Keynesians of the World Unite!

The country needs a revolution, we need change that puts the common good and the national interest in front of corporate profiteering and austerity for all but the rich. Western governments and significant others need to rediscover – and be quick about it - the merits of the positive and proven economics of John Maynard Keynes in which public investments are made and effective stimuli are provided to depressed, damaged or heretofore forsaken economies. As an ‘unreformed’ Keynesian myself I naturally see this idea as preferable to doses of depressing, divisive and failed austerity. Keynesian economic policies would bring an end to the recession and stop the economic ‘bumping-along-the-bottom’ for good.
Major countries - particularly the United States and ourselves – lived for years in a fantasy world of non-existent ‘wealth’ that was ‘created’ by bankers and believed by gullible political accomplices. Creative industry - and by this I mean manufacturing since nothing is more ‘creative’ than making things - has been hollowed out since the disastrous years of the early eighties. I recall Mrs Thatcher’s chief economic adviser asking (privately but not in public) ‘why does the country need manufacturing?’ I was flabbergasted and outraged at that time and have been so ever since as successive governments acted as if they’d been reading the same too-clever-by-half monetarist textbooks. We can co-exist with Monetarists in good times but when the going gets tough it’s time to send for Uncle Maynard.
We need a new industrial revolution, increasing the number of things that we make and mine and have a thriving agriculture. This is not just because self-sufficiency means that the country is less exposed to the consequences of get-rich-quick or manipulative behaviour elsewhere, but because the nation’s self-respect demands it. And ownership does matter - again because of national pride but also because being a ‘branch plant economy’ leaves industry and employment more exposed to closures made by foreign owners. The lack of control over industry represents a failure of the private sector, laissez faire economics and compliant and timid government.
There’s a Dorian Gray feeling about an economy that has relied so much on money lending, taking in washing (sorry, providing services) and wheel clamping (for many years one of the strongest growth sectors). With industries eviscerated and household name British firms falling under foreign control and exporting jobs by the thousand each month, what exactly was it that those in control supposed to have been growing all those years?
Casino capitalism creates nothing, it is a zero sum game - the amount won equals the amount lost. Real capitalists - our Victorian forebears - would be horrified to be bracketed with today’s fly-boys pretending to be beacons of free enterprise. These old-fashioned entrepreneurs had many faults not least their relentless exploitation (now also exported to China) but they had two other qualities - a sense that what they were doing was important for the nation and that the national interest counted as well as their own profits, and the basic money-morality that meant that you didn’t set out to lie and cheat your way to riches.
The other downside of an industry shrivelled in the shadow of globalisation is that some Keynesian remedies do not work quite as easily these days because more of any stimulus leaks out through being spent on imports. In the old days we would have been making the goods on which people spent their extra money, thus creating more wealth which in turn was spent on domestic goods leading to the Keynesian ‘multiplier’ where an original pound of expenditure generates several pounds worth of economic recovery. Investment in infrastructure is preferable to tax cuts and it is important to construct the stimulus to minimise leakage.
So more should be spent on expanding public works (in which more of the good stays at home) and helping to rebuild industry and create jobs directly. What is more, a Keynesian solution does not require huge budget deficits. There is the long-neglected concept of the balanced budget multiplier where higher tax rates are applied to those who spend smaller proportions of their income (the rich) with lower taxes on those who spend greater proportions of income (the rest). But since the adoption of the convenient nonsense of ‘trickle down’ arguments, the idea of taxing people who can afford it has been swept off the table with the crumbs.
I’m tired of hearing that there’s nothing that can be done about globalisation. I for one will never ‘embrace’ it. Eisenhower spoke of the ‘military / industrial complex’. Globalisation has involved a ‘corporate / political complex’ where the actions of rootless corporations are tacitly supported by politicians seeing a short run gain in wealth and needing their campaign coffers filled. But the chickens have come home to roost in droves and the first step would be to break this failed alignment working with like minded nations and getting a grip.
I’m also sick to death of hearing about the ‘vital importance’ of free trade - whatever is meant by that - and hearing chancellors urging the creation of ‘level playing fields’ when what they should have been doing all along is applying the same degree of tilt as the others have been doing for years. I say ‘whatever is meant by that’ because no (legal) trade is completely free in the sense of having a complete absence of regulations and standards. It is a question of how much regulation is needed and how it is enforced when not voluntarily observed.
Just how dreadful do working conditions have to be in China or India before you admit that this isn’t legitimate competition but exploitative cheating? Just how much pollution is it alright to belch out in China? In fact we have been exporting pollution along with our jobs. Production under domestic conditions would have caused less pollution. So globalisation (even without the additional transport emissions) has made global warming worse along, as we now realise, with ecological damage and the spread of disease.
In this context there’s also a lot of dangerous talk about so-called ‘comparative advantage’ where countries to the East make products cheaper for some reason. These ‘reasons’ always including low pay, dire working conditions and serious environmental damage and in certain cases use of child labour, currency manipulation, export subsidies, copyright violations and industrial espionage. After apparent short-term gains in the quantity of electronic gadgets and household bric-a-brac in our homes, this theory leads ultimately to ruin for us too. It is often alleged that we surely have a comparative advantage in being ‘smart’ doing designs and selling services - as if the competitors to whom we have handed our manufacturing and engineering work are stupid and that these ‘smart’ things are not already on their list.
So do I favour so called ‘protectionism’, whatever is meant by that, as opposed to ‘free’ trade? It seems that you can use the word ‘protect’ positively when you insure or take other precautions to secure the future of your home and family but to apply ‘protect’ to the economy on which all this depends has been given utterly negative connotations. The descriptions of ‘fair or ‘loyal’ trade give a flavour but we really need a new word in the mercantile lexicon. But it is not a binary choice. Nothing is ever totally free or totally protected. We need fair and balanced trade and patriotic producers.
I favour a trading environment where our industry, independence, national pride and environment are conserved and where we as a country display the extent of self-interest that other nations do. I favour repatriated production and a context where business leaders rediscover loyalty (bankers need more than this – their very own cultural revolution with a few years spreading muck in the fields to see if they can turn this into brass) and act to enhance the common good. And where consumers preferentially buy English and local and where government, national and local (if any of this is left after the savage cuts) facilitates the rebuilding of productive industry so long dismissed and derided by service economy smart alecs and quick fixers.
Can’t be done? Of course it can – come the revolution! There needs to be the will, robustness in international terms and a genuinely long run vision for the national future. Quite a lot to ask for these days I suspect. In the meantime we should apply the approach advised by John Maynard Keynes to our national infrastructure in all its aspects and not be averse to a fairer system of taxation that would make this an affordable reality. If other countries in Europe adopt a similar approach the effect will be that much greater. Keynesians of the World Unite!