There’s a lovely article up on National Review Online titled, “The End of Keynes: the debt deal is the final nail in the coffin” and written by NR‘s editor, Rich Lowry. But what is particularly interesting is who is actually acknowledging the demise of Keynesian economics but none other than one of the leading Democrats in the American Senate :
Sen. Dick Durbin, the liberal lion from Illinois, pronounces the debt deal ‘the final interment of John Maynard Keynes.’
The burial ceremony should be a nice, simple one after the violence done to the aged economist by the failure of the broad Obama stimulus program. The administration’s serial overpromising in his name did more to discredit Keynes than a century’s worth of broadsides by his intellectual enemies.
It is what I have been saying for a while now. And what I have also been saying is that Keynesian economics is dead everywhere except for just about every economics department in the world. Pick up just about any introductory text, and most advanced texts as well, and they are filled with Keynesian aggregate demand. There is absolutely nothing else. I suspect there would be very few economists who would understand how to interpret economic events without thinking in those terms. That is all they have been taught.
But just as we are seeing the meltdown of our economies under the strain of Keynesian theory, so shall we also see the meltdown of economic theory under the strain of economic events. Eventually there will have to be a return to Say’s Law. Eventually economists will have to again begin to teach that only value adding expenditure creates demand and only private businesses under competitive conditions can deliver value adding productive activity.
To go back to Rich Lowry and NR:
Nearly three years into the Obama administration, the unemployment rate is more than 9 percent, a grassroots movement devoted to cutting government has the upper hand in the House of Representatives, and the debt of the United States could well be downgraded by Standard and Poor’s. If Durbin thought that in these circumstances Keynes was heading anywhere other than a pine box, he hasn’t been paying attention.
But this is more than just the end of Keynes, it is also the end of socialism. It is the end of active government intervention. Not immediately, of course, but over time as the message gets out. The welfare state will never disappear but socialism will.
What we now have is the return to economic activity organised around the entrepreneur. We invented the capitalist free market system in the West and then, as others cottoned on, we abandoned it ourselves for various forms of state direction and control. But if even Democrat Senators can see the writing on the wall there is hope for us yet. The return of the entrepreneur is where the world’s economies must head next and eventually, in time, the economic textbooks will catch up.