Karl Marx was an unwitting world changer. Unlike his predecessor Adam Smith, Marx saw and believed in the inequality that capitalism could bring. This inequality would lead to a revolution of the oppressed workers leading to the formation of a Communist state. However, like the rest of his economist kin, Marx loved to write, his principal works, Das Kapital could make claim to be one of the longest (and most boring) books ever written. However his ideas when teamed up with accomplished writers were haunting.
A leaflet called the ‘Communist Manifesto’, which was distributed to the masses in London contains several passages which to this day remain a part of the canon of political economy.
“A spectre is haunting Europe — the spectre of communism”
“ The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a communist revolution. The proletarians have nothing to lose but their chains. They have a world to win.”
Despite the attractions of Marxism, it never really took hold in the US and Western Europe. Economists were just too enamored with the free market orthodoxy of classical economics. Just to remind you, these economists differed little from the original ideas postulated by Adam Smith.
However in the 1930s free market economics was to face an impossible challenge – The Great Depression. With it came mass unemployment, bankruptcies and falling output. Western democracy itself was threatened. The result of this was a new way of thinking about economic problems and the end of blind optimism that economists held that in the Long Run everything would be OK.
Thus it was in the middle of the great depression that J.M.Keynes rose to prominence retorting to orthodox economists that “In the Long Run we are all dead” Keynes saw no point in waiting a couple of decades for the depression to come to an end. Keynes argued for immediate intervention and by that he meant that in particular the government should spend, spend, spend.
We will look more at Keynes next week.