The Insidiousness of Keynesian Economics

I came across something interesting in the latest issue of Reason in a review of a book that sounds like a throwaway dealing with the battle between John Maynard Keynes verses Austrian economist Friedrich von Hayek in the 1930’s.  Frankly, it is something I had never even considered and that is the intentional inflating of the currency (which is in reality a devaluation of the dollar) in order to keep real wages low while creating the illusion of giving workers higher wages.  Interesting too, that this scheme advocated by Keynes was a means to undercut the power of labor unions, which is normally a good thing.   I mean, I understand that our monetary system is inherently evil and that the printing of dollars out of thin air is, as Ron Paul famously says, a “hidden tax” that destroys the middle class and robs widows and those on fixed incomes of their wealth in terms of buying power, but I never really thought of it as actually aiding large corporations by allowing them to pay workers less while seemingly paying them more.  Here’s the quote:

In a 1930s context of very powerful unions, Keynes thought it was politically impossible to achieve the nominal wage reductions necessary to clear the market for labor—that is, to let wages fall so that hiring would be cheaper and unemployment thereby reduced. He instead promoted inflation as a means to trick labor into taking lower real wages. – From Brian Doherty’s review of Keynes/Hayek: The Clash That Defined Modern Economies by Nickholas Wapshott.

As I’ve said, this is an angle I hadn’t considered before but is something I’m certainly interested in learning more about.  In the meantime, Keynes vs. Hayek Round 2 . . .

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5 Comments on “The Insidiousness of Keynesian Economics”

  1. LJ Says:

    I had an interesting maybe hour long chat (18 years ago?) on the phone with Jrob about Von Mises and the Austrian’s, as he said, “almost getting it right” by eschewing empiricism. Wish I could remember everything we talked about.

    I was believing Austrian economics before I was believing the gospel. In a strange way the Lord used that to bring me to faith and, eventually to Clark, Robbins, and Presupposionalism.


  2. brandonadams Says:

    Regretfully I suppose we’ll be watching round 3 before too long, ft. Bernanke v Rothbard: Following the Lessons of the Great Depression

  3. Steve M Says:

    Printing money out of thin air is theft, but the victims who are damaged the most are led to believe they are being helped and fervently support the policies that rob them.

    Where truth is not important, the best liar wins. This is the nature of modern politics and will be until a majority of Americans discover the importance of seeking truth. The Bible has a monopoly on truth and even most professing Christians do not understand the Bible’s positions on political matters.

    A proper understanding of doctrine by the churches in America is the best hope this country has for political reformation, but the odds of that coming to pass are slim.

  4. LJ Says:

    Steve M wrote: A proper understanding of doctrine by the churches in America is the best hope this country has for political reformation, but the odds of that coming to pass are slim.

    I agree that until the gospel is believed and right doctrine is taught this country will continue its decline. But the Almighty establishes the odds and brings about the end to glorify himself through means the likes of which may be hidden to us for now. We can’t know for sure but it is possible America’s theological apostasy and resultant political and financial bankruptcy may be the means by which a great number, beyond count, are brought to faith in him through Jesus Christ the Lord.

  5. Steve Matthews Says:

    A timely post, Sean. Keynesianism is the devil’s economics. Nothing there but lies and theft.

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