this piece at the WCEG blog, after depicting Adam Smith as being in dialectical opposition to Karl Polanyi on the subject of social democracy versus laissez-faire free markets, he tries to classify Friedrich von Hayek - much beloved of the classical liberal economists like those over at Catallaxy Files - as one of the lesser "channels" in a river "delta" of economics of the 19th and 20th centuries, along with Leninism and Keynesianism.
1. Lenin says the social democracy or democratic socialism is unstable. The bourgeoisie is hegemonic. It will turn the mechanisms of the democratic state to its own purposes. What is needed is aggressive communism to exterminate the bourgeoisie as a class. Only after the aristos and the bourgeoisie and the hep-men and the kulaks and the careerist bureaucrats have been eliminated can a properly-good society be built.
2. Keynes says that we really need much less social democracy (or democratic socialism) than the main Polanyi current believes. Simply stabilize aggregate demand at a high level via clever central bank financial engineering, and people will not mind that the market treats the “fictitious commodities” like commodities. Moreover, the taste-making and the thrift-promoting virtues of the bourgeoisie sitting at the top of a fairly-steep socioeconomic pyramid are a feature, not a bug, for a good society.
3. Hayek says that the problem with classical liberalism was that it was not pure enough. The government needed to restrict itself to establishing the rule of law and to using antitrust to break up monopolies. It was the overreach of the government beyond those limits, via central banking and social democracy, that caused all the trouble. A democratic government needs to limit itself to rule of law and antitrust–and perhaps soup kitchens and shelters. And what if democracy turns out not to produce a government that limits itself to those activities? Then, Hayek says, so much the worse for democracy. A Pinochet is then called for to, in a Lykourgan moment, minimalize the state. After social democracy has been leveled and the rubble cleared away, then–perhaps–a limited range of issues can be discussed and debated by a–limited–restored democracy, with some kind ofIf Smith and Polanyi are to wear the clashing guernseys of Team Freedom versus Control FC, how do we assess these three other channels, if we are to do so? Perhaps DeLong would argue against such fastidiousness, but it seems to me that he has framed these three in order of... something. It's not in order of adherence to democratic principles, because all three credos are in some ways repudiation of the supposed depredations of democracy, from Lenin's mistrust of bourgeois institutions through Keynes' belief in minimalist efficiency to Hayek's railing against what is called these days the voters voting themselves "free stuff". In fact, the lack of faith in democracy is what unites all three, as DeLong tells it - but that's not what they differ on.
group of right-wing army officers descended from latifundistasCouncil of Guardians in the background to ensure that property remains sacred and protected, and the government small enough to fit in a bathtub.
Apart from setting them all on an equally low rating for democracy, I would argue that the axis on which you would plot these three to correctly identify them is class: specifically, which class should be given the reins of government to ride roughshod over the other classes as glorified Guardians of the Galaxy. Lenin believes the exploited workers should rule, Hayek believes the rich and privileged should rule, and Keynes sits somewhere in the middle with the bourgeoisie.
Are any of these better than the others? It certainly puts Hayek in a bad spot, if he's just the other side of an anti-democratic Leninist coin - not so much an anti-Lenin as Lenin with richer mates. DeLong makes this criticism more explicit by later accusing Hayek of being an imperial apologist for the Habsbergs of his native Austria. Lenin's Two Stage Theory - where a temporary period of capitalism will somehow result in socialism - is thus the mirror image of Lykourgan Pinochet-style Hayekism, where a period of fascism will somehow produce a stronger, leaner, more Spartan society.
In the middle, Keynes is no less guilty of wanting to bypass this pesky notion of democratic accountability (according to DeLong's framing), which leads to what these days is called wonkism, or technocracy - and we can all see how that has worked for Europe. Put the eggheads in charge with no pitchfork-wielding constituency to keep them honest, and they will tend to protect their own mates elsewhere in the ruling classes. It is true that of the three, Keynesianism tends to be more democratically popular than the other two extremes, but that is mainly because 21st century society has a much larger middle class - it is a happy coincidence, not a feature.
But why does economics have to abrogate democracy? The framing by DeLong here bypasses the possibility of the coexistence of strong economic theory with a healthy democracy. I am not an expert on Trotskyism or other examples of the more democratic-imbued criticisms of the three channels of economic thought as presented by DeLong. There must be some synthesis, however, which doesn't require abandonment of the Magna Carta.