Not surprisingly, we find that Woodrow Wilson’s economic theories — such as they were — were consistent with his political philosophy. That is, the élite runs everything because ordinary people are incapable of running their own lives without massive State oversight and direction.
Thus, Bagehot’s 1873 book, Lombard Street: A Description of the Money Market, is an application of Bagehot’s theories of sovereignty described in The English Constitution. Bagehot embraced a political — and thus economic — system that assumed a political (and thereby financial) élite as a given and a positive good. Bagehot, in fact, regarded elites as a necessity if society is to advance socially, economically, and politically.
Less than half a century later Keynes took Bagehot’s assertions as proven fact. He based his entire economic theory on the assumption of the absolute necessity for existing accumulations of savings to finance capital formation.
This is based in part on the belief that human labor is really responsible for all production. Technology at best only enhances human labor. The problem is that as technology becomes more expensive, only those who can afford to cut consumption can own, because they are the only ones who can save. It makes sense, therefore, that the economic elite and the political elite should be the same people, at least to Bagehot, and to Keynes after him.
In reality, while technology makes for an independent (though not autonomous) addition to the mere animal power of humanity, it does not change a human being’s physical capabilities. This causes a problem when technology begins to take over the bulk of the physical and even mental input to production, replacing human toil, as we see accelerating today as computer science advances by leaps and bounds.
|Charles Babbage, proto computer inventor.|
This is nothing new. Charles Babbage (1791-1871), often credited with being the inventor of the first computer (Babbage’s “analytical engine”), made the same point. As Babbage explained in his essay, On the Economy of Machinery and Manufactures (1835):
(4.) The advantages which are derived from machinery and manufactures seem to arise principally from three sources: The addition which they make to human power. — The economy they produce of human time. — The conversion of substances apparently common and worthless into valuable products.
(5.) Of additions to human power. With respect to the first of these causes, the forces derived from wind, from water, and from steam, present themselves to the mind of every one; these are, in fact, additions to human power, and will be considered in a future page: there are, however, other sources of its increase, by which the animal force of the individual is itself made to act with far greater than its unassisted power; and to these we shall at present confine our observations.
Bagehot, and Keynes after him, therefore regarded economic and political control by an elite as the proper ordering of society. Like Keynes, Bagehot (and Wilson after him) rejected the substance of democracy, while calling his system democratic. The only real issue was whether the elite that controlled the economy should be an unaccountable private elite, as Bagehot supposed, or a marginally accountable public elite, as Keynes proposed. This, of course, depended on who controlled money and credit, and thus both political and economic power.
 John Maynard Keynes, “The Works of Bagehot,” The Economic Journal, 25:369–375 (1915).
 John Maynard Keynes, The Economic Consequences of the Peace (1919), 2.ii.
 Advances in cybernetics may soon make capital autonomous as well as independent in the production process.
 Charles Babbage, On the Economy of Machinery and Manufactures. London: Charles Knight, 1835, 6.