Dec.7, 2:00 a.m.
In 1931 (or 1932 see below) John Maynard Keynes delivered a lecture in Chicago sponsored by the Halley Stewart Trust on the economic depression and the financial crisis that developed in its wake. During that lecture Keynes commented on the behaviour of leading politicians throughout the west and their reluctance to embrace the correct strategy of economic stimulus. His words from then now some 79 years later bear repeating for they have in some respects a hauntingly contemporary quality and relevance. He said then:
Can we prevent an almost complete collapse of the financial structure of modern capitalism ? With no financial leadership left in the world and profound intellectual error as to causes and cures prevailing in the responsible seats of power, one begins to wonder and to doubt...the immediate causes of the world financial panic-for that is what it is- are obvious. they are to be found in a catastrophic fall in the money value not only of commodities but of practically every kind of asset...Debtors of all kinds find that their securities are no longer the equal of their debts. Few governments still have revenues sufficient to cover the fixed money -charges for which they have made themselves liable.
Moreover, a collapse of this kind feeds on itself. we are now in the phase where the risk of carrying assets with borrowed money is so great that there is a competitive panic to get liquid. and each individual who succeeds in getting more liquid forces down the price of assets in the process, with the result that the margins of other individuals are impaired and their courage undermined. and so the process continues. ..each nation, in an effort to improve its relative position, takes measures injurious to the absolute prosperity of its neighbours ; and since its example is not confined to itself, it suffers more from similar action by its neighbours than it gains from such action itself. practically all the remedies popularly advocated to-day are of this internecine character. competitive wage reductions, competitive tariffs, competitive liquidation of foreign assets, competitive currency deflations, competitive contractions of new development- all are of this beggar-my-neighbour description. The modern capitalist is a fair- weather sailor.as soon as a storm rises he abandons the duties of navigation and even sinks the boats which might carry him to safety by his haste to push his neighbours off and himself in.
I have spoken of competitive economy campaigns and competitive contractions of new development...An economy campaign, in my opinion, is a beggar my neighbour enterprise, just as much competitive tariffs or competitive wage reductions, which are perhaps more obviously of this description. for one man's expenditure is another's income. thus whenever we refrain from expenditure, whilst we undoubtedly increase our own margin , we diminish that of someone else; and if the practice is universally followed, everyone will be worse off. An individual may be forced by his private circumstances to curtail his normal expenditure, and no one can blame him. But let no one suppose that he is performing a public duty in behaving in such a way. an individual or an institution or a public body which voluntarily and unnecessarily curtails or postpones expenditures which is admittedly useful is performing an anti-social act.
Unfortunately the popular mind has been educated away from the truth, away from common sense. the average man has been taught to believe what his common sense would tell him was absurd. Even remedies of a right tendency have become discredited because of the failure of a timid and vacillating application of them at an earlier stage...through lack of foresight and constructive imagination the financial and political authorities of the world have lacked the courage or the conviction at each stage of the decline to apply the available remedies in sufficiently drastic doses;......
In the United States it is almost inconceivable what rubbish a public man has to utter to-day if he is to keep respectable. Serious and sensible bankers, who as men of common sense are trying to do what they can to stem the tide of liquidation and to stimulate the forces of expansion, have to go about assuring the world of their conviction that there is no serious risk of inflation when what they really mean is that they cannot yet see good enough grounds for daring to hope for it....What we have to fear ...is timidity and a reluctance to act boldly.
(J.M.Keynes, an excerpt from the Halley Stewart lecture 1931, the World's Economic Crisis and the Way of Escape Robert Skidelsky states that Keynes gave this talk in Feb. of 1932 but its text is printed in the book entitled Halley Stewart Lecture 1931published by George Allen and Unwin, a copy of which I have in front of me. He then cites his source as the CW vol.21 of Keynes So perhaps Keynes made his talk in Feb. 1932 but it was included in the Halley Stewart Lecture 1931 published in May of 1932 after Keynes' had delivered his address. )
No comments:
Post a Comment