Greece is in many ways the dead end of Keynesian economics; of the idea that aggregate demand alone, regardless of its source, is what fires prosperity. Like many modern top-heavy welfare states, Greece has abundant demand; but thanks to unaffordable government promises it has few willing to produce enough to pay for it, and –even now!—an infrastructure of credit creation ready, willing and able to underpin it.
The result, of course, has been prosperity’s opposite.
So how does something as intellectually lame as Keynesian apparatus get traction? Why were Keynes’s nonsensical nostrums accepted so readily in the mid-twentieth century by neoclassical economists when they’d been thoroughly exploded decades before by British classical economists?
The answer given by Austroclassical economist George Reisman is: “intellectual decay.” Not just in those (like Hayek and the ineffectual Pigou) who attempted to answer Keynes in the 1930s, or later on post-war when the Keynesian technocrats took control of the academies and their centres of economic “planning” -- because the decay had started several generations earlier.
So, you want to know what made Keynesianism possible, and with it disasters like Greece? Answer: intellectual decay.1
Doesn’t it make you want to know more about the wages-fund doctrine “and other such essential doctrines of classical ‘economics” like Say’s Law that Keynes was supposed to have assailed? And about that intellectual decay? Because it wasn’t just exhibited in economics – and it didn’t of course originate there. Because, to paraphrase Keynes himself,
So-called practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct philosopher. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.
We can identify the scribbler most at fault as German philosopher Immanuel Kant3, that “catastrophic spider” as Nietzsche called him who had declared “a few years back” that it was senseless to seek causes or try to integrate knowledge of phenomena since all these mere appearances – the notion for example that saving was somehow causally related to wage levels and future production, for example – or that production of commodities itself creates a market for the commodities produced -- were only surface manifestations of the unknowable.
Trying to explain these slippery manifestations by means of causality and integrated argument would be, argues Kant, a long, slow path to bedlam. American pragmatist John Dewey essentially holds that the ultimate source of the decay recounted above was German idealism, noting Kant as “the thinker who for the past seventy-five years supplied the bible of German thought” that would foment a “revolt” against British support and enthusiasm for laissez-faire liberalism in economics and politics.4 The Kantian “bible’s” core themes, says Dewey, were skeptical, idealist, and duty-based:
Kant to himself and to many in his own day was a revolutionary. There is no valid intellectual access, he taught, to the things of ultimate importance to man. …
the immense interest taken in professional German philosophy in the generation after 1870 — the generation of revolt against the empiricism that reigned in Great Britain from Locke onwards. …
German philosophy was seized upon [by this generation] as a weapon with which to attack the former official philosophy of England. It is more than a coincidence that the reign of German idealism in Great Britain5 coincided with the revolt against laissez-faire liberalism in economics and politics, and with the growth of collectivism … .
… and of intellectual decay.
1. Reisman’s phrase echoes Mises’s on the rise in those earlier generations of “the anti-capitalist mentality”: [T]he supremacy of those modern doctrines is a proof of intellectual decay … . It demonstrates … the decay of the intellectuals and of the bourgeoisie.” (Mises, Omnipotent Government, pp. 118–19)
2. From George Reisman’s book Capitalism: A Treatise on Economics, p. 865. (You can download a free PDF copy at Reisman’s site, www.capitalism.net)
3. Of Kant, the “all-pulveriser,” H.L. Mencken once observed, “Kant was probably the worst writer ever heard of on earth before Karl Marx. Some of his ideas were really quite simple, but he always managed to make them seem unintelligible. I hope he is in Hell." Mencken was being generous.
4. Quotes from Dewey’s 1929 collected essays, Characters and Events: Popular Essays in Social and Political Philosophy, which also suggests: “It is possible that the Great War [no less] was in some true sense a day of reckoning for Kantian thought” (68).
5. Hard to believe, but one of the prime popularisers of Kant’s “idealism” in England was a book written and intended as an entertainment. Little-known now, for a generation of British and American romantics Carlyle's Sartor Resartus was the populariser of Kant’s philosophy.
The book Sartor Resartus (literally, 'The Tailor Re-Tailored') purports to describe dialectically a 'Book of Clothes' produced by a 'professor of clothing' Doctor Diogenes Teufeldrockh (Dr Heaven-Sent Devil's-Dung), which book, we are told, argues that clothes are simply appearances or metaphors for the true 'inner state' of a thing -"the material world is symbolic of the spiritual world of ultimate reality. Man's creeds, beliefs, and institutions, which are all in tatters because of the enormous advances of modern thought and science, have to be tailored anew as his reason perceives the essential mystery behind the natural world."
Itself written metaphorically (of course), the book is in may ways an ancestor to the books of Umberto Eco.