An engraving of St George slaying a dragon graces the cover of James Crotty’s monumental new book Keynes Against Capitalism.3 The dragon is meant to symbolize capitalism, and the dragon slayer represents the great twentieth-century economist John Maynard Keynes. The premise depicted by this imagery will strike many as incongruous with the received understanding of Keynes’s polemical aims. Keynes, the conventional story goes, sought not to dismantle capitalism but to reform it; he recognized that, contrary to the precepts of orthodox neoclassical economics, market forces are not reliable guarantors of full employment and robust growth. Capitalist economies, he argued, routinely deliver suboptimal levels of employment. Slumps that inflict severe distress on the working-class population are normal occurrences. According to the prevailing interpretation, Keynes, an enlightened but loyal member of the British establishment, foresaw that capitalism and the bourgeois values and institutions it underpinned would not be able to withstand another episode of economic turbulence on the scale of the Great Depression. Even smaller-scale downswings, if they occurred often enough and were severe enough, could destabilize the system both politically and economically. His purpose in writing his 1936 masterwork The General Theory of Employment, Interest and Money was to understand why slumps occur, and to identify remedies to contain their destructive force. Once policymakers had gotten the problem of unemployment under control through the application of fiscal and monetary policy, market forces and profit-driven private enterprise could be left to regulate income distribution and to channel resources into their most efficient uses. Capitalism, according to Keynes, needed to be fixed, not abandoned — or so says the standard view of his project. Lawrence Klein, an early champion of Keynesian economics and a future Nobel laureate, put it nicely: “Marx analyzed the reasons why the capitalist system did not and could not function properly, while Keynes analyzed the reasons why the capitalist system did not but could function properly. Keynes wanted to apologize and preserve, while Marx wanted to criticize and destroy.”4
In Keynes Against Capitalism, Crotty argues that the conventional view is all wrong. Far from wanting to rehabilitate capitalism, Keynes was building a case to replace it with a form of democratic socialism in which most large-scale capital investment spending would be undertaken by the state or by quasi-public entities. The Keynesian Revolution, in Crotty’s interpretation, was considerably more revolutionary than we have been led to believe. It did not merely entail a recognition that the state must actively manage the level of aggregate demand to keep the economy operating on an even keel: what is needed is direct public control of the economy’s capital expenditures. In a 1939 interview in the New Statesman and Nation, Keynes described the economic order he envisioned as “liberal socialism, by which [he meant] a system where we can act as an organised community for common purposes and to promote social and economic justice, whilst respecting and protecting the individual — his freedom of choice, his faith, his mind and its expression, his enterprise and his property.”5 What Keynes had in mind, Crotty contends, was a gradual transition, through a process of trial and error, to a planned economy.