“In the long run we are all dead”. This was part of Keynes’s famous quote used as part of an argument for proactive economic policy-making on the part of governments to improve the social outcomes of capitalist development.
In the aftermath of the Great Depression and the Second World War, governments across the world accepted the need for greater intervention in economic life. The form this took varied across countries, from industrial policy and demand management to cooperation between the government, management and trades unions, known as tri-partism.
Keynes had come to the conclusion that, even if there were economic forces that restored some kind of equilibrium after a shock to the system, these would work too slowly to maintain social stability, and even then may not lead to satisfactory outcomes in a democratic society.
I would argue that there are indeed long run forces, tendencies and incentives at work in a capitalist system, such as the rate of profit, and its relationship to competition, investment, growth, productivity, and cycles of production. Such forces seem to be persistent, but they in no way guarantee optimum social outcomes. There is therefore some room for state intervention to improve things, but this is limited by the aforementioned factors. Policy therefore needs to work within the system, channelling market forces towards progressive outcomes.
In fits and starts, and with a good deal of conflict, crisis and winners and losers along the way, this is part of the story of what has happened with the emergence of capitalism and its subsequent development. One doesn’t have to be right-wing to appreciate its power in raising material standards of living more rapidly than any other system in history. But it is subject to what Anwar Shaikh calls ‘turbulent gravitation’: the fact that economic trends tend to fluctuate over time around moving centres of gravitation. His wonderful new book, Capitalism, is full of such insights, mixing rigorous theory with extensive empirical evidence. I will be drawing on the book in future posts, once I have grasped its ideas reasonably fully, and tried to integrate them with my previous understanding of economics.