AH: You’ve been headed for Keynes all this time. You asked in an earlier session whether he was both a liberal and a socialist. It was a rhetorical question, I get that. What makes him so important in your scheme of things—in decoding the relation between liberalism and the Left?
JL: Yeah, well, we’re all certain he was a liberal. The General Theory of 1936 is, among many other things, a rationale for aggressive government intervention in markets, especially when they fail—as they so spectacularly had when Keynes was writing the book. I’m certain he was also a socialist, and that makes him an exemplar of the intellectual tradition I want the Left to embrace.
I mean, he wasn’t a Bolshevik—he detested the Soviet experiment—but he thought that what he called the “ideal society,” socialism, was well within reach, and he came to this conclusion as the Great Depression unfolded! How did that happen? And how did he put it?
I’m no expert on Keynes, although I’m pretty sure I’ve read everything he ever wrote except the Essays in Biography. OK, not the letters, either. But then John Judis, who turned me onto The New Republic essay I mean to explore, tells me the collected works run to 30 volumes, a lot of weekly columns. Haven’t been there, either. And I’m not an economist. Let’s discount what I say accordingly.
Still, I think his writings of 1929-1932, as he finishes the Treatise on Money and starts turning out popular, polemical essays for The Nation and Athenaeum, The New Statesman, The Evening Standard, The New Republic, et al.—I think these writings mark a new beginning. To my mind, the Treatise is the hinge on which his thinking turns: it led him, as I read it anyway, toward the big ideas of The General Theory by way of empirical investigation into the economic novelties of the 1920s. If I’m right about that, the Keynesian Revolution resides in and flows from the composition of the Treatise—the General Theory is the formal announcement, not its original enunciation. To borrow the terms G. L. S. Shackle coined, the Treatise is the turning point and the General Theory is the culmination of the “years of high theory,” ca. 1926-1939.
OK, this consummate liberal, an incredibly privileged scion of Victorian/Edwardian wealth and education, becomes a socialist. By 1932, he advocates central planning—but not on the grounds typically offered by leaders and defenders of the Soviet experiment, as a way of avoiding the anarchy of markets and enforcing growth through increased saving and investment. He wasn’t interested in “extensive” growth, so conceived, because he was cognizant of a new pattern, a new model of “intensive,” consumer-driven economic development, emerging from the American experience. In this, I like to think, he was recapitulating the itinerary of Karl Marx, whose observation of the “most modern bourgeois society” in the 1850s gave him new insights into the nature—the future—of capitalism.
AH: Let’s slow down. You’re saying Keynes was a socialist. Where and how does Keynes come out as a socialist? What makes you think that the American experience matters in his development as a socialist? And why would you compare the “itineraries” of Keynes to Marx? I mean, Keynes had no use for Marx.
JL: If I may, I’ll work backward, or sideways. It’s true, Keynes had no use for Marx. But his fellow Keynesians sure did. The Harrod-Domar model, for example, is an attempt to “dynamize” The General Theory, to turn it into a theory of growth and an explanation of economic crisis. As many observers, including Joan Robinson, Michio Morishima, Shigeto Tsuru, and A.K. DasGupta, have noted, this model strongly resembles Marx’s reproduction schemes of Capital, volume 2, and the theory of crisis implied therein. And it’s worth remembering that Michal Kalecki, the co-founder of the Keynesian Revolution, was a Marxist who, like Evsey Domar, began there, in volume 2, because the Soviet debates of the 1920s centered on what would be the leading edge of growth, producers’ good or consumer goods, saving and investment or demand curves—would it be extensive or intensive growth?
It’s also true that Marx had no use for economists like Keynes, who located the production of value outside the labor process, in the “subjective” regions of consumer demand. Indeed his model showed how a relative restriction of such demand was a condition of capital accumulation. On the other hand, Marx knew, and said on many occasions, that the labor theory of value would soon be an anachronism.
But look at those “itineraries.” That’s where these two giants, one of the 19th, one of the 20th century, begin to resemble each other. I might as well just put all my cards on the table, because what I’m about to say is more of a bet than a working hypothesis. It goes like this: Marx and Keynes made their breakthrough discoveries when and as they realized that the US was the farthest outpost of bourgeois civilization and capitalist development—when and as they incorporated the empirical findings from their study of the US into a new theoretical edifice. But I admit, my structure of proof is still in the making.
We’re all pretty much agreed that the difference between the young and the old Marx is the difference between the Paris manuscripts and the Grundrisse. That’s a pretty significant wager in itself, since these milestones were left by the author as unpublished, unvarnished notebooks. But, notebooks or not, what is that difference? I think it comes down to a new-found understanding and appreciation of what wage labor, money economies, and capital accumulation accomplish—on the one hand, the destruction of tribalism, patriarchy, apprenticeship, craft skill, in short the parochial boundaries of simple commodity circulation, and, on the other, the creation of cosmopolitan loyalties, concrete notions of equality, abstract social labor, production unbound by consumption, in sum the prospect of freedom beyond necessity, that is, beyond necessary labor.
Between 1844 and 1857, in other words, Marx learned to treat capitalism as the welcome solvent of every inherited hierarchy rather than the lamentable effect of the cash nexus on the bourgeois virtues. How did that happen? Here’s that bet. Thanks to his duties as a correspondent for the New York Tribune, starting in 1852, he took notice of the “most modern bourgeois society” in North America: he saw the future of capitalism on the other side of the Atlantic. The result was the Grundrisse, those seven notebooks that fed into the Contribution to a Critique of Political Economy (1859) and Capital, all three volumes. I reverse the order of presentation, placing the methodological principle before the illustration, but not by much, because, as always, the method is enacted in the way Marx writes. As always, he’s working backward.
Bourgeois society is the most developed and the most complex historic organization of production. The categories which express its relations, the comprehension of its structure, thereby also allows insights into the structure and the relations of production of all the vanished social formations out of whose ruins and elements it built itself up, whose partly still unconquered remnants are carried along within it, whose mere nuances have developed explicit significance within it, etc. Human anatomy contains a key to the anatomy of the ape. The intimations of higher development among the subordinate animal species, however, can be understood only after the higher development is already known. The bourgeois economy thus supplies the key to the ancient, etc.
We can begin to understand what has come before us, Marx insists, only insofar as we perceive our departure from it and want to know how it informs our behavior in the present. We couldn’t know we were childish, for example, until we wanted to become adolescents and then adults—until we needed to understand what had come before us, and how it might affect us in the here and now. But these stages of development, still inventions only, were now projected in the late-18th century, by Hume, Ferguson, Smith, et al., as the idea of History and the concept of Society. Then things got interesting.
How difficult and great was this transition [to the treatment of labor in general, as homogenous, interchangeable units of time, which underwrites a labor theory of value] may be seen from how Adam Smith himself from time to time still falls back into the Physiocratic system. Now, it might seem that all that had been achieved thereby was to discover the abstract expression for the simplest and most ancient relation in which human beings – in whatever form of society – play the role of producers. This is correct in one respect. Not in another.
Work is the everlasting Nature-imposed feature of the human condition. Sure, labor is the essence of Man, as Hegel and Marx, following the lead of Luther and modern political economy, insisted. But was it always so? No, not until different forms of labor became comparable, not until human beings of all kinds and derivations could be similarly treated. Here is Marx at his most provocative in Capital, explaining why Aristotle couldn’t have invented a labor theory of value:
There was, however, an important fact which prevented Aristotle from seeing that, to attribute value to commodities, is merely a mode of expressing all labour as equal human labour, and consequently as labour of equal quality. Greek society was founded upon slavery, and had, therefore, for its natural basis, the inequality of men and of their labour powers.
The secret of the expression of value, namely, that all kinds of labour and equal and equivalent, because, and so far as they are human labour in general, cannot be deciphered, until the notion of human equality has already acquired the fixity of a popular prejudice. This, however, is possible only in a society in which the great mass of the produce of labour takes the form of commodities, in which, consequently, the dominant relation between man and man, is that of owners of commodities. (Vol 1, 69, Kerr ed.)
Here’s the kernel of a revolutionary idea—that our ideas about human equality were over-determined by the emergence of bourgeois society and the subsequent development of capitalism. The extremity of both, Marx came to understand by 1857, was the American experiment:
Indifference towards any specific kind of labour presupposes a very developed totality of real kinds of labour, of which no single one is any longer predominant. As a rule, the most general abstractions arise only in the midst of the richest possible concrete development, where one thing appears as common to many, to all. Then it ceases to be thinkable in a particular form alone. On the other side, this abstraction of labour as such is not merely the mental product of a concrete totality of labours. Indifference towards specific labours corresponds to a form of society in which individuals can with ease transfer from one labour to another, and where the specific kind is a matter of chance for them, hence of indifference.
Not only the category, labour, but labour in reality has here become the means of creating wealth in general, and has ceased to be organically linked with particular individuals in any specific form. Such a state of affairs is at its most developed in the most modern form of existence of bourgeois society—in the United States. Here, then, for the first time, the point of departure of modern economics, namely the abstraction of the category ‘labour’, ‘labour as such’, labour pure and simple, becomes true in practice. The simplest abstraction, then, which modern economics places at the head of its discussions, and which expresses an immeasurably ancient relation valid in all forms of society, nevertheless achieves practical truth as an abstraction only as a category of the most modern society.
That’s the Nicolaus translation of the Grundrisse. The International Publishers’ version in Contribution to a Critique is better, more colloquial, more fluid. I checked with my brother on this difference. He teaches German.
AH: Those are some great quotes from Marx, and help me make the case that I intend to make about the role of the United States in the development of Marx’s thoughts about capitalism and about how the future vision can only come out of the past and present. But what happened to Keynes? Don’t you want to make that case?
JL: Yeah, I got carried away there. Maybe because the recent bios of Marx really piss me off by consigning him to the 19th century. The scholars seem to agree that he’s irrelevant just as everybody else decides he’s indispensable.
AH: Oh, I fundamentally agree. with you about the recent Marx bios. Both Sperber and Stedman-Jones are dead wrong with that argument—wrong and condescending! Mary Gabriel, with her great Love and Capital, on the other hand… So, back to Keynes.
JL: OK, on toward Keynes. He was a close reader of the two reports issued, in 1904, by the Commission on International Exchange, a three-person body appointed by Teddy Roosevelt to examine the costs and benefits of installing a gold standard in China and Mexico. That reading informed The Economic Consequences of the Peace (1919), and everything that followed. Who were those three? Charles A. Conant, Jeremiah Jenks, Hugh V. Hanna. Hello? Who the fuck are these guys?
Jenks was a Cornell economist, the author of The Trust Problem (1903), who had served as counsel to the Industrial Commission of the US Congress, which investigated the new role of corporations in American social life, ca. 1900-1902. Its reports are fascinating, and invaluable, by the way, worth a dozen dissertations. Hanna was the president of the Atlas Engine Works in Indianapolis. What was he doing there? Well, he invented and presided over the Indianapolis Monetary Convention and Commission, ca. 1897-1900, which brought us the Gold Standard Act of March 14, 1900 and the framework for banking and monetary reform that led to the Federal Reserve System.
Conant wrote that bill. He was also the secretary, shall we say, of the Indianapolis Commission, and the author, as far as I can tell, of the New York State Chamber of Commerce’s Report of 1906, which called for a central bank under the control of the federal government. He also wrote the Wall Street Journal’s anonymous editorials of 1909 in favor of such a central bank.
You could say, then, that Conant was the grand theorist of the Fed. I do, anyway, in my book on its origins. Keynes read him carefully, because he was interested in money and banking—and because Conant was the outstanding authority on the issue, having written A History of Modern Banks of Issue (1896) and Principles of Banking, 2 vols. (1904).
But Conant was also the grand theorist of modern American imperialism. His essays of 1898-99 on the subject, particularly “The Economic Basis of Imperialism” of 1898, in the North American Review, brought him to the attention of policy-makers like Elihu Root, then the Secretary of War, who sent him to the Philippines with William Howard Taft, there to test the idea that a gold standard would integrate these backward islands into the new global order.
Like Root and Taft, J. A. Hobson read Conant’s essays on imperialism with great care. You might say that Hobson’s book of 1902 is mostly a gloss on Conant’s essay collection, The U.S. in the Orient (1901). And Keynes was a good friend and close reader of Hobson. But then Vladimir Ilyich was also a close reader of Hobson. His Imperialism: The Highest Stage of Capitalism (1914) is mostly a gloss on Hobson’s complaint.
What does that tell us? Never mind. The point is that there is no predictable political valence when you come across the word and the program, “imperialism.” Conant quoted Marx as an authority on money, banking, and the realization of value. Lenin quoted Hobson. What follows?
I don’t want to sound original here. My adviser at Northern Illinois, Carl Parrini, and his friend from Wisconsin, Martin Sklar, “discovered” Conant—that is, they understood his significance as both a theorist and a statesman—and they were led to the source by Richard Hofstadter! Long before I was in print on the man’s theory of economic crisis, these guys were on the case.
Ah, Keynes. Sorry.
Everybody wants to quote “Economic Possibilities of Our Grandchildren,” from 1930, and then scold him as a prophet of more leisure, less work, better living. Fuck them. He was right. We can do exactly as he says, but we are constrained, as both Conant and Keynes remarked, by the psychological imperative of modernity, through which the anal-compulsive urge to accumulate, call it the profit motive—“a somewhat disgusting morbidity,” as Keynes designated it in hilariously clinical terms—becomes respectable, even laudable.
Read “Economic Possibilities” and claim that Keynes wasn’t a socialist. With a straight face. I will laugh at you because your definition of socialism is too refined, too holy, too narrow, too stupid, for me. But then I’ll say, read the Treatise, and read the essay for The New Republic of March 13, 1932, and I’ll ask, do you still want to stick with your definition?
Toward the end of the second volume of the Treatise, which is mostly a rehearsal of economic theory, almost an intellectual history—he’s summarizing what has come before, as a way of breaking beyond it, kind of like James Madison did in 1786, when he confronted the theory and history of republics—Keynes wonders about the new patterns of growth as they were manifested in the US. Here is how he expresses that wonder.
Part of the explanation of the maintenance of equilibrium between investment and saving from 1925 and 1928, when the former was on a grand scale [empirically, he was wrong: investment slackened in these four years], whilst the public were commonly reported to be in an extravagant rather than in a saving mood, is to be found in the great expansion of corporate saving, i.e., of saving effected by Joint-Stock institutions through their practice of dividing amongst their shareholders an amount far short of their total profits. [Think: Apple, and larger, the growing discrepancy between business revenues and spending that equals forced saving by us hapless, helpless consumers]
Both in Great Britain and in the US it is estimated that about two-fifths of aggregate savings are made in this way. In the case of the US, these internal resources of Joint-Stock Corporations have been accumulating at a time when, owing to changes in methods of doing business, the amount of working capital required has been decreasing rather than increasing, whilst expansion in fixed plant has been proceeding at a moderate pace. Thus industry had large liquid reserves which were available to be placed at the disposal of other developments, e.g., building and instalment buying, either direct or through the banking system. (2: 193-94)
What does this mean? What is Keynes saying here? (May I parenthetically add that the modern corporation was still a novel feature of industrial life, more so in the UK than in the US, but still new enough in both places to warrant the kind of deep structural analysis you find in John R. Commons, The Legal Foundations of Capitalism  or A. A. Berle & Gardiner Means, The Modern Corporation and Private Property . That’s why Keynes’s language sounds so quaint.)
He’s onto the most interesting and devastating development of capitalism ever—the capital-saving character of technological innovation after 1920. In the decade of the 20s, investment in plant and equipment out of profits became not only pointless but impossible. You could improve the productivity of existing plant and equipment by replacing it, paying for it out of depreciation funds rather than profits. That is why industrial corporations entered the stock market, offering $8.7 billion as call loans, and opened time deposits worth $6.6 billion at the national banks—there was nothing else to do with their increased profits. When they pulled out of the stock market in October 1929, the shit hit the fan. That’s a fact.
But think about it, when profits become pointless, what happens to capitalism? In a word, it’s over. That “somewhat disgusting morbidity,” the profit motive, becomes superfluous, tertiary, vestigial. So do capitalists. Keynes saw that, and described it, in 1930 and after, no more eloquently and decisively than in his short essay of March 13, 1932, for The New Republic, “The Dilemma of Modern Socialism.”
First he sets up the “ideal society,” socialism, as something already impending, as a practical, measurable reality residing within “the ruin of the old system”:
It happens that the most pressing reforms which are economically sound do not, as perhaps they did in earlier days, point away from the ideal [of socialism]. On the contrary, they point toward it. I am convinced that those things which are urgently called for on practical grounds, such as the central control of investment and the distribution of income in such a way as to provide purchasing power for the enormous potential output of modern productive technique, will also tend to produce a better kind of society on ideal grounds.
Then Keynes takes up the concluding insights of the Treatise, explaining why capital-saving technique points us toward socialism:
For until these latter years, the chief effect of new machinery was to render labor, i.e., men’s muscles, more efficient. Economist could plausibly argue that machinery was cooperative, not competitive, with labor. But the effect of the latest type of machinery is increasingly, not to make men’s muscles more efficient, but to render them obsolete. And the effect is twofold: first, to furnish us with the ability to produce consumption goods, as distinct from services, almost without limit [because profits withheld from the stream of national income that is consumer demand no longer need be withheld, and, as delivered to that stream of income, will create new demand curves, new needs and desires]; and second, to use so little labor in the process that an ever increasing proportion must be occupied either in the field of supplying human services or in meeting the demand for durable [consumer] goods.
Sound familiar? So much for the idea that, like Marx, Keynes wasn’t much of a prophet. The man is describing our time, absent the knowledge—his knowledge—that capitalists and capitalism are vestigial, somewhat disgusting morbidities, malignant traces of a civilization that has outlived its usefulness. But look, the knights and the nobles made feudalism last for 300 years after its death knell in the 14th century. Why would we expect the capitalists and their clients to simply retire? They’ve been fighting a rear guard action for a hundred years, and they sound no less ridiculous that Robert Filmer in debate with John Locke.
But nobody knew then, and nobody seems to know now, that we’ve reached a verge, where our choices actually mean something for the future of the fucking planet. Keynes did. He chose the “ideal society”—socialism. He didn’t just see it coming, he welcomed its arrival. Everything he wrote during and after the Treatise, including The General Theory, is animated by that expectation.
He ought to be a social democratic idol. He sure is mine.