As we saw yesterday, disconnecting production from consumption is a sure recipe for disaster . . . if you define “disaster” as an avalanche of non-productive debt. Spending your way out of trouble doesn’t work, even if it looks as if it does in the short run. In the long run, of course, somebody has to pay the bill, or the system collapses.
|Thomas Hobbes: the State is a "Mortall God."|
If you’re a Keynesian, of course, there’s nothing to worry about. Taking a statement by Keynes slightly out of context, but still applicable in this instance, “In the long run, we’re all dead.” Clever, glib, and the sort of thing you’d expect from someone whose entire system is built on contradiction that can only be hidden for a time by having an absolute faith in the power of government to do anything, i.e., in which the State has become the Hobbesian “Mortall God.”
To recap Rep. Tom Snozzi’s proposal to create jobs rebuilding infrastructure, it embodies at least three fundamental flawed assumptions:
· The purpose of production is job creation. This violates Adam Smith’s first principle of economics, “Consumption is the sole end and purpose of all production,” and offends against human dignity by — in the ideal case — forcing people to produce presumably useless goods and services simply to gain income (anyone who doubts this should read Keynes General Theory, III.10.vi, in which he outlines his solution to involuntary unemployment: jobs created to produce goods and services solely to generate income, not for consumption).
· The only way ordinary people can gain income is to have a wage system job. This offends against human dignity by denying the natural right of private property; an important policy goal of a Keynesian political economy is the elimination of people who use investment income instead of labor income to meet their consumption needs (ibid., VI.24.ii, “the euthanasia of the rentier”).
· Human labor is the sole factor of production; capital at best only enhances the productivity of labor. This offends against human dignity by denying the validity of human reason and the evidence of the senses that capital is clearly productive (ibid., I.3.i, Keynes rejected Say’s Law of Markets, that posits production by labor, land, and technology, on the grounds that demand — income — generated by labor is not sufficient to clear all supply, that is, production, ignoring that land and technology are also productive).
|Keynes: the State has the right to re-edit the dictionary.|
In order to try and make the system work despite the bad principles embodied in Keynesian economics, a few definitions had to be changed, or (as Keynes put it), the dictionary “re-edited.” Three key concepts especially had to be targeted for change:
· Liberty/Freedom of Association and Contract. Instead of a right that permits people to enter into fair contracts for any lawful purpose (i.e., “create money”), liberty now means that people are only free to act in ways that the State finds useful; the State can unilaterally alter the terms of any contract at will (yes, Keynes said that, in the opening passages of his Treatise on Money).
· Private Property. Instead of a right inherent in each person, albeit with the exercise socially determined, private property now means a grant of rights from the State, to be defined or abolished as the State sees fit or finds most expedient (General Theory, V.24.iii).
· Money. Instead of anything that can be accepted in settlement of a debt (“all things transferred in commerce”), that is, how one person exchanges what he or she produces for what others produce, money is now defined not by what it is, but by what it does. Because what money does is buy things, money now means a general claim against the wealth of society issued by the State.
|Pius XI: Socialism embodies a concept utterly foreign to truth.|
The results of the Keynesian re-editing of the dictionary have been disastrous. Three things, especially, have wreaked havoc on society, and even changed the concept of society itself:
· Human Personality. A human person is not someone with inalienable rights to life, liberty, and private property. Instead, the State determines whether a human being is a person at all, what rights he or she has, and what those rights mean. (This, as Pope Pius XI noted, is a “concept of society . . . utterly foreign to Christian truth.” — Quadragesimo Anno, § 117.)
· Justice. Instead of meaning “rendering to each his or her due,” the premier natural virtue of justice now means “rendering to each what best meets the needs of the State or is most expedient.”
· Money Creation. By defining money by its function, separating money creation from production, and claiming the right to alter all contracts at will, the issuer of money — the State — need only consume, not produce, while producers need only produce, not consume.
This, by any objective assessment, is insane. The problem becomes what to do about it — which we will look at tomorrow.#30#