Tuesday, 1 January 2013

Keynes' General Theory of Liberalism

It has been said that Keynes came not to bury capitalism, but to save it.   But what was his purpose with respect to liberalism?

His plain purpose, surely, was to discredit historical liberalism. To historical liberalism the competitive market was the ultimate expression of the congruence of the liberal values of freedom, wealth and rationality. Keynes's reasoning annihilated the merit of the free play of markets:  such play would be unproductive of wealth and punishing of rationality.

But if his negative purpose was to discredit historical liberalism, what was his positive intention? Was it to reinforce the coalition of labourism and Technocracy,  that, under the standard of 'socialism', then constituted an existential threat to liberalism? No:  Keynes deprecated both labourism and technocracy. Keynes was in today's language 'an elitist'; he would not have the fish conflated with the mud (to use his own phrase); he would never truly sympathise with the egalitarianism of Labourism, and there was nothing in his theories to suggest he should. His objection to the inequality of wealth of his day was purely instrumental and contingent: it produced more saving than the economy could absorb.On the same logic, Keynes would favour an increase in inequality if the economy was not generating enough saving. 

And Keynes also repudiated technocracy. Technocratic versions of his own doctrines (eg Lerner's "Economics of Control') repulsed him. To Keynes, Lerner's ideas were a supurious rationalistic antidote to the economic disease that, in Keynes mind, was bottomed in the inadequacy of rationalism.

It was no great wonder that in the last year his life that Keynes was in 'deeply moved' agreement with Hayek on socialism.

So where was Keynes positioned on the ideological matrix? 

Broadly speaking, Keynes was, of course, a New Liberal, a category that progressively displaced traditional liberals in the Liberal Party over the course of Keynes' life.  (His life-long party political allegiance was to the Liberal Party). New  Liberalism might be ruthlessly analysed as merely a dilution of historical liberalism by some stronger currents of the times: by egalitarianism, by rationalism (in the form of Utilitarianism), and by a little of (what we would call) communitarianism, in the guise of 'organic' conceptions of the nation. If you like, New Liberalism was a conglomerate rather than a crystal.    

But Keynes could be interpreted more ambitiously as providing a new doctrinal structure of liberalism;  one that would manage to do service to the preeminent of value of freedom in the face of the inadequacies of human reason.

The foundation of Keynes' rejection of the invisible hand , I venture, was epistemological. Humankind was not capable of the performances the invisible hand required of it. This incapability would appear to clear a  path for planning; but human reason, unequal to making the invisible hand work, would be even more overwhelmed by planning. Keynes, I suggest, found hope in a different possibility: not more control of human will, but less control. Not in less control by the state, but less control by the internal government of the pysche. Less self-control, in other words.

Since at least J.S. Mill there has been a tradition of finding the kernel of freedom in 'sponteneity': the opposite of self-control. Mill's principle adversary here was the informal sanction of 'convention' by society at large. But 'spontaneity' could clearly also be invoked against that self-regulation, which Mill, as a rationalist,  saw rooted in reason. Keynes as an anti-rationalist would find  no such exoneration of self-regulation. And in consequence the puritanical or bourgeois virtues would now be impeachable.

It was, of course, the 'bourgeois' virtues; of thrift, discipline and prudence that  historical liberalism held were necessary for a society wealthy.   But to Keynes, thrift would not add to capital, and prudence would not preserve it, but only waste it in paralysis. Thrift and prudence were abnegations of the will, a kind of stillness, a substitute death, that not only did serve freedom, but which made for poverty. And he had a long treatise on economic theory to argue that contention. By motivating a wish to hold money, all that prudence fostered was a reward for a  form of inactivity -saving-that made us all poorer.

What Keynes was doing, then, was to dethrone the virtues of self-control of historical liberalism, and replacing it with the virtues of impulse; of 'animal spirits' , of enjoying your sin. If we could only be more like artists, and less like clergyman, all would be better. In Keynes, in summary, passion steps in to replace reason, as Hume had proposed so long before. Freedom as licence supplants freedom as truth.

What might be made of Keynes attempt to honour freedom (or, a kind of freedom) in the face of the inadequacy of human reason?

It is arguable whether "freedom as licence" is a better response to the inadequacies of human reason than self-control. Hayek shared Keynes' doubts about reason, but proposed the solution would be found in competition; competition between institutions.And 'institutions' in Hayek means rules, typically enforced by an internal sanction. A population averse to assimilating such internal sanction would leave competition unable to select in succesful behaviours.

But it is even more arguable whether freedom is licence, and if self-control is an  infraction of freedom . To choose a constraint is not slavery. To be unable to choose a constraint - to be unable to 'control one self' -   surely constitutes a form of dominion almost as bad as literal slavery.

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