Asharq Al-awsat English https://aawsat.com/english Middle-east and International News and Opinion from Asharq Al-awsat Newspaper http://feedly.com/icon.svg

A Keynesianism that Creates a Bulwark Against Le Pen and Her Like

A Keynesianism that Creates a Bulwark Against Le Pen and Her Like

Sunday, 17 April, 2022 - 10:45

The French elections have raised grave concerns: its two traditional centrist parties, the Socialists and the De Guellists, are evaporating into thin air. The specter of Marine Le Pen making her way to the Elysee cannot be entirely dismissed.


Nonetheless, let us begin in a different place and time: London in 1936, the year that John Maynard Keynes published The General Theory of Employment, Interest, and Money, in which he rethinks the question of unemployment in pursuit of finding solutions for the crises of the thirties, was published. Classical economics used to present us with three reasons for unemployment: first, workers changing occupations; second, people choosing not to work, especially when government handouts help them meet their needs; third, wages rising at rates employers cannot afford.


Keynes challenged the economic models applied at the time: in the thirties, huge numbers of people were without work (15 million in the United States and 3 million in Britain...), a figure that could not be explained by the three factors mentioned above. Neither were workers changing occupations nor were they lazily refusing to work nor were unions interfering, especially since the economy was not creating any job opportunities, and the high unemployment rate seen during the Great Depression (1929-1933) reduced the unions’ influence. For Keynes, unemployment is the result of a shortage or lack of demand.


Older theories had assumed that demand for goods would automatically bounce back once an equilibrium between wages and demand for labor was reestablished. Keynes, in contrast, believed that intervening in the economy was necessary for breaking the stagnation cycle and thus restoring prosperity. While classical models suggested that, in cases of economic decline, governments should focus on supply, relying on it to stimulate growth and create employment, Keynes put forward the idea that demand should be the priority since, without demand, there is no point in ensuring supply. Moreover, when market mechanisms fail to stimulate recovery, the state’s job is to step forward and create demand, even if incurring a large budget deficit is necessary. This can be achieved through borrowing and using the funds to finance major public investments- building roads and railways or investing in other infrastructure, which not only creates job opportunities but also lays the foundations for and incentivizes private investment itself.


Between the forties and the mid-seventies, the entire democratic capitalist world adopted a model in which the state plays a major role in business, i.e., a Keynesian model. This was the era in which the welfare state was born, taxes were raised, and massive investments in public initiatives were made. At the time, social democrats were at the peak of their powers, and the broad outline of their program was imposing reforms on capitalism. The communist challenge in Europe, embodied by the strength of the Italian and French Communist Parties in particular, granted this tendency greater impetus.


Contrary to what some might believe, reforming capitalism is, as well as being a requisite for democratic stability, very capitalist.


Adam Smith, the “father of capitalism,” had deep reservations about unbridled capitalism, and he made suggestions for how to limit its negative effects on the poor, whom he believed shouldn’t be left to face the ‘invisible hand of the market’ on their own. Even in his defense of commercialist society against Rousseau, he based his argument on the benefits this society provides for the poor through the surplus it creates, which he contrasts with austere, poor societies that devote themselves to the so-called higher ideals.


The US, the bastion of capitalism, grasped this path and moved this direction early on, before eventually overlooking it. It began to do so in 1890, while its industrial revolution was in full swing, when it passed the Sherman Antitrust Act. The goal was to organize how large corporations operated in such a way that prevents the emergence of monopolies and promotes competition. Oversight on massive corporations and cutting legal loopholes were the tools it used to do so.


In any case, things began to change in the seventies. The social-democratic model was dealt a painful blow, and the crisis of Keynesianism crystallized under the pressure of the increased price of fuel. The increased public spending it encouraged was blamed for stagflation. On the other hand, the neoliberal Chicago School thrived, and Ronald Regan and Margret Thatcher then became its first adherents. Next came the collapse of the Soviet Union, which the neoliberals saw less as the demise of totalitarianism than the disappearance of the social question as a whole.


Things continued to move in this direction until the 2008 financial crisis broke out.


Few benefited from this state of affairs than Vladimir Putin. The benefits he reaped from the situation in Britain, where the exorbitant wealth and investments of Russian oligarchs filled the gap between lavish spending and declining incomes, were of particular significance.


What does all of that have to do with France and the potential for populists, fascists, half fascists to make new strides and shift politics from the center to the extremes?


The reasons are many. The most prominent one is that democracy, despite all of its virtues, no longer secures the economic needs of many residents- forget about ensuring prosperity. This matter should not be left to peoples’ whims on the assumption that they are restrained and well-intentioned. The state must jump into the ring so that the poor don’t fight in the opposite corner.


France is merely an example, though it is a prominent and extremely worrying one.


Yes, the socialism we have come to know has been eroded: French socialism met the same fate as French communism, and the mighty force that was Italian communism killed itself and disappeared. It is also true that the meaning of social classes changed significantly. However, the fact that poverty has become shaper and more pervasive is more significant, even without classes, labor, and production.


Just like the fear of communism was among the reasons that Keynesianism was sought, fear of populism is a pertinent motive for seeking a new Keynesianism that creates a bulwark against Marine Le Pen and her like coming to power.


Other opinion articles

Editor Picks

Multimedia