It is not just Marx whose ideas are now been looked at again. So are those of Keynes. While the German Finance Minister, Peer Steinbrück, of the Social Democratic Party, has said that “certain parts of Marx’s thinking are really not so bad” (Times, 20 October) his British counterpart, Labourite Alistair Darling said (typically) “much of what Keynes wrote still makes sense” (Sunday Telegraph, 19 October). Commenting on this, Keynes’s biographer, Lord Skidelsky wrote “anyone under 40 might well have asked: ‘And who on earth is Keynes?’” (Times, 23 October). So discredited had the ideas and policies of Keynes become by the end of the 1970s.
For those under 40, John Maynard Keynes was an inter-war years economist who was at one time credited with having saved capitalism. He argued that capitalism did not automatically tend towards full employment and that government intervention to increase spending was needed to ensure this. He was himself a Liberal, but his ideas were embraced by all three main parties in Britain.
As it happened, post-war Britain did have more or less full employment for twenty or so years after the war, but this was more due to the expansion of world markets than to Keynesian “demand management” policies. When, in the mid-1970s, world market conditions changed, Keynes’s policies were shown not to work. Instead of stimulating a revival of industrial production they added a new problem - rising prices through currency inflation. In all previous slumps prices had fallen, but the implementation of Keynesian policies in the 1970s meant that they continued to rise. A new word was invented to describe the result: “stagflation”.
In Britain the funeral oration on Keynesianism (Keynes himself had died in 1946) was delivered by the then Labour Party Prime Minister, James Callaghan, at the 1976 Labour Party Conference:
“We used to think that you could just spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you, in all candour, that that option no longer exists and that in so far as it ever did exist, it only worked on each occasion since the war by injecting bigger doses of inflation into the economy, followed by higher levels of unemployment” (Times, 29 September 1976).
Or, as Lord Skidelsky put it, “Then Keynesian policies suddenly became obsolete and the theory that backed it was condemned to history’s dustbin”.
Socialists didn’t shed a tear. Keynes had been trumpetted as the man who had made Marx irrelevant. Labour Party thinkers (some of whom had previously claimed to be “Marxist”) argued that there was now no longer any need for a social revolution to replace capitalism with socialism; Keynes had shown how government intervention could ensure steady growth, full employment and rising living standards.
With a big slump seemingly looming, the three main parties are all turning again to Keynesian policies, calling for tax cuts, income redistribution and government spending to deal with the threat. But, if applied, the result is predictable. It will be the same as last time: stagflation.
Marx is only a rival to Keynes in the context of “reform or revolution” since he never advocated any policies to try to avoid or get out of a slump. For him the capitalist boom/slump cycle was the way capitalism worked and no government could do anything about it. So there’s no Marxist tax policy or Marxist monetary policy or Marxist interest rate policy. Marx’s only “policy” was to get rid of capitalism and production for sale on a market with a view to profit and to replace it with socialism and production solely for use and the complete disappearance of the market and market forces. That’s our policy too.