Away from Freedom
II. Keynesism and Socialism
What is this thing called “freedom”?
SINCE KEYNESIANS advocate so many forms of government intervention in the name of “full employment,” it is not surprising to find them favoring it for other purposes. If government should take a man’s earnings because he wants to save too much, why should it not take them on the ground merely that someone else needs or wants them? If government should build power plants to give employment, why not also railways and steel mills? Economists of the new order can only echo, “Why not?”
Is this attitude consistent with constitutional safeguards for individual rights, or liberty? Time is “the stuff life is made of,” said Poor Richard. The time government takes in an experiment with the properties and jobs of individuals can never be put back into the lives of those whom its policies affect. Repeal of an unjust law can never undo the injustices inflicted by it. Dislodging the vested interests in a government activity is even more difficult than dispossessing private owners.
Socialism not a menace to freedom?
Instead of dealing with such questions as these in his discussion of the “Isms” (fascism, communism, and socialism), Samuelson plunges on into a long section entitled, “The use of an over-all pricing system under socialism and capitalism.” In it, the author analyzes “the problem of pricing in a planned socialist state.”
As it turns out, the only “ethical goals” he considers are those of the Socialist: equality of income and “social dividends” to the needy.
What is missing from this picture?
When an author uses socialism as his standard for judging capitalism, and when he concludes that capitalism is the system to be reformed, does he not run the risk that readers may think he regards socialism as the ideal system?
Yet, when the same author discusses government regulation and ownership in the American “mixed” economy or elsewhere, he finds only abuses of what liberty may remain and little or nothing of abuses or evils of government intervention.
Nothing, for example, of government waste of resources, human and material.
Nothing of political corruption among those with a vested interest in government spending and government subsidies.
Nothing of the restrictions and inefficiency of government monopolies, government price controls, and government allocations.
Nothing of the huge losses already inflicted upon savers and investors by interventionist policies, only a mild warning of possible, future dangers.
Nothing of the frauds and character destruction among recipients of social security.
Nothing of the decline in levels of living and work under socialism in Britain, or the growing shortage and high cost of venture capital in the American “mixed” economy.
Nothing of the fact that fascism was a development of the Keynesian managed-economy, full-employment idea, an attempt to subject the individual to the “collective conscience” which Samuelson sets up as arbiter for our own government’s policy.
In order to judge the impartiality of a book or its probable effect on the mind of a student, one must know what the author leaves out as well as what he includes. In Samuelson’s text, the best-seller among all elementary textbooks in economics, one finds little or no mention of the many uneconomic results which competent economists attribute to government intervention in the American “mixed” economy. Instead, he says:
Collectivism vs. individualism
Not only do the authors of the “new economics” largely ignore the evils which some of us believe flow from government intervention; not only do they attribute the imperfections of the mixed economy to capitalism rather than to governmentalism; but one looks in vain for any principle by which to distinguish between individual right and government authority.
Is it fair to call this a collectivistic point of view? Let us contrast it with the individualist view. The individualist considers “society” to mean those relations which individuals enter into with one another as they seek to satisfy their individual wants. Justice means protection of each individual’s liberty, or right, to work out his destiny free from interference or expropriation by others. The function of government is to adminster justice, that is, to preserve freedom, not to dictate activities. And government means, not “society” or “all of us,” but those persons designated to prevent each individual from interfering with the liberty of any other.
What everyone owns, no one owns
What socialism means
What socialism really means is that government officials administer wealth taken from, or donated by, private owners. These officials may set up in business with this wealth and trade it (or the services of it) for other goods produced by private enterprise. Even to call this government administration of wealth “government ownership” is a loose use of terms, but not so misleading as to call it “social ownership,” or “collective ownership.”
Similarly revealing is the passage in Samuelson’s book in which he presents as a paradox the fact that fascist regimes “have often passed socialistic measures.” This is not a paradox at all, for fascism was (or is) a form of socialism similar to British socialism or to the managed-currency, welfare state proposed by American Keynesians.
Frequently, especially in his 1951 edition, Samuelson puts his criticisms of capitalism in the third person: “Social reformers attach great importance to . . .” “society now rules that . . .” “friendly and unfriendly critics think . . .” “democratic countries are not satisfied with . . .” “the collective conscience of the American people” and so on.
Whether or not these imaginary authorities express the author’s own opinions, the reader may judge for himself. In reaching that judgment, he must consider whether the author chooses his spokesmen mainly from one side of the argument, and whether, when he fails to quote an opposing view, he himself gives an effective answer to the “critics” or “social reformers” he professes to quote.
Again, I should like to ask, is it not fair to call this “social” point of view a “collectivist” one? Or even “socialist”?
Of course, this label does not necessarily mean that the point of view is unsound; but classification of anything is a step toward appraisal.
The “New Economics” and Marxian Socialism
From the foregoing, one may see that Keynesism has several points in common with Marxian Socialism. Among these are:
1 the theory that the rate of return on investments tends to decline and unemployment tends to increase in a free-enterprise, capitalistic economy;
2 emphasis on the depressing influence of savings in a “mature” capitalistic economy;
3 theories of an irresistible tendency to monopoly, increasing concentration of wealth, and the doom of free markets in free enterprise, or laissez faire;
4 disparagement of individual enterprise and responsibility in favor of government control over savings and provision for old age, unemployment, and other emergencies in an elaborate “social security” program;
5 proposals for “progressive” income and inheritance taxes;
6 proposals for government management of the currency and banking, for government ownership of certain industries; and for liquidation (“euthanasia”) of the rentier (bond-holding and fixed-income) classes;
7 a collectivistic view of property rights as privileges from the State, to be given or taken away at the will of the State;
8 a tendency to identify government with “all of us,” or with “society,” in the democratic socialist state and in the democratic Keynesian “mixed” economy;
9 a tendency to deal with persons and economic activity in terms of “classes,” “averages,” “aggregates,” and technological or economic “forces”;
10 a mechanistic view of human behavior as predictable and controllable by government, through study and manipulation of interest rates, money, government lending and spending, taxation, and technological developments.
The Keynesian theories are skilfully presented
Yet, despite the similarities between Marxian socialism and Keynesism and despite growing hostility to Russian Marxists, the Keynesian national-income approach makes rapid headway in American colleges and universities. Why? Is it because of the attractive wrappings in which economists of the Keynesian persuasion present their package of ideas?
First, they claim, no doubt sincerely, that they come, not to destroy capitalism, but to save it. Consequently, they get a hearing in places which would be closed to professed Socialists.
Second, they support their theory with charts and diagrams that make it look scientific and exact. They use technical terms and mathematical formulas, as a professional magician uses his stage props, to produce conclusions that disbelieving laymen are unable to refute. They make liberal use of government statistics on national income, savings, investment, consumer spending, and the like. Many people regard these figures as precise and highly significant, so that the proposal to use them as guides for “compensatory fiscal and monetary policy” appears simple and practicable.
Third, by representing government spending and deficits as keys to prosperity, “the new economics” gives aid and comfort to everyone who wants government to do something for him or to his neighbor. For example, Samuelson writes that “to the extent that taxes come out of the income of the more well-to-do and thrifty and are used to make payments to the needy and ready-to-spend—to that extent the total purchasing power is increased.”
By appropriate labelling or emphasis, a teacher or writer may sway students and readers without seeming to commit himself to any definite position. For example, one may more readily get approval for subsidies by calling them “social dividends,” as Samuelson does, than by calling them “doles” as an opponent might do. He may attribute a government policy to “society” or to “the collective conscience of the people” rather than to “government” or to certain “politicians and officials.”
Moreover, as I pointed out above, an author creates an effect by what he leaves out as well as by what he puts in. He may himself believe that he is presenting “both sides” fairly, while he leaves out of consideration or pays little attention to the most telling arguments of one side or the other. Or he may treat objections to his views as “problems” to be solved, rather than as possible invalidations. Professor Richard Ruggles, in An Introduction to National and Income Analysis, uses this method in dealing with difficulties that might be met in applying the Keynesian theory.
Yet, although these writers may adopt a pose of non-partisanship on details of theory or practice, they boldly urge the main outlines of a program that must have far-reaching results in every phase of human affairs. Toward the beginning of his text, Samuelson flatly asserts that:
Thus in a few words he sets forth a government policy that must reach into the minutest details of the life and work of every citizen.
For government can control total savings, investment, and income only by interfering with myriads of individual acts which make up the totals. An overall restriction of bank credit, for example, or a tax increase, directly coerces individual citizens into changing their plans and conduct in countless ways.
In general, moveover, Keynesian proposals for “compensatory” policies follow Marxian Socialism in seeking to force individuals to obey the rule, “From everyone according to his abilities, to everyone according to his needs.” Arguments and theories used to support these proposals are essentially Marxian.
Yet, we cannot show the fallacy of Keynesism merely by noting its far-reaching implications or its resemblance to Marxian socialism. Therefore, let us look at two recent works representative of two points of view common among free-enterprise critics of the doctrine.
The first, The Economics of Illusion, by Dr. L. A. Hahn, presents the “neo-classical” view that rejects the Keynesian over-saving theory of business depressions and urges return to free markets, but accepts government control of currency and credit as a means of stabilizing business or reviving it after a crisis and depression.
The second, Economics and the Public Welfare, by Dr. B. M. Anderson, with a wealth of supporting data, sets forth the classical, laissez faire view that government intervention is the chief enemy of economic stability, progress, and prosperity.
