Patrick Bond wrote:
But isn't that the point Krugman misses? Given that the New Deal
didn't work, really, the only way out of the Great Depression was
extreme devalorisation of overaccumulated capital. A war that
destroys economic deadwood (i.e. is wasteful of people and
resources) is often a useful way to restructure power relations and
prepare the ground for a new round of capital accumulation,
especially when built on the vast industrial ruins of, say, a
Germany or Japan.
Schumpeterians recognise this, right? Can't Keynesians and Post-
Keynesians and Krugmanians?
Keynes (in contrast to "Keynesians and Post-Keynesians and
Krugmanians") understood the preference for spending on war to be, to
a significant degree, an expression of the particular kind of
irrationality (understood as psychopathology) whose dominance in
economic motivation he took to be the defining characteristic of
capitalism.
This is more consistent with Marx than the "functionalist" approach
characteristic of many Marxists.
The psychopathological preferences dominating "common sense" ideas
about appropriate public spending are satirized in the General Theory.
“It is curious how common sense, wriggling for an escape from absurd
conclusions, has been apt to reach a preference for wholly ‘wasteful’
forms of loan expenditure rather than for partly wasteful forms,
which, because they are not wholly wasteful, tend to be judged on
strict ‘business’ principles. For example, unemployment relief
financed by loans is more readily accepted than the financing of
improvements at a charge below the current rate of interest; whilst
the form of digging holes in the ground known as gold-mining, which
not only adds nothing whatever to the real wealth of the world but
involves the disutility of labour, is the most acceptable of all
solutions.
“If the Treasury were to fill old bottles with banknotes, bury them
at suitable depths in disused coalmines which are then filled up to
the surface with town rubbish, and leave it to private enterprise on
well-tried principles of laissez-faire to dig the notes up again (the
right to do so being obtained, of course, by tendering for leases of
the note-bearing territory), there need be no more unemployment and,
with the help of the repercussions, the real income of the community,
and its capital wealth also, would probably become a good deal greater
than it actually is. It would, indeed, be more sensible to build
houses and the like; but if there are political and practical
difficulties in the way of this, the above would be better than nothing.
“The analogy between this expedient and the goldmines of the real
world is complete. At periods when gold is available at suitable
depths experience shows that the real wealth of the world increases
rapidly; and when but little of it is so available, our wealth suffers
stagnation or decline. Thus gold-mines are of the greatest value and
importance to civilization, just as wars have been the only form of
large-scale loan expenditure which statesmen have thought justifiable,
so gold-mining is the only pretext for digging holes in the ground
which has recommended itself to bankers as sound finance; and each of
these activities has played its part in progress—failing something
better. To mention a detail, the tendency in slumps for the price of
gold to rise in terms of labour and materials aids eventual recovery,
because it increases the depth at which gold-digging pays and lowers
the minimum grade of ore which is payable.
“In addition to the probable effect of increased supplies of gold on
the rate of interest, gold-mining is for two reasons a highly
practical form of investment, if we are precluded from increasing
employment by means which at the same time increase our stock of
useful wealth. In the first place, owing to the gambling attractions
which it offers it is carried on without too close a regard to the
ruling rate of interest. In the second place the result, namely, the
increased stock of gold, does not, as in other cases, have the effect
of diminishing its marginal utility. Since the value of a house
depends on its utility, every house which is built serves to diminish
the prospective rents obtainable from further house-building and
therefore lessens the attraction of further similar investment unless
the rate of interest is falling part passu. But the fruits of gold-
mining do not suffer from this disadvantage, and a check can only come
through a rise of the wage-unit in terms of gold, which is not likely
to occur unless and until employment is substantially better.
Moreover, there is no subsequent reverse effect on account of
provision for user and supplementary costs, as in the case of less
durable forms of wealth.”
“Ancient Egypt was doubly fortunate, and doubtless owed to this its
fabled wealth, in that it possessed two activities, namely, pyramid-
building as well as the search for the precious metals, the fruits of
which, since they could not serve the needs of man by being consumed,
did not stale with abundance. The Middle Ages built cathedrals and
sang dirges. Two pyramids, two masses for the dead, are twice as good
as one; but not so two railways from London to York. Thus we are so
sensible, have schooled ourselves to so close a semblance of prudent
financiers, taking careful thought before we add to the “financial”
burdens of posterity by building them houses to live in, that we have
no such easy, escape from the sufferings of unemployment. We have to
accept them as an inevitable result of applying to the conduct of the
State the maxims which are best calculated to ‘enrich’ an individual
by enabling him to pile up claims to enjoyment which he does- not
intend to exercise at any definite time.”
<http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch10.htm
>
In contrast, and consistent with Keynes’s particular conception of
“rationality”, rational criteria for public spending, while excluding
useless and destructive forms of spending, would include “non-
economic” as well as "economic" criteria.
"Where we are using up resources, do not let us submit to the vile
doctrine of the nineteenth century that every enterprise must justify
itself in pounds, shillings and pence of cash income, with no other
denominator of values but this. I should like to see the war
memorials of this tragic struggle take the shape of an enrichment of
the civic life of every great centre of population. Why should we not
set aside, let us say, £50 millions a year for the next twenty years
to add in every substantial city of the realm the dignity of an
ancient university or a European capital to our local schools and
their surroundings, to our local government and its offices, and above
all perhaps, to provide a local centre of refreshment and
entertainment with an ample theatre, a concert hall, a dance hall, a
gallery, a British restaurant, canteens, cafés and so forth.
Assuredly we can afford this and much more. Anything we can actually
do we can afford. Once done, it is there. Nothing can take it from
us.” (Collected Writings, vol. XXVII, p. 270)
Ted
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