In this last piece on Keynesian economics I am going to discuss some of the unanswered questions about Keynesian statist ideology. Let’s hypothetically assume that Keynes’ economic theories are workable and excellent. On the other hand, no one can deny the fact that for it to work there is the need for extremely very intelligent and all knowing leaders or bureaucrats to direct the affairs of state to attain its maximum potential. Sadly, this is where the problem starts. Who takes the decision? Who decides which industry to get what? Who decides when an industry has come to the end of its usefulness? It is an inescapable phenomenon that so many industries die in the course of human progress. Of course, it has been definitively established by Joseph Schumpeter in his creative destruction.
In Britain, for instance, the secretary for agriculture is there mostly to take charge when there is an outbreak of diseases such as foot and mouth disease, bird’s flu etc. He is not there to direct who should produce what and who gets what. Anybody should go and ask the British Prime Minister whether he knows how the British people get fed. He doesn’t need to know, because the market does that. Though the British people don’t produce enough food to feed themselves, yet they are better fed and, sadly, obesity is now putting huge strain on their NHS.
How many people use films in their camera these days? Most cameras, as we know, are now digital technology. So if there is a film industry in a particular statist economy, which has not kept pace with the changing times the minister responsible will have to take the decision to kill off that industry with the resultant loss of jobs. There might be a powerful parliamentarian in the constituency of that industry who lobbies for the minister to keep it afloat by propping it up with tax payer’s money. The fact is that particular economy no longer needs the service of that industry, yet precious cash will be tied up in it while other sectors of the economy that needs it badly with bright prospects starve. It is called misappropriation of resources. It might not touch the sensibilities of these socialist, but it is the beginning of the downward slope. Can you imagine if the computer industry had been stifled in favour of the dying old type writer industry, which served the same purpose, but outlived its usefulness?
Secondly, a powerful bureaucrat or a minister needs a factory in his constituency to mop up excess unemployment in his locality. Now, through arm twisting, a factory is located in an area that lacks so many factors to make the factory viable and run efficiently. Predictably, the factory is then run to the ground at the expense of scarce national resources. And this is exactly what happened in some of the GIHOC industries that were established by Nkrumah. When an economy is run like this it is bribery, corruption, nepotism, cronyism, gerrymandering and all the political vices you can think of that blooms and flourish like spring flowers. Strangely, those who are against capitalism make the most noise in the face of these unacceptable social vices.
In addition, the knowledge needed to run a national economy is so vast; it is practically beyond the capabilities of any single person or group of bureaucrats. According to Professor Thomas Sowell in his monumental book ‘Knowledge and Decisions’ he argues that knowledge is so varied and vast that no single person can be able to master everything. In that, the most brilliant nuclear physicist will be found wanting, and, perhaps die if he is marooned in some jungle in the Amazon forest. Whereas some primitive indigene who cannot even count to hundred can survive in that environment with the slightest ease.
Besides, once such responsibility is reposed in one single person or a group of people they wield so much power that the fortunes of the rest of the population virtually lie in their hands. Worst of all, when this happen in a multiparty democracy, especially when your party loses an election it means you are going to be hungry for a very long time. That is why people cannot contemplate the idea of losing, especially in Africa, and for that matter Ghana, because your survival depends on it. However, Nkrumah had a wonderful solution to that – one party dictatorship. Thank God he was booted out before he could do further damage. And I will reference Bevan again who gave birth to the British NHS. He believed that you can have both freedom and socialism, but he put special premium on freedom to the extent that if socialism can only work at the expense of freedom then he will have to ditch socialism. And I am pretty certain that if he was alive today he would jettison socialism like a cannon ball.
In Mr Kwarteng’s essay he argued that capitalism is all about greed for money – the cash nexus they call it. Is there any difference between someone being greedy for money and Nkrumah being greedy for power and it didn’t matter to him how many lives he trampled on. Socialism is all about the concentration of power to those at the top, and it is counter production. They lack the necessary knowledge to make the system work for everyone, eventually leaving everybody in destitution like our country Ghana, which had bright prospects at the inception of our independence. Most of my critics will not stop to think why we all find ourselves in foreign lands. Especially, those who make the most noise about my articles don’t live in Ghana, but in United States, Britain, Germany and other prosperous Western countries.
The ideas of Keynes have been tried and found wanting, yet economic quacks who don’t pay a price for their stupidity think that it is alive and well. Very serious people have tasted the forbidden fruit of Keynesian economics and gotten their hands burnt pretty badly. The case of Japan is very sad, because they have been applying the Keynesian ideology since the nineties when their economy stagnated and they have not made any meaningful headway ever since. If the Japanese who are very frugal and sharp in attention to detail in their approach to everything cannot make it work, what makes anybody think that they can have success with that half baked ideology?
As Mr Kwarteng wallows in his ignorance of a subject he has no clue, but tries endlessly to impress his unsuspecting admirers, at least, there is one single thing that I will lift my hat in admiration for Lord Keynes. There is no doubt in my estimation that if he was alive today he would have changed his mind on the ideology that he gave its respectable theoretical foundation. Keynes’ ideas changed throughout his life in response to the events around him, something he took pride in, famously responding to criticism that his views were inconsistent by saying, ‘When my information changes, I alter my conclusions. What do you do, sir?’
Keynes was modest enough to accept defeat and move on when he was confronted with the facts. He died just a year after the Second World War. I am convinced that he would have changed his mind if he had lived ten years more. Thank you for your time.
Philip Kobina Baidoo Jnr
London
baidoo_philip@yahoo.co.uk
