William A. Darity (Samuel DuBois Cook Professor of Public Policy, Sanford School of Public Policy, Duke University) argues "that in substantial portions of The General Theory, J.M. Keynes was a mere Gesellist, particularly but not uniquely, in his expressions of political philosophy vis-a-vis the relationship between state and economy".
Keynes' debt to the German Silvio Gesell (one of his beloved monetary "cranks" and "heretics") is no secret, although the technical details are often forgotten. In a nutshell, Keynes adopted Gesell's idea of precautionary money demand as explanation for economic slumps. As financial assets are not produced by labour, this demand invalidates Say's Law.Magpie's Asymmetric Warfare
Less well-known is that Gesell's political philosophy may have recommended him to the illustrious Britisher, as much as his political economy. Gesell was rabidly anti-Marxist, advocating a peculiar anti-Marxist "socialism", which could be summarized thus: Build socialism, make capitalists richer. Also in a nutshell: the wealthier capitalists become, the less profitable capital, supposedly leading to the situation Keynes called the "euthanasia of the rentier".…
Keynes' Gesellist Infection
Magpie
4 comments:
I mention Gesell and Arthur Kitson here - I was posting bc I thought there was a link to an interesting (visually) view of Gesell's work, but on checking I see that it is to Kitson's http://clintballinger.edublogs.org/2013/01/14/some-pre-great-depression-roots-of-the-chicago-plan-minskys-financial-instability-hypothesis/
Thanks for your comment, Clint.
I had a quick look at your post. Very interesting.
To be honest, I had never heard of F. Soddy. I don't think Keynes ever mentioned him (in The General Theory, he did mention Marx, Hobson, Gesell, Malthus, and Major Douglas, but not Soddy). However, judging by his Wikipedia entry, Soddy seems to have anticipated Keynes and his followers in many ways:
"While most of his proposals - 'to abandon the gold standard, let international exchange rates float, use federal surpluses and deficits as macroeconomic policy tools that could counter cyclical trends, and establish bureaus of economic statistics (including a consumer price index) in order to facilitate this effort' - are now conventional practice, his critique of fractional-reserve banking still 'remains outside the bounds of conventional wisdom'."
You seem to be knowledgeable in that subject. Is that believable?
The problem with Gesell ideas IMo are twofold:
1) We cannot ignore savings in a modern economy, people wants to save in the currency and expect it to retain value over time. Actually this si more of a problem for the working class than for capitalists, because they have claims over physical productive assets which generate income streams, while the workers don't.
2) You cannot increase velocity of money through negative rates with too much money stocks around without creating bubbles, which again, hurt mostly the working class with no claims to the assets being inflated. This is already happening in Europe now for example with developing housing bubbles in Denmark due to negative rates forced by the central bank over there.
We cannot apply negative rates without first removing or redistributing a part of the existing savings, and without guarantying a mechanism that returns certain income or gurantees savings for retired people.
''people wants to save in the currency and expect it to retain value over time"
Not expect. Believe. From the state's point of view it doesn't matter if they save in the currency or something else as long as the insurance function is fulfilled.
" You cannot increase velocity of money through negative rates "
There. Fixed that for you. Negative rates is just a tax, and it works like all other taxes. If it causes bubbles, then you need further taxes - confiscation of the capital gain for example.
As usual messing around with interest rates doesn't work. There isn't a "market solution" to the problem.
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