I first started to think and talk about economics in my teens, encouraged – indeed, urged – by my father, George Aitken, who was then the research officer of the Amalgamated Engineering Union. A foundation member of the Communist Party, he left it in 1940 over its decision to obey Stalin’s order to oppose the war against Hitler. But he remained a convinced Marxist to his dying day and had become a considerable authority on Marx’s economic theory.
He also became an admirer of John Maynard Keynes, whose great work, the General Theory, had been published less than a decade earlier, and he was struck by the similarity between the conclusions reached by Keynes and Marx about the internal contradictions within the capitalist system. The surprising thing was that they had come to these conclusions in spite of the fact that Marx’s purpose was to destroy capitalism by exploiting those contradictions, while Keynes’s was to preserve it by making it work. It may seem odd nowadays, but these things were the common subject of conversation in our small family. (I was an only child).
At the time, I was waiting to go into the Royal Navy. In spite of this, my father made sure that I would have a place at the London School of Economics when I was demobbed. In the meantime, I studied for the London intermediate certificate in economics at the old Regent Street Polytechnic. The standard textbook from which we worked was written by a man called Frederic Benham, a follower of the great classical economist Alfred Marshall, and to him Keynes might never have lived. We boringly learned about the marginal theory of value and other bits of economic minutiae, none of which offered the slightest insight into why the world had just passed through a horrendous slump, with tens of millions thrown out of work.
I soon discovered that this was the basis on which economics was taught at LSE, too. Although the head of its politics department was the charismatically left-wing Harold Laski, the man in charge of economics teaching was Professor Lionel Robbins, a Marshallian to his bootlaces. Robbins was a perfectly decent chap (I was at school with his son, who later became a much-admired painter) and was undeniably kind to animals and women; but in spite of this he was fiercely opposed to Keynes. As a result, Keynesianism was barely mentioned in the LSE curriculum, and when it was, it was as an aberration. And this, in spite of the fact that Keynes was at that very moment establishing the world monetary system that would be the basis of three decades of unparalleled global prosperity.
So the prospect of going to LSE seemed to me irrelevant to everything I cared about. Happily, I was stationed near Abingdon (yes, in the navy) and often went to Oxford for what we laughingly called “a run ashore”. Several friends were students at the university there (including Lionel Robbins’ son) and I got to like the place. One day, I put on my best uniform and tramped round banging on college doors until I found one that would have me. I was in, and thanks to the generous grant given to ex-service students, money was no problem.
But the crowning moment came when my tutor handed me my basic economics textbook. It wasn’t a big black book by boring old Benham, it was a big green book by a man called Paul Samuelson – and it was Keynesian from cover to cover. When I expressed wonderment at the disappearance of marginal utility and all that bunkum, my tutor said kindly that I could read it up if I wanted to, but I needn’t bother if I didn’t.
I quickly found that the big difference between the two approaches was that Benham (and Marshall) saw the capitalist system as intrinsically self-correcting, so long as we didn’t interfere with the working of the free market. “Perfect competition”, he believed, would produce perfect equilibrium – in other words, full employment – so long as the politicians kept their grubby hands off it. By contrast, Keynesians saw the market as intrinsically unstable, leading to crises and unemployment, unless we did intervene.
The extraordinary thing about those in the present Government is that they seem to have wiped the slate clean of Keynesianism and gone back to Marshall and boring old Benham. For the central feature of George Osborne’s doctrine is the proposition that, if the state cuts back its spending, that will automatically clear the path for the private sector to step in and provide whatever services are being cut. The idea is that state activity shoulders out the private sector, and if it shrinks then the private investor will move back in.
Yet there is no evidence whatever to support this counter-intuitive 19th century conception. Virtually no one has believed it since it was blown away by the Great Crash of 1929 and the Great Depression that followed it. No one, that is, until George Osborne came on the scene. God knows what his tutor told him – not much, I imagine, since he read history, not economics. But on that flimsy theoretical basis, our economy is being destroyed.
