Let’s say we read Marx’s labour theory of value not as attempting to derive ‘value’ from ‘labour’, but as analysing capitalist society’s idea of value as a means to produce and maintain the social category of labour. (Thanks, N. Pepperell!) This reading sheds an interesting light on the Keynesian revolution. Classical economics, Keynes informs us, took full employment as a given; it simply assumed full employment, without attempting to understand the economic mechanisms that produced it. When Keynes says this, he doesn’t mean classical economics; he means neo-classical economics – Marshallian equilibrium analysis. The classical economists of course assumed no such thing (Marx (and Sismondi…) placed unemployment close to the centre of their theorising.) But Keynes is right in his critique of his immediate predecessors. The innovation of Keynesianism was to reverse the terms in which neo-classical economics had understood the labour-production relation. Neoclassical economics sees labour as the means to the end of production. Keynes’s general theory sees production as a means to the end of labour. Faced with the great depression, and massive unemployment, Keynes proposed deficit-financed government expenditure as a means to ‘produce’ employment. The actual commodities labour produced were incidental – as Keynes vividly illustrates with his great example of burying bank-notes down coal mines, and then digging them up again. Keynesianism – ‘rescuing’ capitalism from itself, and from the looming threat of socialism – can be seen as bringing into the open something that was implicit in earlier mainstream economic theorising: the extent to which economic activity works to produce not commodities, but wage-labour. And – as the social unrest that the great depression brought to the surface suggests – the production of employment is essential if capitalist society is to survive. This is, of course, because people need food to eat. But it’s also because the social system of wage labour serves as an incredibly potent mechanism of discipline and control. When the Keynesian revolution brought ‘full’ employment explicitly to the forefront of policy-making, capitalism, one might say, showed its hand. (I say ‘full’ employment because – again as Marx tells us – ‘full’ employment requires a reserve army of the unemployed.)
This sense that capitalism’s ostensible justification is in conflict with its actual achievements is a constant in Keynes’s work – it’s there in the first pages of his first masterpiece, ‘The Economic Consequences of the Peace’. There Keynes is at his most acerbic, writing more as social critic than policy-maker. In this famous passage, he describes the “psychology” of the pre-war capitalist society he thought likely gone forever.
“Europe was so organized socially and economically as to secure the maximum accumulation of capital. While there was some continuous improvement in the daily conditions of life of the mass of the population, Society was so framed as to throw a great part of the increased income into the control of the class least likely to consume it…. In fact, it was precisely the inequality of the distribution of wealth which made possible those vast accumulations of fixed wealth and of capital improvements which distinguished that age from all others…. The railways of the world, which that age built as a monument to posterity, were, not less than the Pyramids of Egypt, the work of labour which was not free to consume in immediate enjoyment the full equivalent of its efforts.
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 understanding that they consumed very little of it in practice… And so the cake increased; but to what end was not clearly contemplated…. [T]he virtue of the cake was that it was never to be consumed, neither by you nor by your children after you.”
Capitalism is based on a double bluff or deception; but this deception needs to be maintained. The purpose of the General Theory, one might say, is to re-establish this deception, after the catastrophic social collapse of the depression. What is deficit-financed government expenditure if not a form of bluff?
More importantly: there is, I think, a tension between the insight that drives Keynes’s General Theory, and the economic language with which that insight is developed. What could be further from the view of society expressed in ‘The Economic Consequences of the Peace’ (a view of society operative throughout Keynes’s work) than the following line from the General Theory: “Consumption – to repeat the obvious – is the sole end and object of all economic activity”?