Henry Hazlitt dealt well with the contradictions of Keynesism. You borrow money–with interest–from the future to fund the present, and in doing create the illusion of prosperity in the present, at the cost of reduced prosperity in the future. A notable line that comes up often is Keynes aphorism “in the long run, we are all dead”. He had no children, however, and in the long run our children inherit what we create. Keynes was a vicious, selfish man, whose “morality” consisted in convivial clubbishness with those he saw as social and political fellow travellers and bon vivants.
I want to point out, though, the disruptions which his policies, when followed, create in the private sector. Let us suppose that “stimulus” money hits Smalltown, USA. They want to build a new highway, complete with rest stops and playgrounds. The economy is somewhat down, but some businesses are holding on. Where the going wage for, say, a plumber is $15/hour, he will now pay $30/hour. In our country, all Federal contracts have to pay Davis-Bacoin wages, which are substantially higher than what would otherwise be free market prices.
The whole town goes to work on this project, which is scheduled to last some 5 years. During that time, they live well. New restaurants are opened, clothing stores, laundries, and put-put courses. Plumbing companies have a hard time finding workers, since they all go to work for the government. Some go under.
Then the project finishes and the money runs out. Nobody can go out to dinner any more. Nobody buys clothing any more. They stop going to the put-put course, and revert to doing their own laundry. All the businesses that were created by the Stimulus now go out of business. Many or most of the private enterprises that existed before the “blessing” of the project have folded. The town is now in a much deeper Depression than before. Unemployment is even higher than before. What is the Keynesian solution? Either unemployment benefits, funded by some combination of deficit spending, and increased taxes on those businesses that remain productive in other parts of the country. Alternatively, if we use his example of the “benefits” of pyramid building, we use deficit spending to build a second highway next to the first. Now everybody is employed again. Now, the Socialits running the thing have created one more drag on the private sector.
Make no mistake: the end goal is for every man, woman and child in the United States and around the world to depend entirely and he and his for every last detail of their life: food, clothing, shelter, medical care and everything else you need.
This program has been enacted many times around what I will call for convenience the Third World. The IMF loans money for some project. The money is spent (after a suitable amount is siphoned off by the ruling elite), apparent wealth is created for a period of time, then things are twice as bad. The country is in debt, with no private sector resources to pay the taxes needed for survival. What then? Either another round of borrowing (the IMF creates money, as I understand it, so there is no practical limit to their ability to lend), or paying bills with printed money, which creates they hyperinflation we read about around the world. Such policy benefits the ruling class, and wrecks the lives of everyone else. The people with the money, though, have the guns, so things continue on as before.
If people accept the Keynesian argument that spending money creates jobs, this is their fate.
The alternative? IF we are going to spend money for job creation, it MUST be made available to private enterprise, in economically sustainable enterprises. Such loans must be short term, and they must be paid back, as in the microloan program.
To foster global development, we must exorcise the ghost of this very clever, very evil man. And we need to end both the IMF and the World Bank, in a manner like I have proposed for our own national financial system.