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Deception: Root of Capitalism

Essay by   •  March 12, 2012  •  Research Paper  •  1,372 Words (6 Pages)  •  1,577 Views

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In this essay, I will discuss the major concepts of John Maynard Keynes analysis of the capitalist system and his attempt to reduce the inequality between the rich and the poor. Keynes identifies a major inequality of the capitalist system as well as the rich saving their capital, rather than spending it on themselves. He does however state that, "The immense accumulations of fixed capital...could never have come about in a society where wealth was divided equitably." (Keynes, The Economic Consequences of the Peace, 1919, p.116) Although the rich were mainly saving their capital prior to the war, eventually their fear of losing their capital came into effect after the war; as a result the rich started spending their money on themselves causing the poor to see the great disparity between their class and the rich class. Seeing the affect of the war, Keynes proposes a solution to this great disparity but also states, "I believe that there is a social and psychological justification for significant inequalities of income and wealth, but not for such large disparities that exist today." (Keynes, The General Theory of Employment, Interest and Money, 1936, p.137)

Before John Maynard Keynes proposes a solution to the inequality in the current capitalist system, he makes a few observations on the psychology of the two different classes. He sees the affect of the war on the whole system. Before the war, the rich were saving their capital in fear that if they were to spend it on themselves the poor would discover the vastness of the disparity. He then states, "Herein lay, in fact, the main justification of the capitalist system." (Keynes, The Economic Consequences of the Peace, 1919, p.116) Keynes indirectly states that the capitalist system is built on the deception of the poor, that the rich must not show their wealth but rather save and generate more income for a better future. To create more capital, you need more therefore, by continuing the deception of the poor, being that they could one day attain such wealth and also they could not live without the rich, the rich were able to use the poor as cheaper labour and keep them out as upcoming competitors as the rich quickly took over many businesses.

However, this dramatically slows down when the First World War begins, the successful capitalist lose a majority of their capital, and in their fear, they start spending their wealth on themselves but herein lay the fall of an unjust system. Keynes states," The war has disclosed the possibility of consumption to all and the vanity of abstinence to many." (Keynes, The Economic Consequences of the Peace, 1919, p.117) The change of psychology of the poor occurs after the war thus, "The bluff is discovered." (Keynes, The Economic Consequences of the Peace, 1919, p.117) The poor realize the immense amount of luxuries and quality necessities they were deprived of after the war's affect on the rich's spending habits; therefore as the ghosts knocked on the door of the scrooge so have the poor started to knock on the door of the rich because of their desire to have a greater part of the cake.

Keynes introduces the psychology of the investor he criticizes the stock exchange for allowing speculation to spiral out of control and turning enterprises in to a bubble. He says, "Speculators may do no harm as bubbles on a steady steam of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill done." (Keynes, The General Theory of Employment, Interest and Money, 1936, p.129) Keynes suggests that the stock exchange because of its daily fluctuations has turned investing into a short-term game and no longer do you have long-term investors but the majority are looking for instant gains causing speculation to be the center of investing rather than the merits of the business itself. Too offset this over speculative nature Keynes suggests that the brokerages increase their trading fees and that the government increases the taxes. However, Keynes contradicts himself in saying, "Thus if the animal spirits are dimmed and the spontaneous optimism falters, leaving

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