“Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” ( Keynes, 1935) And thus it began with adherence to Keynes’s central theme: the modern capitalist economy does not automatically work at top efficiency, but can be raised to that level by the intervention and influence of the government. Many politicians picked up on these ideas very quickly.
As President Richard Nixon observed in 1971, “We are all Keynesians now,” a refrain sung in three part harmony after the financial meltdown of 2008. However, it is much debated whether Keynes would have supported the way many of them put his thoughts into practice. We are technically awash in cash, sentimental for the old formulas, and what notions we do have as to monetary value can best be seen in the world of contemporary art, as a metaphor for our relation to money.
Keynes identified the economic importance of animal spirits. Making and losing fortunes in the financial markets the led him to refer to the “casino capitalism” of the stockmarket. He also noted that “there is nothing so dangerous as the pursuit of a rational investment policy in an irrational world”. And the art market , driven by celebrity, brand and hype, would certainly qualify as irrational, or in the words if Allan Greenspan, “irrational exuberance”. Are the fruits of all this easy money and corporate welfare $12 million dollar stuffed sharks, and good reason enough people are willing to pay $3 million for a cast of Marc Quinn’s head made from nine pints of the artist’s frozen blood.
…Designed to be mounted on the wall like a deer’s head, it is titled Stephanie but the art world knows it as Trophy Wife. The piece turns the representation of Ms. Seymour into a literal trophy, her nude upper body arching from the wall, breasts covered discretely with hands. The sculpture is one of four identical versions created by Italian artist Maurizio Cattelan. Its real human hair had been perfectly coiffed by celebrity New York stylist Frédéric Fekkai. The catalogue gave a price range of US$1.5- to US$2.5-million, auctioneer Simon De Pury predicted it might go as high as US$4-million. Why would anyone pay such a price for a waxwork of someone else’s wife, when the same amount might buy a modest Monet or Picasso — or an actual trophy wife? The value of Cattelan’s piece, and the thinking behind the auction of which it was a part, demonstrates how the value of contemporary art is determined….
“There grew round the non-consumption of the cake all those instincts of puritanism which in other ages has withdrawn itself from the world and has neglected the arts of production as well as those of enjoyment. And so the cake increased; but to what end was not clearly contemplated. Individuals would be exhorted not so much to abstain as to defer, and to cultivate the pleasures of security and anticipation. Saving was for old age or for your children; but this was only in theory — the virtue of the cake was that it was never to be consumed, neither by you nor by your children after you…. The cake was really very small in proportion to the appetites of consumption, and no one, if it were shared all round, would be much the better off by the cutting of it. Society was working not for the small pleasures of today but for the future security and improvement of the race — in fact for ‘progress’. If only the cake were not cut but was allowed to grow in the geometrical proportion predicted by Malthus of population, but not less true of compound interest, perhaps a day might come when there would at last be enough to go round, and when posterity could enter into the enjoyment of our labours. ( John Maynard Keynes, 1919)
He helped steer capitalism off the rocks in the depression. He conceived the economic machinery that directs our lives. Somehow, his brilliant engine was allowed to run wild; in the hands of those less skilled and with political motivation in mind, it has been associated with the financial morass, government waste, corruption, entitlements,income disparity, mortgage foreclosures and the sanctity of the nanny state. QE1, QE2, …with further sequels in the works.
John Maynard Keynes was born in 1883 and died in 1946. Fathered by an age of rational moralists, he grew up in an age of clever people. They were the fragile gadflies who led us out of Victorian certainty but not quite into the modern world; we know them as Bloomsbury. His life spans the period of change from individual enterprise to mass capitalism, and he was the first to see the inevitability of this change in “The Economic Consequences of the Peace”.The book is seldom mentioned, because its conclusions are so obvious today. Written in 1919, in the heat of resigning as Treasury representative to the British delegation at the Versailles Peace Conference, the book was a sensation and made Keynes internationally notorious at the age of thirty-six.
Perhaps its most famous passage describes the capitalist system that gave birth to Keyne’s class and sustained its self-confidence. It is worth quoting at length, to sample both his penetrating style and his reformist view of a system that Marx wanted to destroy as passionately as Keynes wanted it rebuilt.
“Thus this remarkable system depended for its growth on a double bluff or deception. On the one hand the labouring classes accepted from ignorance or powerlessness, or were compelled, persuaded, or cajoled by custom, convention, authority, and the well-established order of society into accepting, a situation in which they could call their own very little of the cake that they and nature and the capitalists were co-operating to produce. And on the other hand the capitalist classes were allowed to call the best part of the cake theirs and were theoretically free to consume it, on the tacit underlying condition that they consumed very little of it in practice. The duty of ‘saving’ became nine-tenths of virtue and the growth of the cake the object of true religion….”
It took a depression and another world war for the capitalists and the workers to come to terms, with Keynes as their mediator. He was writing then under the shadow of the Bolshevik revolution, which he had feared. When he visited Russia six years later, he came away horrified at this new and utterly drab religion. He called Leninism a religion that prefers the mud to the fish, “Even if we need a religion, how can we find it in the turbid rubbish of the red bookshop? It is hard for an educated, decent, intelligent son of Western Europe to find his ideals here, unless he has first suffered some strange and horrid process of conversion which has changed all his values.”
He was a curious type of economist, one who places personal development above material prosperity and assumes that others will too. This is the key to Keynes; it was to be his triumph as an economist and at the same time his chief failing as a social thinker. He had grown up in an Edwardian late afternoon that cast deep and distinctive shadows on the personalities of those permitted to flourish in it. It is nice to be nostalgic about that age, but in fact it was highly elitist and favored a select few. The pyramid would remain intact, there would just be more candy for everyone.
In 1910 poor-law relief in England reached a fifty year high. Domestic servants in the middle-class London suburb of Hampstead outnumbered all other residents. Three-quarters of Britain’s investment went overseas instead of building up home industry. The empire had not yet started running down, but its heart was; England made up its trade deficit with banking profits. British capitalism, once vigorously productive, had become essentially manipulative. Upper-class Philistinism, with its shooting and hunting types buried emotions and could be cruel to outsiders who seemed to violate the natural order of things.
…I seek only to point out that the principle of accumulation based in on equality was a vital part of the pre-war order of society and of progress as we then understood it, and to emphasise that this principle depended on unstable psychological conditions, which it may be impossible to re-create. It was not natural for a population, of whom so few enjoyed the comforts of life, to accumulate so hugely. The war has disclosed the possibility of consumption to all and the vanity of abstinence to many. Thus the bluff is discovered; the labouring classes may be no longer willing to forgo so largely, and the capitalist classes, no longer confident of the future, may seek to enjoy more fully their liberties of consumption so long as they last, and thus precipitate the hour of their confiscation. ( Keynes 1919)
From their earliest days Keynes and his friends had gathered in secret sects to shut out this thick skinned world. Perpetuating the individualism, even the eccentricity of this life was one of his goals as an economist. His method was not mass organization but the intelligence of the precious few. Leonard Woolf and Lytton Strachey came to his rooms at King’s College in 1903 to invite him into the Apostles,a society of Cambridge’s intellectual elite that met secretly on Saturday nights. Their guiding philosophy was a kind of didactic aestheticism. The ideas were those of the Cambridge philosopher G.E. Moore, or at least their interpretation of him.
They built on Moore’s “Principa Ethica” , a work sweet and confident in its assumption of the existence of beauty and goodness and practical in its calculations of how to attain them. As Keynes later described their version of Moore, good was an attribute as morally neutral as, say, green. A little logical analysis leads quickly to a philosophy of finding the greatest good in the enjoyment of beautiful objects and the pleasures of human intercourse. The gravest sin seemed that of bad taste.
Keynes had no sense of the historical development of society and showed little appreciation of the problem which faced Russia, as it does all countries in the early stages of capitalism, of accumulating capital to build up large-scale industry. His advice to the Russian government was to lower the wages of town workers, and “get itself into a sufficiently strong financial position to be able to pay the peasant more nearly the real value of his produce. ” As the town workers were a small minority and the peasants the vast majority of the population, it certainly wouldn’t have solved the problem. It was about as useful as telling a starving man that what he ought to do is to get hold of a large sum of money without telling him how.
Although, for Keynes, Leninism was a religion he did not wholly approve of it, but he did believe that it would create a society in which money making and love of money would lose their hold, especially among the new generation—though not to the extent of making “Jews less avaricious or Russians less extravagant”.But although this might be alright for the Russians it was not congenial to “an educated, decent, intelligent son of Western Europe” (who, incidentally, made a fortune by financial speculations). He disliked the “mood of oppression” in Russia, for which he had a simple explanation:
In part, no doubt, it is the fruit of Red Revolution. In part, perhaps, it is the fruit of some beastliness in the Russian nature— or in the Russian and Jewish natures when, as now, they are allied together. What can one say of such a shallow interpretation of history except that if Keynes had troubled to understand Marx he might have known what was really taking place in Russia.