It is common to hear about neo-colonialism these days, but not too many people are aware that it’s not just a problem in former colonies, but throughout the entire world. This is the fault of the architect of the modern global economy, John Maynard Keynes, whose version of socialized capitalism (really an application of Fabian socialism) was intended to keep the British power elite in place at the end of the nineteenth century.
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| Walter Bagehot |
No, we don’t mean the British Aristocracy or Monarchy, but the monied class, whom Keynes and his mentor Walter Bagehot considered the real power in the State, and which the policies of the Fabian Society, like Hitler, was careful to placate.
The basic problem was that proceeding apace with the rise of industrialization, aristocratic England developed an elitist form of democracy, exemplified by the political theories of Walter Bagehot presented in The English Constitution (1867) and applied in Lombard Street (1873). As far as Bagehot was concerned, the British rule of India by a private company of capitalists for the benefit of the benighted natives and English lower classes — the (wealthy) white man’s burden — was the ideal situation, as it left the people who really mattered (i.e., those with money) in charge.
In English type democracy this new aristocracy of wealth — “a chosen people,” as Bagehot called them (Walter Bagehot, The English Constitution. Portland, Oregon: Sussex Academic Press, 1997, 17) — governed the lower classes for their own good, while the old aristocracy degenerated into useless and expensive anachronisms. Not surprisingly, Bagehot despised America and its institutions, and greatly admired the totalitarian philosopher, Thomas Hobbes.
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| Thomas Hobbes |
Naturally, the English idea of democracy manifested as capitalism, a system of concentrated private ownership of capital. There is substantially only a difference in degree and not in kind between English type democracy and French type democracy, and thus between capitalism and socialism. Not surprisingly, Keynesian economics — which combines Fabian socialism and classical Ricardian capitalism — relies heavily on Bagehot’s theories of politics and economics. (John Maynard Keynes, “The Works of Bagehot,” The Economic Journal, 25:369–375 (1915))
Keynesian economics is a serious problem not only because it imposes a colonial model on the entire world, but because it is based on a perversion of natural law, a monetary and financial theory known as “the Currency Principle.”
Most simply stated, the Currency Principle is that the amount of money in the economy determines the level of economic activity. Production derives from money, therefore the only way to finance economic growth is to produce more than is consumed, accumulate a surplus, and use the surplus to finance additional production.
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| John Maynard Keynes |
Keynes accordingly defined saving as “the excess of income over expenditure on consumption.” (John Maynard Keynes, The General Theory of Employment, Interest, and Money (1936), II.6.ii.) To ensure that there is a sufficient surplus to finance growth, this justifies concentrated wealth — “The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during the half century before the war, could never have come about in a Society where wealth was divided equitably.” (John Maynard Keynes, The Economic Consequences of the Peace (1919), 2.iii.) — overproduction, consumerism, and the issuance of government debt far beyond the power of an economy to support without risking economic catastrophe. (Harold G. Moulton, The New Philosophy of Public Debt. Washington, DC: The Brookings Institution, 1943.)
The logical flaw in the Currency Principle is obvious. If nothing can be produced without having first accumulated savings, then what is the source of the initial production out of which savings were accumulated?
Keynesians are not alone in accepting this paradox. Monetarist/Chicago and Austrian economists also fail to question the logic of the Currency Principle’s underlying assumption. Where the other schools merely accept the Currency Principle as a given, however, Keynesians attempt to resolve the contradiction or circumvent it and change reality by manipulating the symbols of reality.
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| Meh. Close enough. |
As such, Keynesian economics is a form of what Dr. Richard Feynman termed “Cargo Cult science,” and is based on faith instead of reason. Keynesian economists typically apply the magical “law of similarity.” (“From the first of these principles, namely the Law of Similarity, the magician infers that he can produce any effect he desires merely by imitating it.” Sir James George Frazer, The Golden Bough: A Study in Magic and Religion. New York: Macmillan, 1922, 11.) They attempt to create what they believe to be the indications of a thriving economy (e.g., high wages, full employment, everyone’s material needs adequately met) by using the coercive power of the State to impose desired results.
Similarity is akin to the belief that people can be made to conform to some authority’s version of virtue, e.g., Puritanism, through legislation. In this framework, because a thing is legal, it is also virtuous — the end justifies the means or “might makes right.” Pope Pius XI condemned such legal and moral positivism as a non-theological form of modernism.
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| Keynesian witchcraft: "Foul is Fair" |
By manipulating the symbol of wealth and the medium of exchange — money and credit — Keynesian economists attempt to change or create truth (reality) by lying. As Keynes admitted, “For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.” (John Maynard Keynes, “Economic Possibilities for Our Grandchildren,” Essays in Persuasion (1931).)
Consequently, Keynes declared that a modern economy requires an authoritarian or totalitarian government. To control lives and actions, the State must have the power to improvise reality by “re-editing the dictionary” with respect to money, changing or adjusting the medium of exchange and its value to achieve desired results. (John Maynard Keynes, A Treatise on Money, Volume I: The Pure Theory of Money. New York: Harcourt, Brace and Company, 1930, 4.
So, it is not completely by chance that the global economy is so screwed up, at least for the great mass of people . . . it was designed to do that while keeping the financial elite in power, whether they call themselves capitalists socialists, or Great Reseters. It’s all the same for the propertyless — and thus powerless — people at the bottom.
#30#
