The 20th century was greatly affected by the ideas of several influential men from the century previous. Charles Darwin's theory about biological origins had an impact that ranged from biology to philosophy, theology and even politics, while Sigmund Freud's ideas transformed the way men thought about their own minds. With the help of Friedrich Engles, Marx inflicted his particularly virulent form of socialism on the world. And while there is no single individual who can be deemed culpable for the idea of liberal government by representative democracy, it became the dominant form of government around the world during the 19th century.
All of these influences played a major role in the way John Maynard Keynes formulated his general theory of employment, interest and money, which was articulated during the 1930s. Keynes inherited his amoral, materialistic outlook from the Darwinians, his notion of the integral role of "animal spirits" was derived from Freud, and one of his primary objectives in constructing the general theory was to save liberal democracy from what he saw as the imminent threat of Marxism.
It can be argued, and in fact it was repeatedly predicted by Austrian School economists, that Keynesianism was intrinsically flawed and therefore doomed to failure. But the Austrian case is a logical one, and there is little respect for logic in a modern world that has made a universal fetish of the scientific method nor is the average individual capable of either following the logic of Keynesian economics or comprehending the conclusive logical case against it. The 20th century was the age of empiricism, and 20th century humanity requires an empirical basis for criticizing what purports to be an empirical science.
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Now the Keynesian case is collapsing, both in its crude popular form as well as the more sophisticated intellectual one. In the case of the former, it is easy for even the non-economist to recognize that unemployment did not fall in response to the huge federal stimulus package. No one is fooled by the Soebarkah administration's insultingly stupid "jobs created or saved" metric. In the case of the latter, there is a growing body of empirical evidence indicating that the core idea of Keynesianism, the idea that government spending causes economic growth, is observably incorrect.
In studying the government debt market, we have inadvertently been led to question the economic theory that most fervently justified recent government spending programs: that of Keynesian economics. The so called "beautiful theory" of Keynesian economics is arguably the most influential economic theory of the 20th century, shaping the way Western democracies approached the balance between free market capitalism and government initiatives. Like many beautiful theories, however, Keynesianism has ultimately succumbed to the ugly facts. We firmly believe the Keynesian miracle is dead.
– Eric Sprott and David Franklin, "Fooled By Debt"
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In the end, Keynesian economics has turned out to be nothing more than an intellectual excuse for politicians to do what they always want to do, which is spend more money. This is proved by the fact that Keynesianism was only ever properly applied during the economic downturns of the post-World War II period; somehow its directive to spend less money and raise interest rates during the boom times was never applied.
Marx was the first of the great 19th century figures to fall. While the "scientific" part of "scientific socialism" was always a dubious assertion, the appearance of information technology and robotics put the final nail in the coffin of the conceptual foundation of socialism, the labor theory of value. Freud, too, was eventually unmasked as an unscientific charlatan; no one has ever managed to find a superego anywhere and patients undergoing psychological therapy have a significantly worse recovery rate than those who rely on their own resources. The Austrian School Keynesian skeptics, long ignored by academics and politicians alike, are having the last laugh, as one stimulus program after another fails to lift the global economy out of its immense slough of debt. Only Darwin still remains potentially viable thanks to the ex post facto revision of his theory to account for Mendel's genetic science, but there are growing signs that the theory of evolution by natural selection will soon go the same way as scientific socialism and psychoanalysis and the theory of the tripartite mind.
As for liberal representative democracy, it is ironic that the great devotion to Keynes on the part of those putative representatives may play an important role in killing off that theory, too. Modern society believes that the Founding Fathers were simply being bigoted by limiting the voting franchise to wealthy white males, but their writings make it very clear that they believed a universal franchise would quickly lead to tyranny and ruin. When one considers the vast edifice of bureaucratic control that has been constructed across America and Europe as well as the incipient bankruptcies that so many Western countries are presently facing after less than a century of suffrage, it appears increasingly likely that they were correct.