What Will They Put in Place of Keynes?
Except in the Socialist Party of Great Britain, Keynes has for forty years dominated the British scene — the economists and politicians, the Tory, Labour and Liberal parties (including the Labour Party’s “left-wing” fringes and hangers-on), the TUC and trade unions, all (with few exceptions) swallowed the Keynesian nostrum that full employment can be maintained and crises and depressions avoided by keeping up “demand”: giving people “more money to spend”, as the Labour Party defined it. All it meant in practice was “printing more money” — inflation — with the result that prices are now nine times what they were in 1938.
It has received such a battering that its adherents have deserted in droves. Not quite all, however; there are still groups such as the Labour Party “left wing”, the Bourbons of the economic world, who still go on mouthing the old incantations as if nothing had happened.
Now however comes their problem. What are they to put in its place? Several new nostrums, or rather old ones revived, have been offered. Sir Keith Joseph, representing one wing of the Tory Party, puts forward his “social market” policy which means going back to a less-controlled and more competitive capitalism but with welfare provision for the needy.
Professor R. R. Neild (The Times, 30th September 1976) leans in the opposite direction. Arguing that British capitalism cannot stand up to competition from Japan, Germany and other more efficient and cheaper producers, he wants the adoption of wholesale, long-period “protection” to keep out cheap imports and enable home industries to be rebuilt and modernized behind a protective wall. He recognizes, as Marx did a century ago, that it is only the cheap producers, able to dominate the world markets, who want “free trade”. He thinks that the objections of the European Economic Community can be overcome.
Doubtless the Labour and TUC advocates of import controls will rally round the doctrine. Professor Neild is the repentant Keynesian who wrote to The Times on 26th Feb 1974 announcing that he and other economists had deserted Keynes and had come to the conclusion that “its application in policy making has been a major cause of Britain’s post-war economic troubles”.
Behind the “Times.”
The Times and its Economics Editor, Peter Jay, have also been moving backwards. They want something like the restriction on currency issue exercised in the 19th century by the gold standard, with a Currency Commission to do the job. They have gone a long way from the Times editorial of 15th October 1968 which dismissed as a “crude error” the belief that “price inflation could be tempered by printing fewer notes”. Incidentally, Peter Jay (30th September 1976) fears that the Labour government will revert to the “expansionist” doctrine and produce a big new surge of inflation in 1977.
For the moment the Labour government says it has set its face against that policy. The Prime Minister, Callaghan, in his speech to the Labour Party Conference declared: “The option of spending our way out of a recession existed no longer.” (Financial Times, 29th Sept.) Promising no more borrowing (followed a day later by news of an application to borrow 2,300 millions from the International Monetary Fund) he also made a cryptic reference to the Labour government having “even borrowed ideas” presumably meaning that he at least has discovered that the Keynesian doctrines are fallacious. But what he went on to offer was the policy of enabling companies to make bigger profits — the same old capitalism.
Against him are other Labour Party groups who think that the remedy is “socialism”, meaning more state capitalism; but Jack Jones, General Secretary of the Transport Workers’ Union, promptly punctured this belief. Speaking at the Labour Party Conference he said: “If we had public control of the lot we would still need to get the balance of payments, the level of borrowing and investment right before we could get a lasting cure of the inflation problem.” (The Times, 30 Sept.) He called it “socialism” but has to recognize that it would be capitalism.
There is of course one idea that none of them has borrowed or will look at — the Socialist idea put forward by Marx, that there are no ways of making capitalism work in a way satisfactory for the working class.