Nkrumahism, The Can Of Worms I Opened – Keynesian Economics

By | July 19, 2015

Feature Article of Sunday, 19 July 2015

Columnist: Baidoo, Philip Kobina


Anybody who can extricate himself from the slippery and amorphous political economic thought should join me on this conclusion. If that same person is able to independently apply his mind seriously to unadulterated and unvarnished economics knows that Keynesian economics is dead. And I will repeat again that Keynesian thoughts died long time ago, however, like the flat earth theory believers, this confused and sinister cultish thinking fuelled by political economy still survives in the loudest of economic quacks. Economics is a very funny subject; it is the only academic discipline that two opposing theories can all be awarded the Nobel Prize, for example Robert J. Shiller and Eugene F. Fama in 2013. It is, therefore, a minefield to stick your neck out and take a bold stand, and I am not going to shrink when it comes to Keynesian ideology.

Newton was a brilliant physicist and mathematician. His theoretical achievements were beyond brilliance, perhaps, a genius plus would be more appropriate. However, even on the back of such sterling credential, if he had written a book on economics I wouldn’t recommend it to anyone, because he sucks at it. All the prediction he made on economics failed miserably. He had his limitation because he was human. Keynes was a brilliant economist. I cannot begin to compare myself to his intelligence. I am puny compared to what he accomplished. But I have the benefit of hindsight made possible as I stand on the massive shoulders of history.

When the U.S. economy went belly up in the 30s the hardships that it left in its wake was immense. The reverberation touched every state of the art economy at the time. There is no dispute about the fact that it led to the rise of Adolf Hitler. As a result, every thinking mind was looking for a constructive, systematic and coherent approach to the crisis that will, first and foremost, alleviate it, and, perhaps, prevent future occurrence. It was in the midst of this frantic brain storming that Keynes came up with his magnum opus, which actually provided the theoretically foundations for the ideas Roosevelt was already implementing. Some of those ideas were started long before he became the president of the United States when he was the governor of New York. As a matter of fact, the ideas that Mr Kwarteng claims as Keynesian had seen the light of day three years before the publication of ‘The General Theory of Employment, Interest and Money’ in 1936. His approach was basically pedestrian, because he wrote a similar book in 1930 entitled: A Treatise on Money, which was savagely attached by F. A. Hayek and other economists for the inconsistency and confusion that run through his thoughts in the book.

Now, I have to make room for a little digression. In Mr Kwarteng’s essay that I have taken the pain to answer point by point, he wrote and I quote, ‘Lastly, Frankin D. Roosevelt’s [sic] reliance on Keynesian economics is what has made America today. Many of America’s physical infrastructures and some of America’s powerful institutions in existence today derived from his New Deal, which, in turn, relied heavily on John Maynard Keynes’ “The General Theory of Employment, Interest, and Money.” Social Security, Securities and Exchange Commission (SEC), Federal Deposit Insurance Corporation (FDIC), Federal Housing Administration (FHA), Federal Crop Insurance Corporation ( FCIC), Tennessee Valley Authority, 40-hour worksheet, abolition of child labor, unemployment benefits, etc., all resulted from Franklin D. Roosevelt’s deployment of Keynesian state capitalism (state intervention)’ In exception of FCIC, which was established in 1938, and the 40 hour worksheet also passed in 1938, all the rest came into effect before the publication of ‘The General Theory of Employment, Interest and Money’. An infrastructure like the Hoover Dam the authorisation was given in 1928 by congress – a year before the 1929 crash. The serious question that anybody reading this piece should demand from Mr Kwarteng is as follows: how can the establishment of these institutions be influenced by Keynes’ book when it was published in 1936. I have said already and I will repeat again that these people falsify evidence to fit into their narrative, like Noam Chomsky, Al Gore, Rachel Carson and their fraternity. They lie and cheat, and it doesn’t matter whether other lives are at risk, so long as it will make their story look and sound nice. Mr Kwarteng has been asking me in every essay he puts out there to read certain writers who don’t score a single point in my books due to my suspicion on their credibility. I never knew he will do the same thing. Of course, they say birds of the same feather flock together. Now, to those who would like to give him the benefit of the doubt that it might have been an oversight, this is my obvious responds. He is not a person that makes such mistakes and when he does he corrects them in a short order during the commentary sections. So don’t be fooled; it is his stock in trade.

The 40 hour worksheet is unmitigated nonsense. As I write there are freshman doctors in Britain and America who work well over 60 hours a week. How does he account for that under a system run by the government especially in Britain? And are doctors not also workers? Some silly legislators sit in their comfortable and pampered air-conditioned rotundas to churn out baloney laws and he thinks they bring about progressive changes. After slavery was abolished in America, almost all ex slaves who were involved in that complex sickening arrangement called ‘share cropping’ used to sleep on dirt floors. With time, as result of competition, the floors became insulated and then the glass window panes started appearing without any legislation. It was pressure in the competitive market system that elevated the plight of the share cropper. I can assure you the blacks didn’t have any friends in the Capitol Hill, and it was at the height of racism. Think about it.

Coming back to our main theme, the central thesis of Keynes is that free market is unstable and that the guiding hand of the government can ensure full employment during economic meltdown. It was simply the recycling of the Karl Marx twaddle in his Das Kapital. In effect, it is a mild revision of Marxism without the violent vitriolic attack and overthrow of the ‘blood sucking capitalist’, but smooth transition from private to the state.

Keynes connection with the Fabian society runs very deep. Of course, he was a Bloomsbury intellectual; therefore, it is not strange that he will write a book such as his ‘Theory on General Employment, Interest and Money’. He was simply a reformed Marxist due to what he witnessed in his extensive tour of Russia. The book that put his name on the world map, which Mr Kwarteng alluded to in his essay, ‘The Economic Consequences of the Peace’ is a classic leftist thinking full of bombastic prophesies. He described the Versailles Treaty as a Carthaginian Peace in his book. He argued that, the Germans shouldn’t pay any war reparation, and that the victorious Allied forces should be magnanimous to the Germans who started the war, but lost. He further posited that if they should pay, it shouldn’t be more than £2 billion. The general idea behind his thinking was that a crippled German economy will affect Britain as well as Europe. Delusional people think that his nonsense was vindicated as a result of the persistent high unemployment that plagued the British economy in the 1920s when his ideas were not adopted in the Treaty. It is not strange, because people easily subscribe to easy explanation, especially when they can point their misfortunes to outside forces. The problem of the British was caused by Winston Churchill’s bullish insistence on keeping the gold standard to the pre-war parity. Of course, these are two explanations to a problem, however, I prefer the latter because all the predictions Keynes made in his book fell flat in its face. He wrote that European output in iron would decrease as a result, however according to the records supplied by Étienne Mantoux in his ‘The Carthaginian Peace: or the Economic Consequences of Mr. Keynes’ by 1929 iron output in Europe was up 10% according to the 1913 figure. He was more specific on German iron and steel output to decrease, but steel rose by 30% and by 1927 iron output increased by 38% compared to 1913 records (within the pre-war borders). Keynes further asserted that German coal mining efficiency would fall, but labour efficiency by 1929 had increased on the 1913 figure by 30%. The worst one was his contention that Germany would be unable to export coal immediately after the Treaty. Regardless, German net coal exports were 15 million tons within a year and by 1926 the tonnage exported reached 35 million. He also stuck his neck out that German national savings in the years after the Treaty would be less than 2 billion marks: however in 1925 the German national savings figure was approximated at 6.4 billion marks and in 1927 7.6 billion marks.

I would like to ask Mr Kwarteng what sort of prediction he was talking about, which Keynes made in that book that came to pass. It is obvious from the above data that his predictions were way off target, perhaps not anything close. In effect, this fictitious argument he made in his book is what made the European public opinion acquiesced, or adopted appeasement to Hitler’s aggression, because they thought the Germans have been badly treated. If I have to be nasty I will conclude that his thoughts led to the appeasement of Neville Chamberlain and Édouard Daladier. And because Hitler came to do what he did is the main reason why people look at that useless book with prophetic wonder. Other than that, the rise of Adolf Hitler was the making of stupid politicians; on the contrary, Hitler would have been a footnote to contemporary history. Thank you for your time and look forward to the second part.

Philip Kobina Baidoo Jnr