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“Practical men, who believe themselves to be exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”
–John Maynard Keynes (one of those “academic scribblers”), writing in 1936
As predicted by Adam Smith in his 1776 opus, “An Inquiry into the Wealth of Nations” – the wealth of nations depends on the reigning economic ideology of its leaders and our Congressional Representatives.
Since Adam Smith’s opus emerged 250 years ago, we’ve seen several other economic stars emerge – including five born this week (May 5-8). The team on the left is led by the uber-scribbler Karl Marx (born on May 5, 1818), followed by his modern-day French disciple Thomas Piketty (born May 7, 1971). On the right, we see Adam Smith’s contemporary, David Hume (born May 7, 1711), and Smith and Hume’s modern disciple, Friedrich Hayek (born May 8, 1899). In the golden middle, we find the leading academic economics textbook author of the last century, MIT’s Paul Samuelson (born May 5, 1915).
One month later, we celebrate the birth of Adam Smith (June 5, 1723) and his modern opponent, John Maynard Keynes (born June 5, 1883). I would also like to honor the upcoming 96th birthday of the wide-ranging scholar and one of the greatest living economists, Thomas Sowell, born June 30, 1930.
On April 8 this year, The Economist (magazine) printed an essay by economist Joseph Stiglitz praising Keynes as “the man who saved capitalism from itself.” Keynes doesn’t need cheerleaders, as his theories have been the reigning leitmotif among professors and politicians in the 90 years since his greatest book “A General Theory on Employment, Money and Interest” came out in 1936. Even President Nixon said, “We’re all Keynesians now,” so let’s take a brief look at what happened to nations following Keynes:
John Maynard Keynes was a skilled investor, even though he eschewed gold as a “barbarous relic.” To rescue capitalism, Keynes sought a “middle way” between capitalism and socialism in his magnum opus.
Capital is a harmless word, based on the Latin term for ‘head of cattle, since livestock are a key source of capital in a farming economy. Karl Marx loved attacking capitalism, but he never had much of it. Marx’s mother and wife bemoaned that, saying, “Karl should start making capital instead of just writing about it.”
Keynes’s 1936 economic Bible became an immediate sensation among politicians of that day, although it came under savage critique by most economists. It quickly became the source of Franklin Roosevelt’s “pump priming” promises, which sounded great, but such theories did not work too well, as the Great Depression deepened during FDR’s second term (1937-40) and only ended due to war, after Pearl Harbor.
Writing in the latest issue of “Future of Freedom” (April 2026 edition), economist Richard Ebeling titles his piece, “The Damage Still Done by Keynesian Economics, 90-Years On.” In sum, Ebeling writes:
“What Keynes succeeded in doing was providing a rationale for what governments always like to do: spend money and pander to special interests. In the process, Keynes helped undermine what had been three of the essential institutional ingredients of a free market economy: the gold standard, balanced government budgets, and open competitive markets. In their place, Keynes’s legacy has given us paper-money inflation, government deficit spending and more political intervention…”
The decline of the dollar began in earnest right about the time Keynes appeared on the cover of Time Magazine (December 31, 1965), with inflation and soaring gold and silver prices soon following. In 1971, when President Richard Nixon “closed the gold window” to dollar convertibility, he did so while quipping, “We’re all Keynesians now.” Since that day 55 years ago, gold is up 140-fold in dollar terms, meaning today’s paper U.S. dollar is worth less than a 1971 penny was, in terms of gold convertibility.
More recently, in 2014, Thomas Piketty helped re-ignite Marx’s and Keynes’s policies with his best-selling doorstop, “Capitalism in the 21st Century.” In essence, Piketty’s 700-page critique of capitalism echoed Marx’s three-volume sleeping pill, Das Kapital.
Piketty’s tome seemed to be on every left-leaning coffee table in the politically charged campaign of 2015-16. The main premise of Piketty’s book was that capital growth exceeds economic growth, so the vast majority of wealth will tend to gravitate into the hands of a very few capitalists, who will then pass their wealth on through inheritance to a select few, exacerbating the division of wealth. Piketty’s solution to the uneven distribution of wealth is a coordinated international tax on the rich of up to 80% in income taxes and an annual 2% wealth tax on the rich. (This was thought to be radical in 2014, but it is now being put forth seriously by some candidates as the only logical and moral path toward “social justice”).
Today, it seems, high-income taxes don’t provide enough punishment for the rich. Many politicians seek an annual “wealth tax,” but something so innocuous sounding as a 2% wealth tax could have devastating economic consequences. Many of the top 1% (richest) are business owners invested to the gills in people and equipment. They survive on a thin profit margin. To sell 2% of their assets each year would involve a major downsizing. Even for passive investors, a wealth tax would involve a forced sale of assets, pushing prices down. As for income taxes, there is a narrow pool of the super-rich. If you tax 80% of their income one year, you might get $100 billion, but you’ll get very little in Year 2, after the rich create their tax shelters.
Ironically, if you want to collect more taxes from the rich, a moderate tax rate is your best weapon. Check out the Laffer Curve for proof.
Happy Birthday, Karl Marx. Now, get lost.