Table Of Contenti
Keynes Against Capitalism
Keynes is one of the most important and influential economists who ever
lived. It is almost universally believed that Keynes wrote his magnum
opus, The General Theory of Employment, Interest and Money, to save capit-
alism from the socialist, communist, and fascist forces that were rising up
during the Great Depression era. This book argues that this was not the
case with respect to socialism.
Tracing the evolution of Keynes’s views on policy from WWI until his
death in 1946, Crotty argues that virtually all post-W WII “Keynesian”
economists misinterpreted crucial parts of Keynes’s economic theory,
misunderstood many of his policy views, and failed to realize that his
overarching political objective was not to save British capitalism, but
rather to replace it with Liberal Socialism. This book shows how Keynes’s
Liberal Socialism began to take shape in his mind in the mid-1 920s,
evolved into a more concrete institutional form over the next decade or
so, and was laid out in detail in his work on postwar economic planning
at Britain’s Treasury during WWII. Finally, it explains how The General
Theory provided the rigorous economic theoretical foundation needed to
support his case against capitalism in support of Liberal Socialism.
Offering an original and highly informative exposition of Keynes’s
work, this book should be of great interest to teachers and students of eco-
nomics. It should also appeal to a general audience interested in the role
the most important economist of the 20th century played in developing
the case against capitalism and in support of Liberal Socialism. Keynes
Against Capitalism is especially relevant in the context of today’s global
economic and political crises.
James Crotty is Emeritus Professor of Economics at the University of
Massachusetts Amherst and Senior Research Associate at the Political
Economy Research Institute. His research in theory and policy attempts
to integrate the complementary analytical strengths of the Marxian and
Keynesian traditions.
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Economics as Social Theory
Series edited by Tony Lawson
University of Cambridge
Social Theory is experiencing something of a revival within economics.
Critical analyses of the particular nature of the subject matter of social
studies and of the types of method, categories and modes of explanation
that can legitimately be endorsed for the scientific study of social objects
are re- emerging. Economists are again addressing such issues as the rela-
tionship between agency and structure, between economy and the rest of
society, and between the enquirer and the object of enquiry. There is a
renewed interest in elaborating basic categories such as causation, com-
petition, culture, discrimination, evolution, money, need, order, organ-
ization, power probability, process, rationality, technology, time, truth,
uncertainty, value etc.
The objective for this series is to facilitate this revival further. In contem-
porary economics the label “theory” has been appropriated by a group
that confines itself to largely asocial, ahistorical, mathematical “mod-
elling.” Economics as Social Theory thus reclaims the “Theory” label,
offering a platform for alternative rigorous, but broader and more critical
conceptions of theorizing.
46. Knowledge, Class and Economics
Marxism without Guarantees
Edited by Theodore Burczak, Robert Garnett and Richard McIntyre
47. Markets
Perspectives from Economic and Social Theory
William A. Jackson
48. Keynes Against Capitalism
His Economic Case for Liberal Socialism
James Crotty
For more information about this series, please visit: www.routledge.com/
Economics- as- Social- Theory/ book- series/ EAST
ii i
“This book is a marvel of economic narrative, with Crotty’s clarity and
Keynes’s elegance in stunning counterpoint, from Versailles through the
Depression to the war and Bretton Woods, all bringing forth the great,
neglected fact that Keynes’s Liberal Socialism was far more radical than
modern memory would have us think.”
James K. Galbraith, Lloyd M. Bentsen, Jr. Chair
in Government/ Business Relations, University of Texas at Austin
“James Crotty’s writings have always been marked by deep thought and
analysis, independence of mind, a judicious amalgamation of theory
and empirical evidence and humane and realistic policies. The present
volume is characterised by all these traits, it is vintage Crotty. The author
makes a convincing case that Keynes since The Economic Consequences of
Peace (1919) has been developing his ideas on liberal socialism that high-
light the centrality of planning and public investment in sustaining full
employment, ideas that came to full maturity in The General Theory and
Keynes’s writings and activities after its publication, in World War II and
up to his death in April 1946. Crotty’s arguments undermine the conven-
tional wisdom of Keynesians and non- Keynesians alike that Keynes’s
aim was to save capitalism from itself and should be required reading for
professional economists of all persuasions, policy makers, and concerned
citizens appalled by the economic and political malaise we currently find
ourselves in.”
Geoffrey Harcourt, Emeritus Reader in The History of Economic
Theory, Cambridge, Honorary Professor UNSW, Sydney
“This bold and brilliant work revolutionizes our understanding of Keynes’
economics. Instead of reopening the often-d ebated topic of the essen-
tial characteristics of ‘Keynesian economics,’ James Crotty puts Keynes’
lectures and writings into the context of both the economists and politicians
with whom he interacted and of his political and policy engagements.
Focusing on the moving pulse of Keynes’ ideas from 1919 through his
death in 1946, the author traces the evolution of his profound and exten-
sive vision: achieving a sustainable future for capitalism cannot be left to
market forces, but must be managed through public investment and of
socialist planning and coordination. This book’s provocative approach
is perfectly timed for broad rethinking of macroeconomics that is now
underway. In the density and originality of its themes, and in the integrity
and depth of its scholarship, the reader is left in little doubt that this is the
work of a master.”
Gary A. Dymski, Professor of Applied Economics, Leeds University
Business School, University of Leeds
“Regardless of whether you share Crotty’s revisionist framing of Keynes’
overarching vision, this smart, erudite and illuminating book is steeped
in the enduring wisdom of its subject, and shines a powerful light on the
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fundamental differences between the economics of Keynes and practice of
postwar “Keynesianism” – a distinction of pressing relevance for today’s
economic challenges.”
Jonathan David Kirshner, Stephen and
Barbara Friedman Professor of International Political Economy,
Department of Government, Cornell University
“James Crotty has written an outstanding description of the evolution
of Keynes’s thought on the role of State involvement in a capitalism that
promotes full employment and fairness. Characterisations of Keynesian
economics by policy-m akers and academics runs far afield from the clarity
of purpose that Keynes held when describing the working of a capitalist
economy. Crotty, in this clear and well written book, has surely set the
record straight.”
Professor Roy Rotheim, Skidmore College, USA
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Keynes Against Capitalism
His Economic Case for
Liberal Socialism
James Crotty
vi
First published 2019
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
52 Vanderbilt Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2019 James Crotty
The right of James Crotty to be identified as author of this work has been
asserted by him in accordance with sections 77 and 78 of the Copyright,
Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilised
in any form or by any electronic, mechanical, or other means, now known or
hereafter invented, including photocopying and recording, or in any information
storage or retrieval system, without permission in writing from the publishers.
Trademark notice: Product or corporate names may be trademarks or registered trademarks,
and are used only for identification and explanation without intent to infringe.
British Library Cataloguing- in- Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging- in- Publication Data
Names: Crotty, James, 1940– author.
Title: Keynes against capitalism : his economic case
for liberal socialism / James Crotty.
Description: 1 Edition. | New York : Routledge, 2019. |
Series: Economics as social theory |
Includes bibliographical references and index.
Identifiers: LCCN 2018059994 (print) | LCCN 2019001777 (ebook) |
ISBN 9780429464911 (Ebook) | ISBN 9781138612839 (hardback : alk. paper) |
ISBN 9781138612846 (pbk. : alk. paper)
Subjects: LCSH: Keynesian economics. | Socialism. | Liberalism.
Classification: LCC HB99.7.K38 (ebook) |
LCC HB99.7.K38 C76 2019 (print) | DDC 330.15/6–dc23
LC record available at https://lccn.loc.gov/2018059994
ISBN: 978- 1- 138- 61283- 9 (hbk)
ISBN: 978- 1- 138- 61284- 6 (pbk)
ISBN: 978- 0- 429- 46491- 1 (ebk)
Typeset in Palatino
by Newgen Publishing UK
vi i
This book is dedicated to the hundreds of bright and highly
motivated UMASS graduate students who took my course
in macro theory over the four decades that I taught it. The
lively discussions and debates that took place in the class-
room helped me develop the interpretations of Keynes’s
views on economic theory and economic policy that are the
subject matter of this book.
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ix
Contents
Acknowledgments xii
1 Introduction: was Keynes trying to save capitalism
or create “Liberal Socialism?” 1
PART I
From The Economic Consequences of the Peace
to The General Theory 23
2 The Economic Consequences of the Peace: 1919 25
3 Making sense of chaos: 1919– 1923 34
4 Public investment and state planning in 1924: the
real Keynesian revolution begins 48
5 The return to gold in 1925: deflation, social justice,
and class struggle 63
6 Three important “essays in persuasion” on the proper
economic role of the state: 1925– 1926 70
7 Destructive competition, corporatism, industrial policy,
and the new economic role of the state: 1927– 1928 84
8 Britain’s Industrial Future and the Board of National
Investment: a detailed analysis of the institutions to be used
by the state to regulate capital accumulation in pursuit of full
employment under Liberal Socialism 95
