John Maynard Keynes Knew What Occupy Wall Street Tells Us Today: "Banks and bankers are by nature blind."
Economist Friedrich Hayek is the darling of conservatives. Progressives prefer John Maynard Keynes. But when it comes to sensible policy, there's really no contest.
by James K. Galbraith
Getting the word out on AlterNet.
11 comments:
Galbraith:
"Keynes in 1930 knew what Occupy Wall Street tells us today: the Great Depression was produced by banks. He wrote “Banks and bankers are by nature blind. They have not seen what was coming...” Even when faced with their own destruction they get it wrong: “In the United States,” he wrote “some of them employ so-called ‘economists’ who tell us even today that our troubles are due to the fact that prices have not fallen enough...” [Shades of Inside Job.] “A sound banker, alas! is not one who foresees danger and avoids it, but one who when he is ruined, is ruined in a conventional and orthodox way along with his fellows, so that no one can really blame him.” Sic Transit Gloria Charles Prince and Richard Fuld."
This is BS I'm sorry. If you read the Keynes quote, Keynes does not make the case that the GD was "produced by banks" like Galbraith writes. Keynes makes the case that bankers are morons, losers, yes, who never see it coming and plead innocence and run to the government tit when their incompetence catches up with them. I'd agree with Keynes about that, but both the GD and the GFC were caused by a misunderstanding or surrender of fiscal authority of the Federal Government.
The problem is and was FISCAL POLICY. These OWS people should be advised to move their act to Washington where the problem really is, instead of telling them in effect that they 'have got it right'. I love their hearts but they dont really understand what this is all about. Galbraith should be trying to educate them instead of pandering to them.
I have my doubts about Galbraith as far as his true understanding of MMT, I dont think he really gets it. He, Hudson, Baker should just retire already and get out the way.
Resp,
interesting article indeed. The video debate was more than disappointing in my view. I don't know if you watched it, but it appears that our "intellectual currency" is ironically being noticeably "debased" by the sharp emergence of "Hayekians" the world over. The last Hayek speaker, Mr. White I believe, was the most substantial (literal meaning) of them all, but even he failed to issue much of anything in regards to what Hayek really was SAYING AND SUGGESTING TO DO AT THIS TIME.
All I heard the Hayekians talk about was (ironically) debasing their opponents media-ized arguments (not even their actual arguments) as if somehow a negative generates a positive. Hayekians, both in debate and in economics, appear to believe, in spite of any scientific data, some sort of reverse-spontaneous combustion. Truly a shame in too many ways.
It's funny Matt b/c I was wondering myself during the debate just how much Galbraith really knows (or at least is interested in revealing) regarding MMT. There were numerous opportunities to discuss the nature of taxes, spending, and deficits, and solvency but to which he all too easily let pass away like clouds in the sky. I have the utmost respect and admiration for the man to be sure, but I do wonder if he's more interested in NOT rocking the boat all that much.
i thought this was referencing salma hayek sorry for the interruptions
yeah her too!!! LOL...is she the "gold standard" or something!! ;)
Even a blind squirrel gets a nut every now and then. Hayek was right about corporatism.
LOL to be sure Anonymous. Like I said I liked Mr. White...the last Hayek speaker. He actually had things to say about theory and ideas and policy and I actually agree with him.
I think MMT-ers and Keynesians are not very particular with their investment allocations process and focus on the far too general and undifferentiated concept of "aggregate demand" without offering any real specific implementation ideas that explain how booms are created..I suspect they are "natural." Although isn't that just like saying UE is "natural"? I am afraid so. This is really just not good enough for MMT policy. I think that perhaps Hayek may have better solutions in how to marshal fiscal expenditures. Perhaps if we had MMT'ers at the "sluice gates" if you will ensuring proper expenditure amounts were being issued for private wealth accrual while we had the Hayek-ers "down in the fields" to insure that those dollars would be properly allocated and used in the most market efficient manner according to the market. What does that look like exactly? I am not so sure and unfortunately the Hayek'ers aren't very specific in their ideas either, probably b/c they are not interested in ANY fiscal spending, so they probably see no need to marry up with it at all. I wouldn't be surprised to hear Warren say tax cuts would do it, however I think that still is perhaps too vague in terms of how to get investment up and running perhaps. I wonder and tend to initially agree that it is a waste to take on public works whose costs exceed their benefits. However I think MMT can and needs to address this concept, b/c there is a difference between valuable works that are expensive with perhaps a low return in financial capital, however they may still be worth in regards to society as well as in regards to how those jobs "feed and provide" for families and communities, etc. Is it better to get paid to do a less useful activity in lieu of doing nothing at all? I'm sure Austrians would argue that the person could do something if he was left to his own devices, but obviously that is just crass and crude and ridiculous to think such a thing. However MMT-ers do have the burden of proof to show that truly that person will not do anything else instead. When I get the chance I intend to read up on Hayek's "Price and Production" to get better acquainted with those ideas. I think the various green energy scandals of mal-investment by this admin. are valid critiques of fiscal expenditure in action and do need to be properly addressed in the real world. Hayek was definitely a master at how markets are more efficient and more informed than governments and I tend to at least intuitively agree with him and feel that MMT-ers need to somehow marry Keynesian fiscal policy with Hayek's confidence in the market. Mr. White also mentioned that in the 30's Hayek advised central banks to have "constancy in the total money stream" which Mr. White explains means, "stabilization of nominal GDP." That sounds to me like fiscal spending?!?! Mr. White, unfortunately NEVER explains what that means exactly and how they go about achieving that. Never-the-less it is definitely interesting. I think that there are under-currents that we share with Austrians and perhaps it may just be that we both are masters of opposite sides of the business cycle. Keynes at the bottom and Hayek at the top. Interesting thoughts indeed.
Overall, the entire debate focused far too much on monetary policy, which it appears was assumed to be some type of Keynesian stance, which if so, is a clear break from MMT. Not nearly enough of the discussion was on managing and achieving proper fiscal policy and THAT I believe is the most unfortunate thing of the debate. Frankly I think MMT is deficient in that regard as well...the implementation aspect of fiscal policy that is, which seems to be exactly what Hayek is concerned about. Perhaps there is still yet we can learn from each other.
Mario,
" but I do wonder if he's more interested in NOT rocking the boat all that much." I think you have it here with Galbraith.
And Tom is on to what Hudson is doing wrt how Hudson chooses to structure his phrases for purely a political strategy. And Dean Baker just still doesnt get it.
These older folks have to consider whether it is time to be handing it over to a younger generation such as Mike, Warren, Profs Wray, Fullwiler, Kelton, Mitchell, etc... who have always operated and been immersed in a FFNC regime and dont have the "academic baggage" so to speak.
This younger generation just has no problem speaking the PLAIN TRUTH, no "beating around the bush". This is what the younger people who make it to MMT understanding just plain do. All of them: Mike, Warren, Marshall Auerback, Cullen Roche, Bill Mitchell, all the many others; they just unapologetically tell it like it is. I think this is the better approach.
Resp,
I would not be too hard on Jamie wrt MMT. He is not an MMT developer and does not represent himself as an MMT proponent, although he is more than sympathetic to MMT. He regards himself as a Galbraithian, carrying on in the tradition of his famous father, e.g., in his book, The Predator State. Yet, he has often been a powerful voice echoing the MMT perspective on monetary economics and would place him in the "MMT camp."
I do think that he is correct in laying the blame for the Great Depression at the feet of the banks and financial system, because it was a debt-deflationary depression resulting from excessive leverage and imprudent lending, much like the present crisis.
While government was involved to a degree, it was not government that cause that depression any more than this one. Depressions and panics often took place prior to government creating moral hazard, for example. The 19th century is replete with evidence attesting to this.
Government policy and practice allowed both to happen and then were rather ineffective it addressing the real issues in a timely fashion, allowing the situation to spin out of hand. I would say that the depth of the depression in both cases was and is due to the government's failure to use fiscal policy to address the problems, resulting in intractable situations that could have been greatly reduced if not avoided.
Finally, I think that we have to credit Galbraith for being one of the few who has been willing to come out in favor of MMT-based principles and solutions, even at the risk of reputation. Early adopters bear the brunt, and he is really the only well-known mainstream economist that has associated himself openly with the MMT economists. So rather than criticizing him for not having gone far enough or not being always 100% in paradigm, I think that we should be commending him for going out on a limb by coming out openly about his association with MMT.
quite true Tom. A proper perspective on the matter indeed. The first gen is definitely to be respected and honored and weighed by the atmosphere of their time. We do ride in the wake of what they started.
Matt...I think that the way these "torches" get passed down is not so formal. In other words it is not so much that the elders pass it to the young as much as it is the young who SHOOT UP and claim "space" while the elders quite down and start to retire, etc. If you look at how organizations develop and evolve that seem to be more like it. Official "passing the torch" methods rarely hold if this dynamic isn't also going on. It's always about what MORE can a person do, if they feel so inclined. Carving a place out for themselves where no one knew was there for them prior. It's an amazing thing really.
Matt, for example, your skills and knowledge base are so strong and deep that you could easily start expanding your reach in the world if you had the time and energy, etc.
I'd love to do it, but I'm not god enough and don't know enough (yet?). Plus I am still working and expanding my career so this is my contribution.
The fact of the matter is that those of us who are the regulars on Warren's blog and what-not...we are the next generation and we're all over the globe really. Perhaps if we started to create more unity somehow either through conferences, group papers and proposals, in-depth analysis of policy implementation, in-depth dissection of other "schools" ideas, etc.
perhaps if we could more cohesively join up with UMKC school.
etc., etc., etc. It's all about authentic expansion is my point.
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