Each scholar’s new book reflects his distinct intellectual engagement with Keynes, but collectively they point in a common direction. Keynes, they suggest, would argue that our current mess has three main causes: failures of the economics profession, mistakes by government, and regrettable social trends.You can probably guess the first two; what of the third?
These books suggest that Keynes also would have found something troubling about contemporary Western society, or at least the version of it that emerged in the post–Cold War United States. Keynes’s economics was rooted, always, in a normative, philosophical vision, in particular that the economic game was not about winning the candle. This was one of Skidelsky’s great contributions in his biography, and Return of the Master treats us to a chapter on “Keynes and the Ethics of Capitalism,” including Keynes’s aversion to “the objectless pursuit of wealth.” Rather, the purpose of economic activity (and the role of the economist) was to “solve” the economic problem--the provision of adequate needs, opportunities, and comfort--so that the important things in life could be pursued.Probably you'd guessed that too.
But in the mania of the American housing bubble, the chase of wealth became everything. The financial sector expanded, national savings rates plunged, and Clinton-era deregulations were followed by the Bush administration’s abdication of government oversight. Financiers eagerly accepted the open invitation to recklessness and enjoyed astronomical compensation packages for embracing imprudent risks. Borrowers took on debt far beyond any responsible expectation of what they could repay. In retrospect even Alan Greenspan finally understood the errors of the era of unregulated finance he championed.
Where Obama chiefly disappoints is in his failure to challenge "the objectless pursuit of wealth" in favor of different values, social values. It's an uphill climb, but if the president can't do it, I wonder who can.