Keynes Unable

Originally published in the November 13, 2017, issue of the Weekly Standard.

Hayek vs. Keynes: A Battle of Ideas
by Thomas Hoerber
University of Chicago Press, 192 pp., $22.50

Robert Skidelsky, whose biography of John Maynard Keynes is unlikely ever to be surpassed, judged that his subject “never needed a Jehovah, because he had never experienced despair.” Skidelsky was speaking of religion and morals, a department where Keynes was a typical Bloomsbury hedonist. In economics, to find a system with no Jehovah, it is necessary to consult not Keynes but his archrival, Friedrich Hayek. There most certainly was a Jehovah in Keynes’s economic system; he saw him every morning when he shaved.

Americans sometimes fail to grasp the full extent of Keynes’s egotism, which underlay all his theories of government by economic experts, because we assume that all aristocrats are like that. They are not. The Cambridge Apostles were notorious for their arrogance throughout Edwardian England, from Westminster Palace to the pages of Punch, and his fellow Apostles considered Keynes exceptionally arrogant even by their standards. Bertrand Russell, who may be considered an authority on the subject, marveled at Keynes’s self-regard.

This is the sort of historical and psychological context that might usefully be provided in yet another book on the Keynes-Hayek debate. Alas, this is not what is offered by Thomas Hoerber’s little book, which has the feel of a think-tank white paper stretched beyond its natural limits. Rather than bring the debate of yesterday to bear on our own time, as the dust jacket promises, he merely retells yesterday’s debate in today’s clichés, in order to support his arguments for greater economic regulation by the state and, especially, the European Union.

Hoerber’s contention is that the fight between Hayek and Keynes has been mischaracterized as one between freedom and control, when really both sides were equally interested in freedom. Hayek’s mistake, he argues, was in failing to see that Keynes embraced economic planning precisely in order to preserve liberal democracy from the threat of revolution. This is an old tactic. Keynes used it himself in his popular journalism—heed my advice, or else capitalism will be discredited and who knows what will follow! Equating Hayek and Keynes on this basis makes as much sense as equating the NYPD and a Mafia protection racket: One offered a warning, the other a threat.

In reality, Keynes did not care a fig for freedom. He claimed to, but then so did the Soviets, on the logic that man under capitalism cannot be free if he is starving. Was Lenin therefore a devotee of freedom? Keynes’s contempt for the common people was boundless. In any conflict between their preferences and his own expert prescriptions, Keynes never hesitated to choose the latter. He predicted in the General Theory that the future would require—the understatement is justly famous—“a somewhat comprehensive socialisation of investment.” If he sometimes referred to this end state as a free market, the appeal was rhetorical.

Hoerber repeatedly uses the same maneuver to defend his own cherished ideal, the EU. Libertarians have no love for this institution, he has noticed, but this is only because, like Hayek, they do not take a sufficiently wide view of freedom. The EU “was founded from the outset on liberal market values,” he insists. “Freedom in political terms, embodied in democracy, became the unshakeable foundation of the EU, an ideal Hayek defended passionately in The Road to Serfdom.” (Mind the dangling modifier.) Libertarians fail to recognize the EU as the true guardian of freedom only because they are blinded by their Hayekian misapprehension that fishery licenses are the first step on a slippery slope to the gulag.

If this is his argument, Hoerber cannot have read The Road to Serfdom very closely. In fact, I am sure he hasn’t, because he commits the howling anachronism of claiming that the book warns against the “nanny state.” This is a phrase beloved by modern Hayekians but not by Hayek. It first came into use more than two decades after The Road to Serfdom was published, and as far as I know Hayek never used it. More importantly, the penny-ante regulations the term refers to—smoking bans, soda taxes—are categorically not what Hayek was warning against.

The regulations Hayek warned against were those that socialism cannot help but impose because it requires them in order to function. The decision to fix prices or plan production does not lead to an unaccountable army of paid snoops and arbitrary bureaucrats, it necessarily implies them, because those are the only possible means of its enforcement. That is the whole thesis of the book: “Socialism can be put into practice only by methods of which most socialists disapprove.” Hoerber’s failure to grasp this point leads him into the strangest and weakest of his central arguments, that Hayek was “oversimplifying” to draw an equivalence among fascism, communism, and socialism.

“There can thus be no doubt as to the fundamental difference between communists and socialists in basic attitudes towards political values, such as democracy and economic policy,” Hoerber triumphantly concludes at the end of his chapter on Hayek’s theory of totalitarianism. The basis for this claim is that social democrats say nice things. But the best intentions will not prevent a Kautsky from becoming a commissar when the necessities of economic planning demand it—again, this is Hayek’s entire point. Hoerber thinks that you can tell the difference between nice and nasty socialists by their attitude to power: “If it becomes an end in itself, as for Lenin or Stalin, the danger of corruption is great.” And if not, not? This is startlingly naïve, even from a true believer in the European project.

Keynes was a man of surfaces. His knowledge, even of economics, was not deep, and he was not well read. His pamphlet “The End of Laissez-Faire,” which biographer Skidelsky calls his “most learned essay in political economy” and praises for “his range of references,” cites nothing Keynes would not have read as an undergraduate. When he won Cambridge’s Adam Smith Prize in 1909, he had, ironically, not even read The Wealth of Nations. He labored to cultivate his instincts, not his erudition, and Hayek was right when he reflected that Keynes’s “interests were very largely guided by aesthetic appeal.”

It is an unattractive quality in an intellectual, this substitution of instinct for learning, but at least Keynes’s instincts were generally good. He had a real sense for beauty, a real quality of command, real charm. Hoerber, too, operates at the surface of things. He too tries to prevail on his readers by means of attitude more than argument. But instead of speaking in the manner of a self-confident English aristocrat, he talks like a professor at a French school of management, which he is. He is guided not by instinct but by that far less reliable shortcut, cliché (“neoliberalism,” “sustainable growth,” “raptor capitalism”). Every currency in the world has suffered inflation since the days of Keynes and Hayek. Apparently the coin of expertise is no exception.