The theory of output as a whole, which is what The General Theory of Employment, Interest and Money purports to provide, is much more easily adapted to the conditions of a totalitarian state.
John Maynard Keynes
In looking at and assessing the economic paradigm of John Maynard Keynes — a man himself fixated on aggregates — we must look at the aggregate of his thought, and the aggregate of his ideology.
Keynes was not just an economist. Between 1937 and 1944 he served as the head of the Eugenics Society and once called eugenics ”the most important, significant and, I would add, genuine branch of sociology which exists.” And Keynes, we should add, understood that economics was a branch of sociology. So let’s be clear: Keynes thought eugenics was more important, more significant, and more genuine than economics.
Eugenics — or the control of reproduction — is a very old idea.
In The Republic, Plato advocated that the state should covertly control human reproduction:
You have in your house hunting-dogs and a number of pedigree cocks. Do not some prove better than the rest? Do you then breed from all indiscriminately, or are you careful to breed from the best? And, again, do you breed from the youngest or the oldest, or, so far as may be, from those in their prime? And if they are not thus bred, you expect, do you not, that your birds and hounds will greatly degenerate? And what of horses and other animals? Is it otherwise with them? How imperative, then, is our need of the highest skill in our rulers, if the principle holds also for mankind?
The best men must cohabit with the best women in as many cases as possible and the worst with the worst in the fewest, and that the offspring of the one must be reared and that of the other not, if the flock is to be as perfect as possible. And the way in which all this is brought to pass must be unknown to any but the rulers, if, again, the herd of guardians is to be as free as possible from dissension.
Certain ingenious lots, then, I suppose, must be devised so that the inferior man at each conjugation may blame chance and not the rulers and on the young men, surely, who excel in war and other pursuits we must bestow honors and prizes, and, in particular, the opportunity of more frequent intercourse with the women, which will at the same time be a plausible pretext for having them beget as many of the children as possible. And the children thus born will be taken over by the officials appointed for this.
Additionally, Plato advocated “disposing” with the offspring of the inferior:
The offspring of the inferior, and any of those of the other sort who are born defective, they will properly dispose of in secret, so that no one will know what has become of them. That is the condition of preserving the purity of the guardians’ breed.
In modernity, the idea appears to have reappeared in the work first of Thomas Malthus, and later that of Francis Galton.
Malthus noted:
It does not, however, seem impossible that by an attention to breed, a certain degree of improvement, similar to that among animals, might take place among men. Whether intellect could be communicated may be a matter of doubt: but size, strength, beauty, complexion, and perhaps even longevity are in a degree transmissible. As the human race could not be improved in this way, without condemning all the bad specimens to celibacy, it is not probable, that an attention to breed should ever become general.
Galton extended Malthus’ thoughts:
What nature does blindly, slowly and ruthlessly, man may do providently, quickly, and kindly. As it lies within his power, so it becomes his duty to work in that direction.
Margaret Sanger — the founder of Planned Parenthood — went even further, claiming that the state should prevent the “undeniably feeble-minded” from reproducing, and advocated “exterminating the Negro population”.
And these ideas — very simply, that the state should determine who should live, and who should die, and who should be allowed to reproduce — came to a head in the devastating eugenics policies of Hitler’s Reich, which removed around eleven million people — mostly Jews, gypsies, dissidents, homosexuals, and anyone who did not fit with the notion of an Aryan future — from the face of the Earth.
Of course, the biggest problem with eugenics is that human planning cannot really control nature. Mutation and randomness throw salt over the idea. No agency — even today in the era of genetics — has the ability to effectively determine who should and should not breed, and what kind of children they will have.
As Hayek noted:
The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society – a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.
Keynes’ interest in this topic appears to have descended from his contempt for the individual, and individual liberty. He once wrote:
Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these.
The common denominator in all of these examples — and in my view, the thing that brought Keynes toward eugenics — is the belief that the common individual is too stupid to be the captain of his own destiny. Instead, the state — supposedly equipped with the best minds and the best data — should centrally plan. Eugenicists believe that the state should centrally plan human reproduction, while Keynesians believe that the state should centrally engineer recovery from economic malaise through elevated spending. Although it would be unwise to accuse modern Keynesians of having sympathy for eugenics, the factor linking both of these camps together is John Maynard Keynes himself.
Keynes’ description of an economic depression — that a depression is a fall in the total economic output — is technically correct. And many modern Keynesian economists have made worthwhile contributions — Hyman Minsky, Steve Keen, Michael Hudson, and Joe Stiglitz are four examples . Even the polemicist Paul Krugman’s descriptive work on trade patterns and economic agglomeration is interesting and accurate.
The trouble seems to begin with prescriptions. Keynesianism dictates that the answer to an economic depression is an increase in state spending. And on the surface of it, an increase in state spending will lift the numbers. But will momentarily lifting the numbers genuinely help the economy? Not necessarily; the state could spend millions of dollars on subsidies for things that nobody wants, wasting time, effort, labour and taxes and thus destroying wealth.
And the state can push a market into euphoria — just as Alan Greenspan did to the housing market — creating the next bubble and the next bust, requiring an even bigger bailout. State spending creates additional dependency on the state, and perverts the empirical market mechanism — the genuine underlying state of demand in a market economy — which signals to producers what to produce and not produce. Worst of all, centralist policies almost always have knock-on side-effects that no planner could foresee (causality is complicated).
So Hayek’s view on the insuperable limits to knowledge applies as much to the economic planner as it does to the central planner of human reproduction.
While eugenicists and Keynesians make correct descriptive observations — like the fact that certain qualities and traits are inheritable, or more simply that children are like their parents — their attempts to use the state as a mechanism to control these natural systems often turns out to be drastically worse than the natural systems that they seek to replace.
As Keynes seems to admit when — in the German language edition of his General Theory — he noted that the conditions of a totalitarian state may be more amenable to his economic theory, the desire for control may be the real story here.
Keynesianism brings more of the economy under the control of the state. It is a slow and creeping descent into dependency on the state. As we are seeing in Europe today, cuts in state spending in a state-dependent economy can cause deep economic contraction, providing the Keynesian more confirmation for his idea that the state should tax more, and spend more.
That is, until nature intervenes. Just as a state-controlled eugenics program might well spawn an inbred elite suffering hereditary illnesses as a result of a lack of genetic diversity (as seems to have happened with the inbred elite Darwin-Galton-Wedgwood clan), so a state-controlled economy may well grind itself into the dirt as it runs out of innovation as a result of a lack of economic diversity. Such a situation is unsustainable — no planner is smarter than nature
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