As Marisa Tomei’s character said in My Cousin Vinnie (still in the running as “Best Lawyer Movie Ever”), it’s a frickin’ nightmare (or words to that effect). The Keynesians and their clones are desperately trying to come up with explanations and new catch phrases to sweep what they claimed was impossible under the rug. Again.
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| John Maynard Keynes |
Of course, Keynes’s schedule still has about a decade to run until everything is fine and dandy; he said we’d only have to lie to ourselves for a century before we were able to turn his fantasies into fact. No, really, he really said it. As he declared in an essay, “Economic Possibilities for Our Grandchildren,” first published in 1930 and republished in his collection, Essays in Persuasion (1931),
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.
To be strictly accurate, of course, Keynes said “at least another hundred years” . . . giving him an out if it happened to take a few millennia or so longer than a mere century. Still, a hundred years, give or take, should be enough time to convince even a politician or an academic economist that something isn’t working and can’t work.
So, what’s going wrong? Why do we say the system isn’t working and cannot work? For starters, the U.S. economy appears to be heading into what in Keynesian economics is utterly impossible: a “full employment recession.” In the Keynesian lexicon, “full employment” is the ideal situation, the economy is working perfectly. After all, in the Keynesian economic religion, labor produces everything. Capital only provides the environment within which labor can be productive. In the Keynesian lexicon, capital and land are therefore factors of production that do not themselves produce.
It's a little like saying that when a baker makes bread, the flour, salt, water, yeast, and even the oven and the fuel for the oven are factors of production but produce nothing themselves; it is all the baker . . . at least, according to Keynesian theory. Only labor is productive, and not anything on which labor is expended.
The problem is that Keynes never seemed to ask himself how much bread — or anything else — could be produced if only labor was available . . . which would seem to be the case in a “full employment recession.” The labor is there, why do we need anything else, such as raw materials, capital instruments, land, and natural resources. If labor is the only true factor of production, then it should be able to produce without anything else.
If labor cannot produce by itself alone, it necessarily follows that the other factors of production are in some way productive. Raw materials, for example, provide the, well, material out of which something is produced, e.g., iron ore produces the iron, iron produces steel, steel produces sheet metal, and sheet metal produces automobile bodies . . . not all by themselves, of course, but with the addition of other productive factors, none of which is productive purely by itself, any more than labor is exclusively productive.
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| Take away the tools and land. . . |
Production, it seems, is not the result of a single factor, but of a system which combines many factors. In the binary economic framework, these include both human factors (“labor”) and non-human factors (“capital”). Keynes, however, restricted production to labor, and labor to physical and mental toil, putting him a step ahead of some other socialists by including mental toil, but still lagging far behind the economics of reality that allows labor to include all human activity and permits non-human factors, grouped as “capital,” to be productive as well.
Denying reality as Keynes did, of course, violates the first principle of reason as the “law (or principle) of (non) contradiction.” That is, nothing can both be and not be at the same time under the same conditions. (The other way of stating the first principle of reason is called the principle or law of identity, that which is true is as true and is true in the same way as everything else that is true. Keynesian economics violates the first principle of reason regardless of which way it is stated.)
A full employment recession, however, is not the only problem. Fiddling with the interest rates has caused such confusion in the secondary stock and bond markets that the speculators are betting on a financial downturn to accompany the “full employment recession” that will result in massive layoffs as consumer demand falls in response to inflated consumer prices.
You see, a “full employment recession” is impossible to sustain unless government spends massive amounts of money that it creates out of nothing to subsidize the full employment. Unfortunately, infusing massive amounts of new money backed only by government debt instead of private sector assets into the system inflates the currency, raises prices, and cuts consumer demand . . . which decreases the demand for new capital and decreases employment as jobs become redundant. This also decreases the tax base and has a negative impact on the government’s credit rating . . . which is exactly what has been happening.
And if anything else were needed to show that the Kingdom of Keynes on Earth is further away than it has ever been, the “Miss Universe” pageant is allowing a married woman to be a contestant! Will the horror never end?
What is the solution? As far as we know, the only thing to do is to adopt the Economic Democracy Act. It’s based on sound theory and practice, and each part of it has been proven to work, something the Keynesian fantasy economy can’t possibly claim.
#30#