A BOOK ON JOHN MAYNARD KEYNES

Economics can be awfully boring and I admit it was a struggle to get through "Keynes, the Return of The Master." I wanted to understand his message a little better and perhaps succeeded. You may not have heard of Keynes as in some circles he is very much out of favour. But after the Great Depression his ideas were heralded as the solutions to handle future depressions.

He is dismissed by conservative thinkers who now seem to have the bigger stage. Keynes is criticized as the guy who wants to increase spending during a depression or recession even to the point of a deficit. Those who think that is terrible (and some of them seem to be in control) say that it is far better to cut expenses. They overlook that his theory includes the idea that governments should run surpluses when times are good and then spend when it is needed for the very slow times that otherwise result in unemployment. In fact he thinks that running a surplus keeps growth from getting out of control when it could precipitate a crisis.

I discovered that underlying his mathematical and psychological thinking is a different kind of philosophy than one hears much of these days. The purpose of economics is not to make finances more efficient. Keynes feels that the only purpose is so that people could live "wisely, agreeably and well." He didn't restrict that to the rich, but felt income inequality was part of the problem. One of his most famous quotes is "..in the long run we are all dead."

As ordinary citizens we hear a lot about how important it is to protect the job creators, but in truth we are all job creators. Meeting our needs and wants is what gives someone else a purpose (and an income). We in turn use our talents and energies to meet other people's needs and wants. Governments are not the problem as was famously said by Ronald Reagan, but they can facilitate the solutions.

The author recounts history noting that governments swing from conservative to liberal and back to conservative. The problem is that society goes too far in one direction creating a crisis that causes a swing in the opposite direction. One of the problems comes from a political context. Rich people are at bottom interested in protecting and expanding their wealth and power. A philosophy that justifies what they want to do to benefit themselves is just another tool. With their wealth comes power that can be leveraged to attain their goals.

The author, Robert Skidelsky has written a lot of books on economics including a much more substantial book on John Maynard Keynes. This one is struggle enough, but it is fairly current covering events up to 2009. He recognizes that Keynes had his limitation, lived in a different era, but that his wisdom still shines and should be heeded.

23 things they don't tell you about capitalism

The author Ha-Joon Chang is not anti-capitalist as the title might imply, but feels that we have been misled by free market capitalism.  I was given this book and took it as a bit of a challenge as my son had brought it home after reading on his flight over from London, England. The challenge part was that I had to finish it before his flight back.

Ha-Joon makes many many points and in a short blog I cannot do justice to them (I probably couldn't do much better in a long post).

Although you have to twist your thinking in a number of ways it is not difficult to understand. I have always felt that the rules are made by those in power and that the masses (including myself) are easily or at least sufficiently won over to accepting their viewpoint of free market capitalists. Ha-Joon points out with many examples of how the thinking has been distorted. Born relatively rich (in the West) we tend to be very self-righteous that we deserve to be in power.

The free market people in power say the market is supreme and corrects itself. In the most extreme beliefs, regulations are always harmful, government should be minimized, poor people are poor because of their own inadequacies. Their views on collective organizing is that it is really a dirty word--"socialism". "Government", to quote Ronald Reagan "is not the solution, it is the problem". History is re-written to prove their viewpoint.

There is no such thing as a free market, or maybe I should say we don't actually have one. Originally a free market was conceived as one where a company was totally liable for their debts, meaning the owners had to pay all the bills even if that meant they would pay out more than they had invested. The invention of the limited liability (as you see with many companies adding Ltd. to their official company name)  unleashed capitalists from the fear of unlimited debt. Quite rightly investors were interested to minimize their risk and society as a whole benefited. The free market believers usually overlook this fact and resent that workers want to minimize their risks.

The truth is all countries reached their current level of success with practices that would not be approved by the free marketers, including their own countries. The United States, amongst many other nations strongly practiced protectionism to give their own industries a fighting chance to establish themselves.

It is assumed that poor nations need to learn the new free market rules if they are to succeed. Ha-Joon points that in fact poor nations are actually much more innovative than richer nations. They have to be to cope. He gives the example of some people selling space in a long line. One experience that I recall was on a trip to Cuba taking a tour bus to visit Havana we were confronted with a deaf mute whose mastery of English I am not sure of. Actually met him on two different trips and at first found him very annoying, but eventually understood he was filling a need that a lot of us had. We couldn't figure out where our bus was parked. He had recorded all the bus numbers and knew where they were parked. He depended on us appreciating his service which not everyone did.

One of the basic tenets of free market thinkers is that the market is rational, but actually that is not true. The more complex our society the more difficult it is to be rational. In truth most people at some stage trust what they are told. The system breaks down when trust breaks down.  No single person understands all the options.

Efficiency is easily abused. For instance money can be transferred in seconds from one project to another across continents. This has encouraged investors to seek short term payoffs and avoid those long term projects requiring patience. It has been assumed by most of us that shareholders have the strongest stake in a company, but actually they are not as committed as workers and suppliers who cannot switch their efforts so easily.

Financing is a dominant force in the world.   It can speed growth, but also create crisis. It tends to short term planning as opposed to long term planning. The author concludes (amongst other things) that we need to end our love affair with free market capitalism and to recognize that human rationality is severely limited in a very complex world.

Like to get a fuller view of Ha-Joon's thinking? Visit his website, http://www.hajoonchang.net/