools. Sadly, under the marketist revolution education degenerated to just another item of competitive advantage to be gained, or to be denied to others. Now, depressingly much of world's decisions (from political commitments to building yet another hotel or brothel over a gym or a library) are in the hands of elite power players and richer businessmen; they are not stupid, but increasingly rarely the brightest. The education systems of the rich, or of anyone else, could be more aware of the primate instincts of territoriality and pecking order. But teaching to subdue your ego, or to appreciate less greedy choices, is not a sin.

by das monde on Fri Mar 14th, 2008 at 02:12:37 AM EST
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