The Crisis of Keynesian Economics by Geoffrey Pilling (1986)


Needless to say, not all aspects of the crisis of Keynesianism have been considered in this book. Given its length this was not in any event possible. Concentration has been deliberately placed throughout on the fundamental methodological matters which are involved in a consideration of the nature of Keynesianism. The failure of Marxists in the past to deal adequately with these issues has been emphasised at several points. It is this failure, in the final analysis a reflection of theoretical scepticism, which has allowed those to emerge who wish to cull various bits and pieces from Marx in order to try to breathe life into a dying Keynesianism. This is not the first time this sort of thing has happened to Marx and doubtless it will not be the last. Such is the weakness of bourgeois thought as a whole that it is obliged to dip into Marx in order to provide a better antidote against him: ironical but true.

We have suggested that the method of Keynes was essentially that of empiricism, the outlook predominant in England. It was a method based on the acceptance of the immediate appearances of things as constituting the final arbiter of science. Marx proceeded from a quite different angle. And here, at the level of fundamental philosophical conceptions, involving basic questions in the theory of knowledge, there can be no bridges built, no compromises effected. Inspired by the task of preparing for the overthrow of the capitalist system, Marx’s method was one which insisted on probing beyond these immediate appearances and thereby establishing the essence (a contradictory essence) of capitalist social relations. Only in this way would it be possible to establish both the necessity of the appearances of bourgeois economy and the historical necessity for their overthrow.

Now while the immediate appearances of the economy after 1945 seemed ‘favourable’ (rising output, increasing incomes and generally improving living standards) Keynesianism was accepted on the standard English grounds that it seemed to work; that it brought about desired results. As we have tried to show these appearances were in fact highly contradictory. In particular, they were far from being permanent, having been born out of the deepest social and economic crisis which capitalism had up to that point experienced. But just as the capitalist with a sum of money is little interested in the origin of his money (he is interested in expanding it, not ruminating on its source) so orthodox economics made little effort to probe to the historical roots of the inflationary boom which capitalism experienced from the end of the Second World War onwards.

It need not be stressed that the breakdown of Keynesianism has thrust orthodox economics into a deep crisis, perhaps as great as that which gave birth to The General Theory. Until recently at least monetarism seemed destined to replace Keynesianism as the new orthodoxy, although growing doubts as to its ability to ‘work’ have led an increasing number of economists to question its soundness. But in any event, whatever its immediate fate in academic and political circles, two features of monetarism are worth stressing. First, a point already made in the text: there is nothing at all new in this doctrine, and in this respect, orthodox economics is being forced to return to an old and discredited school as it seeks either explanation or rationalisation for the current crisis afflicting capitalism. Secondly, monetarism is based upon fundamentally the same empirical outlook as was the work of Keynes and his school. It too starts from the attempt to systematise the immediate appearances of the economy but just as little as Keynesianism is it able to inquire into the nature of such appearances, to penetrate to their essence.

We have earlier noted that Keynesianism, while badly bruised by the convulsions which hit world economy in the 1970s, is not completely dead.

It still retains a certain degree of influence both amongst academics who continue to see it as the only viable alternative to monetarist doctrines as well as in the labour movement. We have not said a great deal about this latter question; our aim has been to focus on a number of theoretical and historical questions which in the long run are of greater significance.

But the ability of British capital to reflate by means of greater government expenditure, if necessary behind a tariff wall, are bound to fail. As Keynes said, with 1914 Britain ceased to conduct the international orchestra. True then, it is infinitely more so some 70 years on when Britain’s chronic decline as an industrial, commercial and financial power are patently obvious. Far from being able to pursue an independent economic policy, British capital is at the mercy of world forces over which she now has little or no control. And quite apart from the purely economic objections to be levelled at the feasibility of a Keynesian-style programme in current conditions, the reactionary political features which often accompany it are also worthy of note. As we have earlier suggested, the calls for import controls, exchange controls, etc. express the decay of capital, its inability to develop world economy, signify the fact that it is driven to turn its back on its conquests of the last century – free trade and an international division of labour.

Lenin was fond of remarking that in the realm of philosophy, when one form of idealism was in conflict with another, Marxism could only gain. This is certainly true of the present crisis of economics. It presents Marxism with a great opportunity to influence a new generation of students and others, increasingly restless at the inadequacy of the theories proffered by the various orthodox schools. But if there is to be a development of Marxism the fundamental philosophical and methodological issues which really lie at the root of bourgeois ideology in all its forms will have to be given central attention. It was as a contribution to that task that this book was written.