The General Theory of Employment, Interest and Money was published in 1936. But Keynes’ initial draft of 1933 contained a feature which was omitted in printed version. In the draft, Keynes employs a taxonomic framework to distinguish the classical theory of capitalism from his general theory. The taxonomy showed that depending on the manner in which capital and motivation of production are incorporated, an economic enterprise’ “market-clearing results will be either ensured or merely possible”. When compared to the co-operative economy of the classical theory, the entrepreneur economy illustrated by Keynes can succeed in bringing about the following outcomes – market clearing, stagnation and instability. Keynes also agreed with the distinction Marx made between C-M-C and M-C-M. In other words, between a) selling commodities (C) to obtain money (M) with which to buy other commodities and b) purchasing commodities with money so as to generate more money. These two models also seem to distinguish the modes of operation of the proletariat and bourgeoisie respectively. The fact that Marx and Keynes agreed on many fronts is a sign of authenticity for Keynes’ theory. It also holds relevance for policy makers of today, for the early years of the twenty first century has seen renewed interest in socialism and community-based economic systems as is evident from the success of the World Social Forum in Porto Allegre (Maclachlan, 1993).
Another crucial point that Keynes makes is the distinction between consumption and investment, the understanding of which is key to grasping his larger synthesis. To quote,
“His theory states that employment depends upon the amount of investment, or that unemployment is caused by an insufficiency of investment. This, of course, is a great simplification. Nevertheless, it indicates the emphasis on investment. Not only do some workers receive employment directly in building new factories, houses, railroads, et cetera, but the workers so employed spend their money for the products of factories already built, pay rent on houses already built, ride railroads already built, et cetera. In brief, employment in investment activity helps to maintain demand for the consumption output of existing facilities. In order to make full use of the factories already in existence, we must always be building new factories…” ( Maclachlan, 1993)
Continuing on the theme of Keynes and the modern social justice movement, the questions raised by Keynes’ work pertaining to the effect of the wealth owning class of society on the rest of the populace deserves mention here. According to Keynes, when wealth-holding class chooses to hoard the money rather than channelling it toward development projects that includes investing and lending, then the whole of the society is adversely affected. If this practice of preferring to own rather than invest was pervasive among the wealth-owners is a sure indicator of future economic uncertainty, which would not augur well for all sections of demography. In other words, in an atmosphere of predictable economic future, there would be no point in storing money in currency form. In Keynes’ own words, “the desire to store wealth in the form of money is a barometer of the degree of our distrust of our own calculations and conventions concerning the future. . . . The possession of actual money lulls our disquietude; and the premium which we require to make us part with money is the measure of the degree of our disquietude.” (Rousseas, 1986) And this observation has a lot of relevance today as the world economy is headed toward a period of recession at the time of writing this essay.