The millennium’s unlikely prophets2 min read . Updated: 01 Apr 2011, 09:01 PM IST
The millennium’s unlikely prophets
The millennium’s unlikely prophets
Both Karl Marx and John Maynard Keynes seemed to have been permanently banished into the dark shadows of obscurity until the bright boys of Wall Street almost brought the world economy down in a speculative fit. Few economists and pundits emerged from the wreckage with their reputations intact. Marx and Keynes came out with enhanced status.
Keynes’ prophetic disciple Hyman Minsky had a better explanation for what happened in his thesis on financial instability, while the American economist Irving Fisher’s theory of debt deflation offered a better explanation of the subsequent demand collapse. Keynes mattered only at the third stage, when governments around the world ran huge budget deficits to keep the demand engines chugging despite the global panic. One could also argue—contra Marxist belief—that it was the users of capital (bankers and derivative traders) rather than the owners of capital (the shareholders of global banks) who were the villains of the piece.
So Taylor can at one place discuss Gaussian distribution of asset prices (the well-known bell curve), while at another place tartly dismiss Milton Friedman, who along with Robert Lucas was responsible for placing some of the most potent sticks of dynamite under the Keynesian edifice in the 1970s, as someone who merely gave a modern spin to the doctrines of 19th century Swedish economist Knut Wicksell. At another place, Taylor dismisses what is called new classical economics, which arose out of the so-called Lucas critique and is a centrepiece of contemporary textbooks, as “a restatement of extreme nineteenth-century neoclassical ideas decked out in mathematics borrowed from 1960s rocket science".
However, the deeper point Taylor makes is that much of modern economics is actually derived from insights provided by economists in previous ages. He powerfully illustrates this in almost every chapter in his book. The great masters have been forgotten as the history of economic thought has disappeared from university courses and mathematical elegance has become an end in itself. Economics has suffered because it turned its back on its own rich heritage.
How to Change the World by the Marxist historian Eric Hobsbawm is a
Though Hobsbawm remained a party animal (as the term was understood in another age), he steered clear of the two extremes that many of his contemporaries embraced: becoming a party hack or settling into world-weary cynicism. Nor did he go down the rabbit hole of postmodernist cultural criticism, which became the sorry refuge of a lost ideology.
Hobsbawm argues in his introduction that “Marx is, once again, very much a thinker for the twenty-first century" though he also adds later: “The Marx of the twenty-first century will almost certainly be different from the Marx of the twentieth." Nor does he shed tears for the Soviet Union and its several clones, uniformly brutal social and economic disasters. For Hobsbawm, the continuing relevance of Marx is three-fold—as a thinker on the economy, about history and human society. One almost gets through the book feeling that Hobsbawm has more hopes for Marx as a thinker than as a guide for political action, which makes the title of his book even more puzzling.
Neither Marx nor Keynes can fully explain what to do about the challenges facing us in the new century, as both Hobsbawm and Taylor freely admit in their books. Yet they deserve to be read and studied—for their insights into economic cycles, the nature of government, radical uncertainty, the hope of human freedom, and much more. The two books under review offer a window to the worlds of Marx and Keynes.
IN SIX WORDS
Political economy, past and perhaps future