Tag Archives: john maynard keynes

A warning from the past. Might the American Empire drag down America?

Summary:  Hubris is the great destroyer of Empires.  Especially the mad American Empire, which costs much, brings no economic benefits (no treasure ships coming home, no advantage to our exports), and multiplies our enemies.  Britain’s post-imperial periods was painful, as it will be for us if we fail to learn from the past.

Americans take great pride in our weaponry, such as the new Virginia Class attack submarines — among the most sophisticated weapons ever built, $2 billion each, with no relevant foe warranting their deployment.  Likewise we exult in the Americans of our Special Operations Command, among the most skilled and dedicated soldiers in world history — almost 60 thousand strong (roughly the size of Canada’s armed forces), operating in 75 nations, “an almost industrial-scale counterterrorism killing machine” (in the words of John Nagel, former advisor to Petraeus and President of Center for a New American Security).  And in our world-girdling chain of hundreds of bases around the world.

Can we afford them?  Or does their cost weaken us, more than offsetting their benefits?  This was asked at the twilight of the British empire.  They ignored the question, dooming Britain to decades of economic decline — punctuated by financial crises.  We can learn from these warnings, prophetic then and perhaps today as well.

Mike Lofgren (recently retired after years of work on the staff of the House and Senate budget committees; see his recent LA Times op-ed) sent me a powerful example, a memorandum from John Maynard Keynes (then in the Treasury), written in August 1945.  Days before we cut off Lend-lease aid, a severe blow to the UK.  In July 1946 Keynes negotiated the Anglo-American loan (see Wikipedia), incurring a crushing debt (at favorable rates) to keep the Empire afloat for another generation.  It was finally paid off in 2006.  This is from The Lost Victory: British dreams, British realities, 1945-1950 by Correlli Barnett (1995),

… we undertake liabilities all over the world and slop money to the importunate represents an over-playing of our hand, the possibility of which will come to an end quite suddenly and in the near future unless we obtain a new source of assistance.

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Leadership in action: when resource constraints meet conspicuous consumption, we just ignore the problem

Summary:  Rising population, finite resources.  Don Vandergriff asks if we have the creativity and wisdom to cope with these two colliding trends? 

“In the long run we are all dead. Economists set themselves too easy, too useless a task if, in tempestous seasons, they can only tell us that when the storm is long past the ocean is flat again.”
— John Maynard Keynes in A Tract on Monetary Reform (1923)

I don’t understand why we don’t confront these issues head on? Is that we suffer from hubris? Or, is it people are just so scared, they ignore the data? 

What pisses me off about lack of leadership on these issues, and our own arrogant ignoring the signs is that in no time in human history have we possessed the information and resources to fix problems before they get too bad. The problem is hubris, stupidity and organized religions, all of them. 

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Keynes comments on our new-found love of austerity

Summary:  We’re living in an time of deja vu.  Our Af-Pak War repeats the mistakes of Vietnam; Europe’s economic policy repeats mistakes of the 1930’s.  Slow and stupid are the two sins God always punishes.

(1) Mark Thoma (Prof economics, U Oregon) coined a term for the advocates of austerity now (i.e., increase savings during a recession; they fit no current school of economic theory) — Correction on 21 June:  it was coined by  Rob Parenteau of The Richebacher Letter (source).

Who is correct, Keynes who argued that budget cuts in a recession make things worse — his “paradox of thrift” — or the austerians who say that budget cuts restore “confidence in the markets” and make things better?  {source}

As usual, John Maynard Keynes gives us a pithy answer.  He wrote to American journalist Walter Case on 14 September 1931:

To read the newspapers just now is to see Bedlam let loose. Every person in the country of super asinine propensities, everyone who hates social progress and loves deflation, feels that his hour has come, and triumphantly announces how, by refraining from every form of economic activity we can become prosperous again.

(2) For a clear explanation of the issues, I recommend “Now and Later“, Paul Krugman, op-ed in the New York Times, 20 June 2010 — Opening:

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