Keynes the Man.pdf - The Ludwig von Mises Institute

48 Keynes, the ManBy also severing interest returns from the price of time or fromthe real economy and by making it only a monetary phenomenon ,Keynes was able to advocate, as a linchpin of his basic political program,the “euthanasia of the rentier” class: that is, the state’s expandingthe quantity of money enough so as to drive down the rate ofinterest to zero, thereby at last wiping out the hated creditors. Itshould be noted that Keynes did not want to wipe out investment:on the contrary, he maintained that savings and investment wereseparate phenomena. Thus, he could advocate driving down therate of the interest to zero as a means of maximizing investmentwhile minimizing (if not eradicating) savings.Since he claimed that interest was purely a monetary phenomenon,Keynes could then also sever the existence of an interest ratefrom the scarcity of capital. Indeed, he believed that capital is notreally scarce at all. Thus, Keynes stated that his preferred society“would mean the euthanasia of the rentier, and consequently, theeuthanasia of the cumulative oppressive power of the capitalist toexploit the scarcity-value of capital.”But capital is not really scarce: “Interest today rewards no genuinesacrifice, any more than does the rent of land. The ownerof capital can obtain interest because capital is scarce, just as theowner of land can obtain rent because land is scarce. But whilstthere may be intrinsic reasons for the scarcity of land, there areno intrinsic reasons for the scarcity of capital.” Therefore, “wemight aim in practice … at an increase in the volume of capitaluntil it ceases to be scarce, so that the functionless investor [therentier] will no longer receive a bonus.” Keynes made it clear thathe looked forward to a gradual annihilation of the “functionless”rentier, rather than to any sort of sudden upheaval (Keynes 1936,pp. 375–76; see also Hazlitt [1959] 1973, pp. 379–84). 11Keynes then came to the third economic class, to whom he wassomewhat better disposed: the investors. In contrast to the passive11See also the illuminating article by Andrew Rutten (1989). I am indebted to Dr. Ruttenfor calling this article to my attention.