Keynesism in a Nutshell; H. Hazlitt

Henry Hazlitt Keynesism in a Nutshell Henry Hazlitt, a frequent contributor to The Freeman, has a long and distin guished career as an economist, jour nalist, editor, and literary critic. Best known of his numerous books is Eco nomics in One Lesson, originally pub lished in 1946 and since translated into eight languages with sales of more than 700,000 copies. The recently revised edition is once more available in in expensive paperback. JOHN MAYNARD KEYNES was, basi cally, an inflationist. This has not been clearly recognized because he never spelled out, step by step, the consequences of his proposed remedy for unemployment and depression. That remedy was deficit spending by the government. He recognized that increased govern ment spending paid for by equally increased taxation would not "add purchasing power." The increased taxation would offset any "stimu lus" that the increased government spending would provide. What counted, he confessed, was the gov ernment deficit. But he failed to take his readers beyond this step. How 650 would that deficit be financed? Ei ther the money would have to be borrowed, or new (paper) money· or credit would have to be created. But if the· money were borrowed, then the previous spending stimulus would be reversed by a deflation when the borrowing was repaid. The only thing to prevent this reversal would be to allow the new spending to remain outstanding. In other words, the Keynesian solution to every slow down in business or rise in unem ployment was still another dose of inflation.

I may point out (if that is still deemed necessary in this inflation ary era) that no inflation of which we have historical know ledge re sulted in sound and continuedbusi ness expansion but only in currency depreciation, a wanton redistribu tion of profits and losses, disorga nized output, and economic demor alization. This has been true whether we begin with the coinage debase ment of ancient Rome or the paper money scheme of John Law in 1716. The lessons of inflation are soon forgotten. They apparently must be relearned in every generation. ® Bill Anderson ECON'OMIC DEMOCRACY DEMOCRACY is a hallowed word in our society. Its very name denotes free choice, relief from oppression'i self-determination, civil liberties and. rights of expression. Indeed, the word, according to theologian Mi·, chael Novak, is considered "so fa·· vorable that even the least demo-· cratic of nations insist upon calling themselves by the name which most condemns them."l Yet, at the same time, it is a misused term, one that all too often brings semantic confu·· sion rather than enlightenment to the social agenda. "Economic De·· mocracy" is such a term, a "hook"