Okay, we actually
answered this question — very briefly
— in yesterday’s posting. As we noted, according to Adam Smith and a bunch
of other people (such as a couple whose first name happens to be “Pope”), the
purpose of production is consumption. This does make a little bit of sense, after
all. If something is not going to be
used (consumed), why bother to produce it?
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| We asked for "rentier images." This is what we got. |
Oddly,
under the principles of Keynesian economics, the purpose of production (at
least by capital) is not consumption! No,
as far as John Maynard Keynes was concerned, people who use what is produced by
capital for consumption throw a monkey wrench in the works. He actually called for the “euthanasia” (mercy
killing) of the rentier, a “rentier” being a small investor who lives
off the income from investments.
Of
course, Keynes did not advocate actual murder. Like the Mafia Don who doesn’t
dirty his hands with the blood of the victims he orders whacked, Keynes figured
that the operation of the system would gradually eliminate the small owner from
the economy . . . with a few assists from the State in the form of guaranteed
wages and benefits, supplemented with welfare. Who, after all, would want to
assume the risks of owning anything when he or she can obtain an absolute
guarantee from the State that everyone will always be taken care of, forever?
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| "M gon' make you an offer you can't refuse." |
Why
eliminate small owners who use their ownership income for consumption instead
of reinvestment? Because in Keynesian thought, the only way to finance new
capital formation is first to cut consumption and accumulate money savings. The
accumulators — the capitalists (necessarily guided by the State to ensure that
they use their wealth properly to accumulate more wealth instead of spending
it) — take their savings and invest in new capital formation that presumably
creates jobs for non-owners so that non-owners can produce with their labor,
which in the Keynesian universe is the only thing that really produces.
Okay, a
few obvious flaws here. One, it is counterproductive to finance new capital
formation by cutting consumption. It reduces demand, and thus the incentive for
forming new capital. It is far better, as Dr. Harold G. Moulton pointed out in The Formation of Capital (1935) to
finance new capital formation by turning the present value of the new capital
into money and repaying the loan with the profits of the capital itself.
Two, if
labor is the only truly productive thing and capital at best only enhances
labor, why do we need capital at all? Wouldn’t an economy that relies on labor
alone be more rational — and more efficient in ensuring that labor receives its
just due? Shouldn’t we just strip everybody (else) naked and send them back
into the trees? (Always exempting ourselves, of course. . . .)
That
latter is not as ridiculous as it sounds — that someone would make such a
suggestion, that is. It is, essentially,
the proposal of Arthur Penty, the founder of “guild socialism” (if you ignore Richard Orage) who called for
the elimination of all (big) machinery, taken to its reductio ad absurdum.
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| The Besterchelloc . . . or something like that. . . . |
It comes
as no surprise that G. K. Chesterton and Hilaire Belloc booted Penty from the
distributist movement for such rampant illogic . . . or that today’s “neo-distributists”
(who seem particularly fond of Keynesian assumptions, if not Keynes) — at least
those represented on one major distributist website — at one time had more
books by Penty alone on their suggested reading list (supplemented with other
socialists and Marxists) than by Chesterton and Belloc combined. (The list mysteriously disappeared after this
posting originally appeared.)
The
point here, however, is that the purpose of production is consumption. Under
the delusion that cutting consumption is essential to finance new capital,
however, Keynesian monetary and fiscal policies have stripped purchasing power
from ordinary non-capital owners — increasingly without jobs — and transferred
it via inflation to the rich.
This allows
the rich to invest in new capital that eliminates even more human labor (“jobs”)
from the production process. It accelerates the eventual implosion that will
occur as the powers-that-be try to impose the irrational situation in which a
single monolithic entity produces everything that no one has the capacity to
consume.
In the
interim, and to take up the slack caused by job loss and inflation, consumers
and government go into debt. This will, hopefully, be repaid with cheaper money
as the government spends more and more and induces inflation at a faster and
faster rate to try, like the Red Queen in Through the Looking Glass, and
stay where it is.
Clearly this is insane — but that doesn’t stop
anyone from complaining about conspicuous consumption by the rich, when the
real damage is being done by their non-consumption.#30#