Citizens or Subjects: Keynesian Economics

Many Americans watch with alarm as their government attempts to lurch from servant to master of its citizenry. Keynesian economic theory legitimizes that control and instructs the adherent that the ruling elites can best determine the economic fate of millions.

John Maynard Keynes (1883-1946) was the influential British economist who asserted that enlightened government control of economic policy could guarantee national economic health, prosperity, and growth by escaping the turbulent and unpredictable forces of free markets. Keynesian economic models advocate government control of wages and prices, claiming that judicious adjustments would ensure employment, control inflation, and -- combined with the careful insertion of public monies at appropriate places and intervals -- guide the planned economy to preeminence. His theories were widely accepted for decades, applied throughout the world to one level or another. They lost favor only when the evidence accrued, overwhelmingly, that those who actually applied them failed, and those who adhered the most to the Keynesian model suffered the most. Britain's economy before Margaret Thatcher was the most obvious example, where government economic policies and an extortionary labor movement produced a collapse of what had been one of the world's most robust economies.

Despite this, the Keynesian model is powerfully resurgent. Obama is certainly a disciple -- not publicly acknowledged, but indisputably in policy. Alan Greenspan has been known to quote Keynes to visitors and in congressional testimony (which may explain a great deal), and the popular press has lately sung Keynes' praises. The New York Times seems oblivious to the lessons of history where Keynes is concerned. Government control of major industries and financial sectors is the very epitome of Keynesian economic theory, which Obama has achieved with the U.S. auto industry and Wall Street. Add to that failed model the government control of health care, the massive cap-and-trade tax increases, restrictions and reductions of industry, and the ideological radicalism that justifies anti-capitalist social engineering, and we have a toxic mixture that may well permanently undermine American economic strength.

Keynesian economic enthusiasts are quick to shift blame for the disasters of government economic involvement we see today in the European Union and the U.S. Yet the consequences have become so obvious, the impact so far-reaching, that the correlation can no longer be spun away. Greece is insolvent, soon to be followed by Spain, Portugal, and perhaps Italy, which in concert may well bring down the euro. Germany is in the unenviable position of having to bail out the outrageously profligate Greece with hardworking German citizens' tax euros, all while realizing full well that it will not make one iota of difference in the long run.  We see a productive and responsible nation following the laggard and fool to economic ruin, enabling a spend-aholic in its addiction.  

Austerity measures are unpopular; the Greeks seem to feel entitled to German money, much as a U.S. labor union, or "community organizing group," or a Democrat policymaker feels entitled in the U.S. The Greeks are burning and murdering to show their anger at the fiscal failure they are in large measure responsible for, much as President Obama and Congress pose and posture anger at U.S. industry for the problems their own policies help orchestrate. We are on the same road to ruin as Greece, and our speed increases every day.

In 1959, Henry Hazlitt wrote The Failure of the New Economics: An Analysis of the Keynesian Fallacies as a criticism and exposition of where Keynesian economic theories are flawed. One passage has particular relevance today. Hazlitt points out that Keynes, an elitist to the core, began with a very statist assumption:

...that there exists a class of people [perhaps economists very much resembling Lord Keynes] who are completely informed, rational, balanced, wise, who have means of knowing at all times exactly how much investment is needed and in exactly what amounts it should be allocated to exactly which industries and projects, and that these managers are above corruption and above any interest in the outcome of the next election.

In that one sentence, Hazlitt cuts to the heart of the problems we now face. It is a utopian delusion that government can overcome fundamental human urges, make the correct decisions at the correct time, remain free of corruption and special interest influence, and ensure prosperity with benevolent statist altruism. Obama and the left are true believers in this utopian fiction, arrogant as only echo-chamber academics can be, and blind to the evidence of history. Keynes has been a raging success in the university and union hall, but nowhere else. Much like socialism and communism, his doctrine is kept alive in those powerful institutions to vex us again and again.

The evidence found in America's current financial situation is that the very problems government claims to remedy it instead exacerbates. Here the spin cannot keep up with the reality of increased unemployment and shrinking productivity, or the looming catastrophe of massive deficits. The outcome is always far worse than if free markets could have corrected themselves. Nothing is too big to fail, and failure is the legitimate consequence of mismanagement. It stanches a resource drain and breeds success when its lessons are learned. That is what is missing in Obama's economic model: any appreciation of the consequences of failure or success, or the clear lessons of both. It centers on one thing: government control of economic engines by elites.

The deficits resulting from the unrestrained input of public monies to select industries do not alleviate the underlying problem, and they must go on endlessly. Already Fannie Mae says it needs another $8.4 billion to cover losses, bringing its consumption of taxpayer dollars to $83.6 billion. Freddie Mac is in the same condition, and the cost is hitting $145 billion. It will continue to increase, having been promised unlimited support through 2012.

Those who apply Keynes forget the rights of the citizen and gravitate to treating him as a subject to be manipulated and controlled, his tax dollars harvested on an ever-increasing level. The predictable outcome is that economic decisions are made where the citizen has no influence, and often no knowledge. The nation's economic health is shaped in back rooms, its future planned by a select few without debate, without due consideration, justified by one crisis after another, concocted and staged to mask the truth. This is the modus operandi of a thoroughly corrupt Democrat party and Obama; their furious spin machine runs day and night.

American voters did not elect Keynesian socialists to deconstruct the most successful economic system the world has ever seen, but that is what is happening. It is now evident, even to some of Obama's most ardent supporters, that the promises were merely expedient tools to power, classic stereotypes of political rhetoric forgotten as soon as the oath of office had been spoken. The citizens have noticed the cynicism and arrogance, and we are not forgiving of the deception. 

Let us remind those in power: We become militant to protect our freedoms, not government handouts. You will not remake us without our permission, which you do not have. Some lessons from history percolate through the bias of a complicit press and their political allies. For Americans, some truths truly are self-evident. 

More government means inefficiency, corruption, and excessive spending. Excessive spending means more taxes. More taxes mean less growth and more regulation. More regulation means less freedom, and less freedom means failure. It always has, and it always will.
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