Mat Van Den Art's Blog

1.1 Keynes vs Friedman – The struggle which changed the history

Posted in MDes Dissertation by matvandenart on August 11, 2010

When economist John Maynard Keynes wrote in 1936 his most famous book – general theory of employment, interest and money, his ideas become the corner-stone of the pre and post-war period of modern capitalism respected by policy-makers in all major western countries. Keynes economic model promoted free capitalism within the boundaries of strict governmental oversight where government acted as a referee in the order to prevent another financial crisis as the one in 1929. Keynes fought for the rights of the common man as the key to successful capitalism and for governmental oversight of the size and activities of all major financial players capable of causing great destruction to national and emerging global economies.

Post war period of relative economic success combined with the hunger for extreme growth brought forth another economic giant and thinker, the Nobel price winner Milton Friedman. Friedman’s western world followers Ronald Regan, Margaret Tacher and August Pinochet to mention few, listened to alluring voice of emerging financial markets to provide their countries with the fast cash solutions(Perkins)1 to their political mismanagement agenda. Repayment to the markets was in the form of free market monetarism and resentment of regulations and limitations of Keynesian policies.

The struggle between Keynes and Friedman’s vision of sustainable global growth could be summarized in the following story well known among the financial sector.

One day Keynes and Friedman stand in front of the st. Peter at the gates of Heaven. When asked to account for themselves, Keynes claims that he tried to save millions of poor people from starving during the depression. Friedman on the other side states blandly that his goal was to get rid humanity of sin. How so, st. Peter asked Friedman? Breaking of rules is sin the professor replied so I tried to remove rules.

Video 1)

Limitless pursuit for economic benefits/money as the prime motivation for the companies and individuals operating within the capitalistic framework is understood to be right and is tolerated by general public. The economic growth is seen as the prime principle of any company’s existence. Local, national, social or even environmental issues come into consideration later. Human societies are forced to tolerate decisions made by global profit-hungry companies on their behalf, directly affecting their quality of life, environment and other local or national issues.

Video 2)

The current economic system which changed name from Keynesian capitalism to Friedman’s predatory capitalism rewards the most reckless taking higher risks in the order to gain the most regardless of the effects and implications to the wide public or local/global environment. The exploitation of either intentionally fabricated or real crises and imposition of mass-medial shock therapy creates atmosphere of fear – fear for job loses, financial security, social status, health care standard and others. Human susceptibility to insecurity and fear in turn makes ordinary citizens more inclined to acceptance of otherwise irrational or socially/environmentally damaging governmental or corporatocracical decisions.

Video 3)

The state in which current financial system appears to operate could be compared to the system where the road rules would be removed and the faster driver would be preferred over the most cautious one. The fastest and presumably most reckless reaching the destination in shortest time is rewarded with the bonus regardless on the number of offences or accidents caused on his way. General tolerance to such behaviour can be no more accredited to human inability to understand or control complex global systems in which our current economic system operates. This is the problem of values, constantly advocated by mass media advertising supported by unceasing hunger for economic growth.

We are systemically being blinded by global corporations using the financial reliance of mass media on advertising to increase demand and persuade wide public about our indisputable right for more. This constant ideologistic bombardment creates ad by ad social model revolving around capitalistic consumerism where our needs and values are being shaped by what we can afford rather than what is right for common good.

However do not be folded, this problem is not new to our society. So far we just have not been able to overcome it. The same challenge was described by Edward R. Murrow broadcast journalist in 1938 at CBS television convention; Television represents evidence of decadence, escapism and insulation from realities of the world in which we live. We are currently wealthy, fat, comfortable and complacent. We have built in allergy to unpleasant or disturbing information, our mass media reflect this. But unless we get up from our fat surpluses and recognize that the television in the main is being used to distract, delude, amuse and insulate us. Then television and those who finance it, those who work at it, and those who look at it might see totally different picture too late.2

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1) John Perkins. Hoodwinked: An Economic Hit Man Reveals Why the World Financial Markets Imploded–and What We Need to Do to Remake Them. New York (NY): Crown Business ; 2009.

2) As stated during CBS television convention by Edward R. Murrow, in 1938.

Video1 ) John Perkins. Author. GreenFestival[podcast on the Internet].2Celsius Network; 2009 Nov [cited 2010 July 25]. Available from: http://www.youtube.com/watch?v=lYJmyaSRBm0

Video 2-3 ) Naomi Klein. Collumnist. The Shock Doctrine: The Rise of Disaster Capitalism [podcast on the Internet] VideoNation; 2007 Sep [cited 2010 July 25]. Available from: http://www.youtube.com/watch?v=JG9CM_J00bw

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  1. Content « Mat Van Den Art's Blog said, on August 11, 2010 at 10:48 pm

    […] 1.1     Keynes vs Friedman – The struggle which changed the history […]


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