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August 22, 2007

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Shane Barclay

Keynes offers a thorough destruction of the then-contemporary laissez-faire policy and popular mindset, stating that the efforts to achieve the “divine harmony between private advantage and the public good” have proven to be ineffective. Keynes believes that the “pudding” of social welfare and individual satisfaction still lacks something.

Keynes offers a variety of ways that the government can play a role in the economy that will benefit both the individual and the nation. Hye Jin, Adriana, Zack, and others outlined the tangible efforts that the government should make, such as control of currency, debt, and investment. Keynes’s suggestions to how the government should step up in the economy are practical, well-thought, and not too radical, but the input that will decide whether or not the move away from laissez faire will be completed comes from the people.

The people of 19th century England were bombarded by the thoughts of many intellectuals whose opinions, according to Keynes, all boil down to two schools of thought: individualism and laissez faire. These two ideas became the focal point of English learning and the basis for how people pursued their interests. Keynes has a problem with this trend because those two schools of thought are far too intrinsically tied to Darwinism. Laissez-faire is, to him, the natural selection of businessmen, not the economy and state. He wonders how England could promote ideals for the overall welfare of the state that correspond with the suffering of those victimized by the ascension of the fortunate.

Therein lays the fundamental problem—overall social and economic welfare is not achieved through Darwin-based ideals. Laissez faire is basically a dumbed-down hypothesis that is not thorough, but its simplicity and immediate rewards make it attractive to the overall state. Keynes challenges the people of England to recognize the room for improvement and consequently alter their opinions on how the economy (read: state) is run. He realizes that this is a monumental task, but has no doubt that it is worthwhile because it does indeed serve the interests of both the individual and the economy. It is up to the people to analyze and alter themselves so that capitalism can me adjusted “without offending our notions of a satisfactory way of life.”

Stephen Deng

Keynes foresaw the disastrous effects of the Treaty of Versailles when he said “vengeance, I dare predict, will not limp.” (28) He saw that the reparations required of Germany was economically unrealistic and would only lead to economic disaster and future conflict.

He wanted a realistic policy of reparation be applied and supported by the Allies. He wished for a cancellation of inter-ally indebtedness as the current financial situation would put more pressure for German payment and future disputes. Finally, he wished for an international loan which would be used to rebuild broken Europe. In essence, Keynes wished to set-up the post-WWI world with a blank slate – a unified move towards reconstruction and cooperation moving forward instead of an atmosphere filled with bitterness and exploitation.

It is interesting to read Keynes’ "The End of Laissez-Faire" with his post-war ideas in mind. Many of you have summarized his main points: a need for semi-autonomous organizations solely concerned with public good and the increased role of the government and community in what was currently deemed individual or private.

I find a bit of a conflict between his belief in the goodness of people to make the right decision in his immediate post-war critique in "Essays in Persuasion" and his more guarded (against human nature), organizational approach to social welfare in "The End of Laissez-Faire." Two of his post-war proposals – the alleviation of inter-ally debt and more mild German reparations – require a certain trust of the willingness of humanity to “forgive and forget.” In his other piece, he utilizes a much more untrusting tactic of government intervention and organizational facilitation to ensure the world is good and well.
Granted, controlling capitalism and rebuilding war-torn Europe are two vastly different endeavors, but I would say that at the root, both are combating issues of greed and competition. So why does Keynes offer such different approaches to these two similar (in the theoretical vein) problems? To manage the issues with capitalism, he could have appealed to human logic and the used the “assertion of truth, the unveiling of illusion, […] and [the] instruction of men’s hearts and minds” as the means. (45) Similarly, his post-war proposals could have been filled with much more rhetoric about the organizational strategy behind reconstruction.

In the end, he still preaches the same general ideas about community and society leaning towards a more cooperative and (in his view) logical future. Both pieces wish for stronger social welfare institutions and a betterment of the commonwealth. However, I believe the economic disaster that was post-WWI Germany and her increasing restlessness (Mein Kamp was published a year earlier), caused a shift in Keynes’ belief in human nature. He saw the need for formal intuitions that combated the same greed he abhorred but at the same time, kept the self-serving human interests at bay.

How interesting that collectively, we as people of a government – a society, are believed to be able to improve social welfare for all, but as individuals, we are seen to only hoard for ourselves. What do you guys think?

Vaclav Burger

Unfortunately, there is not too much I can say different from many of my peers on this matter because the question is straight forward. I can pick out the good points that John Maynard Keynes talks about in getting back to the world of the past. I think the main point is that capitalism just needs to be well managed in so far as the sectors that are not run by individuals should be acted upon by a small group from the State. Investments are an example of a specific area that would benefit from State leadership. It seems to resemble the social security system run by present day US.
The time of Laissez-faire and signing at Versailles of the treaty between the European countries caused discontent. Keynes believes that there is no middle road from the treaty, but that social and private interests don’t work hand-in-hand within the real world. The idea to get back the good world of free trade, economic progress, etc., is Keynes’ way of escaping the autonomous State of Laissez-faire

Carolina Merizalde

Appearances are deceiving! As John Maynard Keynes purports, the fact that laissez-faire seemed the best alternative at the time, given the weakness of its opponent ideologies (Marxist socialism and protectionism), does not automatically mean that it is THE path to follow.
Keynes exposes a dual aspect of laissez-faire in his writing; on the one hand, competition can be stimulated through the pursuit of self-interest, yet by the same token this doctrine subjects an entire nation to the impulses and decisions of individual enterprises which do not always act in the best interest of society as a whole. In fact, Keynes introduces a parallel between laissez-faire and Darwinianism that clearly exemplifies this point:
“Darwin invoked sexual love, acting through sexual selection, as an adjutant to natural selection by competition, to direct evolution along lines which should be desirable as well as effective, so the individualist invokes the love of money, acting through the pursuit of profit, as an adjutant to natural selection, to bring about the production on the greatest possible scale of what is most strongly desired as measured by exchange value” (III).
As Keynes points out, individuals may know what their driving force is and what their ultimate goal may be; however, they do not necessarily know how to attain it. Consequently, uncertainty, risks, and ignorance can lead to economic complications at the national level that cannot be solved by individuals, but by a semi-autonomous governing body. Keynes establishes that “the most important Agenda of the State relate not to those activities which private individuals are already fulfilling, but to those functions which fall outside the sphere of the individual, to those decisions which are made by no one if the State does not make them” (IV).
Therefore, Keynes’ solution consists of a mixed economy with both private and state intervention, allowing for the maximization of the capacities and input of the private individual sector and creating the support of a solid governmental structure ready to take charge in times of macroeconomic troubles such as unemployment and deflation. In this manner, Keynes implies that European economies after WWI would have been better off by focusing on reforming their economic and political policies and those of the other participants of the war rather than retaliating against Germany through the impositions of the Treaty of Versailles.

Noah Castro

I tend to agree with the perspective illustrated by Sam Iverson as he has concisely laid out the points most relevant to Keynes’s principles of economic reform. I also noticed that people have been using the term laissez-faire quite extensively throughout the discussion and I think it would be beneficial to cite the definition of the term as Keynes sees it. “The prevailing notion is that P.E. undertakes to show that wealth may be most rapidly accumulated and most fairly distributed; that is to say, that human well-being may be most effectually promoted by the simple process of leaving people to themselves; leaving individuals, that is to say, to follow the promptings of self-interest, unrestrained either by State or by the public opinion, so long as they abstain from force and fraud. This is the doctrine commonly known as laissez-faire.”(Cairnes)
I agree with Zack Simon’s words about social responsibility. Thus far not many people have been acknowledging this aspect to Keynes’s argument. Keynes is most definitely a capitalist and the most fundamental component of the capitalist system is the utilitarian freedom to pursue personal economic/capitol gain. Keynes takes issue with the system that is ruled by private interests because within the context of modern society private interests cannot reach an adequate standard of social responsibility. According to the Keynesian train of thought this standard of social responsibility is an invaluable contributor to national and the global economies. Therefore, it is the responsibility of state governments to maintain standards of social responsibility in preserving progressive economies.

Shannon Oakes

As most people have said, Keynes is looking for a healthy medium between a completely free economy and state control. He says in The End of Laissez Faire, “I believe that in many cases the ideal size for the unit of control and organisation lies somewhere between the individual and the modern State.” He makes a number of good points which can be applied to corporations in today’s economy. He says that “until the ambit of men's altruism grows wider,” that is, that certain individuals discount their greedy impulses, government intervention will ensure a stable economy. He also says that the nation-states must be united and support a capitalistic economy. Government control must be well thought out and by no means experimental. Keynes’ ideas were radical for his time and a capitalist economy was not favored by the general population because it was so new. Keynes proposes “a new set of convictions” supporting his ideals at the end of the Laissez Faire essay. Unfortunately, Keynesian economics were not adopted, which may have contributed to the dawn of World War II. However, Keynes’ theories were definitely contemporary for his time and his theories were adopted following the war. His ideas were revolutionary and marked the dawn of neo-classical economics.

Meng Chen

Per the discussion above, I agree with my classmates who have outlined Keynes’ belief in striking a balance between actions of the government in order to balance and make up for were individuals and the private sector fall short in terms of investment and spending. Keynes does not believe in purely laissez-faire nor does he believe in strict governmental controls in the economy. Instead, he sees the government’s role in stimulating the economy when the general populace and corporations are too timid to take a risk and the economy is stagnant. He does not feel like the government needs to step in when industries and private businesses are already managing an economic aspect; however, the government should step in where nothing is being done. He also sees a benefit in small autonomous groups acting in interest of the people and free from direct, strict governmental oversight.
Of particular interest to me are how the earlier international events influenced Keynes’ views on what should be done to achieve a better economic and political situation. Keynes looks upon the Treaty of Versailles with utmost disregard and disbelief at the short sightedness of the Big Four (Wilson, Clemenceau, Lloyd George and Orlando). Keynes sees the necessity of addressing a shattered Europe’s economic needs, while the Treaty of Versailles focuses mainly on reparations and punishment that forces Germany into an even more unbearable economic and international situation. Keynes’ warnings against the spiteful and unworkable treaty go unheeded, and he can only stand by and watch as his ominous predictions about the failure of the treaty come true. This at least in part shapes his views on the government’s role in economic affairs.
Another significant influence on Keynes’ economic perspective and what he believes needs to be done comes from the Great Depression in the late 1920s and early 1930s. Keynes saw as economies collapsed and remained stagnant at such horrific low levels of income. Instead of a self correcting system as classical economists believed in, Keynes saw that there was no impetus necessarily for an economy to grow or decline; that is, economies could stay still for a significant amount of time. Whereas earlier economists believed that as the economy slumped, interest rates would drop and thus decrease the cost of investment, which would reinvigorate the economy as businesses took advantage of these low interest rates. Also, saving would not be as profitable as investing due to these low interest rates. However, Keynes noted that a major problem with this argument was that as the economy spiraled downwards, income for everyone decreases and savings are used up. The Great Depression clearly showed these signs, and it was not until the US government implemented public work programs during the New Deal that the economy began to recover. This showed a situation where the private sector was not able to positively affect the economy, and the government had to step in to at least begin the process. Examining the disastrous consequences of the Post WWI treaty and the miserable stagnation of economies during the Great Depression shaped Keynes’ views on the role of the government and private sectors in trying to establish a world of economic prosperity and free trade.

Dave Koken

Keynes’ ideas have been recited many times at this point, and I think it far more interesting to consider how his ideas would be implemented in modern society to enhance governance and economic well-being.

His ideas for the furtherance of “semi-autonomous bodies” working towards a public good are very interesting and could provide better direction for achieving societal aims. The majority of the work then, will be the very difficult process of defining WHAT exactly is in the public’s best interest and creating a system in which these institutions will truly be motivated to pursue such ends.

There are many obstacles in this process domestically and even more if these policy strategies are to be implemented on an international or global level. Keynes names institutions like Universities and even some publicly scrutinized corporations as such “semi-autonomous bodies” who could possibly act without “motives of private advantage,” but I wonder if this is really possible. Assuming for now that these institutions are not motivated by mere profit (which, I think, could be argued to an extent), I still believe that there are other interests at work then that of some shared “public” interest.

There are always stakeholders in these institutions that will affect policy and work for their private interests instead of the altruistic goal of the public good. Universities have regents and corporations have CEOs and boards of directors; unifying the interests of the important stakeholders within these institutions seems like a very difficult task to me.

Furthermore, reconciling the views of a group of nations, as is expected by institutions like the World Bank or the IMF is an even more daunting task. These groups, although under some international scrutiny, have some nations that exercise far more influence than others within the organization. Unless these nations behave completely altruistically, it seems likely that they would not make decisions in the name of some global “public interest” either.

His other ideas on how to manage “risk, uncertainty, and ignorance” within this system seem to run in to some similar issues. For example, he asks for some form of “coordinated act of intelligent judgment” as to how much a community should save or invest. I find it hard to imagine how a decision like this could be made without the presence of special interest groups and undue influence in a direction away from the “public good”

Essentially, my problem with Keynes’ prescriptions are that I believe they rely too much on a perfect democratic system. His goal is to steer the economy toward the achievement of public interests, but I think that deciphering WHAT those goals should actually be within the context of the pluralistic states, and the even more divided world as a whole, is far more difficult than he makes it seem. Perhaps his reforms do represent an improvement in the strategy for pursuing the goal of working for the public interest, but I think there is still much work to be done to create a "wisely managed" capitalist system.

Michael Budahn

While I agree with many of the previous speakers approaches to Keynes recomendations, I do not agree with some interpretations of Keyenes' orientation towards "Laissez-Faire" economics. Shane's comment outlines Keynes attitude towards "Laissez-Faire" as such: "Keynes offers a thorough destruction of the then-contemporary laissez-faire policy and popular mindset". This is simply not so. Keynes apears to admire many aspects of "Laissez-Faire" economics, otherwise, why would he be so bent on keeping them?

From the reading I gathered that, similair to the testamants of the then emmensely popular ideology of social Darwinism, capitalism and the accompanying "Laissez-Faire" doctrine are the product of evolution. Keynes writes that "the principal of laissez-faire had arrived to harmonise individualism and socialism, and to make at one Hume's egoism with the greatest good of the greatest number". Here, Keynes depicts a side of capitalism that is flexible and responsive. The rigid mindset of conservative economists, ironically, doese capitalism no credit by sticking to it so blindly. Or, as Keynes puts it, "contrawise, devotees of capitalism are often unduly conservative, and reject reforms in its technique, which might really strengthen and preserve it, for fear that they may prove to be the first steps away from capitalism itself." This lack of faith among its most devout followers clashes with the idea that the beauty of capitalism lies in its ability to adapt to changes in supply, demand, consumer preferences etc. etc.

In utilizing a tactic cognizant of capitalisms ability to adapt, Keynes doese the ideology a favor by equiping it with the theories necessary for its continude survival. If capitalism were to stay the same, it would be out of character considering its evolotionary ability to encorporate and satisfy various circumstances and conditions. With the use of his simple recomendations, giraffes can still be giraffes, just without the gross inequalities of their forefathers.

Vera Bersudskaya

Keynes is an economic genius, a prophet of his time, who had some great insights into how the world works and who could not abstain from warning everyone and providing brilliant advice on economic as well as political and social problems. His book Essays in Persuasion is a guide to the post-WWI world that aims at improving the condition of the world as a whole. First of all he warns about the disastrous consequences of the Versailles Treaty and insists on decreasing the reparations that Germany has to pay. He also suggests that the debts of the Allies, especially those to the U.S. have to be canceled to encourage the reconstruction of Europe.
When England returns to the Gold Standard, he warns that this is not a very sound decision, because this leads to the sterling being overvalued and thus to unemployment and loss of exports. And then, when Britain is forced to give up the Gold Standard, he predicts that other nations will follow and there will be another way of “managing” currencies, other than through gold.
When the depression arrives and countries are experiencing deflation, he recommends increasing consumption and government spending as well as encouraging long-term investment. He is a visionary because all of the economic councils and such advocate the reverse. Thus, when WWII finally causes increase in government spending and the economy picks up, we realize that Keynes was right.
As others have already pointed out, Keynes advocates ‘wisely managed’ capitalism, where the government manages employment, savings and investment, and population. He is definitely not an anti-capitalist, because he realizes right away the ‘religious’ character of Leninism, rather than of an alternative economic system.
Finally, during the harsh interwar years, Keynes has enough faith in capitalism to say that the economic crisis is a stage in the development of a better more efficient economy that will come for [his] grandchildren.


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