Keynesianism: A Bridge to Neoliberalism

Ted Reese

September 23rd, 2022

As capitalism sinks into its deepest crisis for a century – probably one far deeper – calls from the left grow louder for a return to the ‘Keynesian’ principles that apparently underpinned the postwar productivity boom: a minimal nationalization program of key industries and utilities combined with well-funded public services and a ‘welfare state’. Such an approach, the logic goes, redirects money away from greedy shareholders and into the pockets of underpaid or underemployed workers, boosting demand for consumer goods and, therefore profits and economic growth.

Such policies, moderate social democrats claim, were previously implemented because of the persuasiveness and correctness of the arguments of John Maynard Keynes, along with the militancy of organized labor.

Communists would agree with the latter part of the statement, but often claim that it was the ideological pull of the Soviet Union, with its uniquely fast rate of industrialization and low living costs, that compelled the ruling class to make such concessions.

While both arguments contain an element of truth, they are ultimately inadequate. In reality, the turn to Keynesianism after WWII and before that in the US during the Great Depression expressed the needs of capital accumulation at a particular point in time; ultimately serving to restructure the economy in a way that made possible the ensuing turn to ‘neoliberalism’ – reprivatization, rollbacks of union rights and welfare, and the centralization of political power – itself made necessary by the changing or rather ever-rising demands of capital accumulation.

The inherent logic of capitalism simply makes the ‘mixed economy’ championed by social democrats unsustainable. Today, this is truer than ever.

Keynes and Keynesianism

A Cambridge academic, Keynes was no social democrat or trade union man. A member of the British Liberal Party, he distanced himself from the labor movement. He made clear that “The class war will find me on the side of the educated bourgeoisie.”

He called Marxism “obsolete” and “scientifically erroneous.” Against Marx’s now empirically testable[1] theory of value – i.e. that it comprises socially necessary labor time – Keynes accepted the vulgar political economy of marginal utility theory, that value and price are determined wholly through the subjectivity of demand and the limit of supply on the market. (Vulgar in the sense that capitalism’s earlier theorists, Adam Smith, and David Ricardo, had recognized labor as the source of value.) Stealing a living, Keynes accepted that this theory was unfalsifiable since “two incommensurable collections of miscellaneous objects cannot in