“Practical men, who think themselves exempt from any intellectual influence, are generally the slaves of some inept economist. The authority-mad, who listens to voices in the air, are deriving their passion from some scholarly writer of a few years ago.”
John Maynard Keynes (one of those “academic writers”), writing in 1936
As Adam Smith predicted in his 1776 essay, “An Inquiry into the Wealth of Nations.” A nation’s wealth depends on the governing economic ideology of its leaders and our Congressional representatives..
Since Adam Smith’s writing emerged 250 years ago, we’ve seen many other economic stars rise – including five born this week (May 5-8). The team on the left is led by the uber-scrabbler Karl Marx (born 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 (b. 7 May 1711) and Smith and Hume’s modern disciple Friedrich Hayek (b. 8 May 1899). In the middle, we find MIT’s Paul Samuelson (b. May 5, 1915), author of the leading academic economics textbook of the last century.
A month later, we celebrate the births of Adam Smith (June 5, 1723) and his modern antagonist John Maynard Keynes (b. June 5, 1883). I would also like to honor the incoming 96.Th Birthday of the prolific scholar and greatest living economist, Thomas Sowell, born June 30, 1930.
On April 8 this year The Economist (magazine) published an article by economist Joseph Stiglitz praising Keynes as “the man who saved capitalism from itself.” Keynes needs no cheerleaders, for his ideas have been the reigning leitmotif among professors and politicians. In 1936, his major book “A General Theory on Employment, Money and Interest” was published in 90 years. Even President Nixon said, “We’re all Keynesians now,” so let’s take a brief look at what happened to nations that followed Keynes:
Keynesian ideas have harmed nations more than they have helped them.
John Maynard Keynes was a skilled investor, although he dismissed gold as a “barbaric relic”. To save capitalism, Keynes sought a “middle way” between capitalism and socialism in his masterpiece.
Capital is an innocuous word, based on the Latin term for ‘head of cattle’, as cattle are the key source of capital in an agricultural economy. Karl Marx loved to attack capitalism, but he never had too much of it. Marcus’s mother and wife lamented, saying, “Carl should start. to make Capital instead of just writing about it.”
Keynes’ 1936 economic bible became an instant sensation among the politicians of the day.Although it came under severe criticism from most economists. This quickly became the source of Franklin Roosevelt’s “pump priming” promises, which sounded great, but such ideas didn’t work much, as the Great Depression deepened during FDR’s second term (1937-40) and after Pearl Harbor, the war ended.
Writing in the latest issue of “Future of Freedom” (April 2026 edition), economist Richard Ebling titled his piece, “Still Damaged by Keynesian Economics, 90 Years On.” In summary, Ebling writes:
“What Keynes succeeded in doing was to provide an argument for what governments always like to do: spend money and pander to special interests. In the process, Keynes helped undermine three essential institutional components of a free market economy: the gold standard, balanced government budgets, and open competitive markets. In their place, the Keynesian legacy has given us paper currency inflation, government deficit spending and more political interference…”
The dollar’s decline began when Keynes appeared on the cover of Time magazine (December 31, 1965), and gold and silver prices soon followed. In 1971 When President Richard Nixon “closed the gold window” for the dollar swap, he did the same, joking, “We’re all Keynesians now.” 55 years to the day, gold has risen 140 times in dollar terms, meaning today’s paper US dollar is worth less than a pie of 1971 in terms of gold replacement.
More recently, in 2014, Thomas Piketty helped re-ignite the policies of Marx and Keynes with his best-selling book, “Capitalism in the 21St century.” In essence, Piketty’s 700-page critique of capitalism echoes Marx’s three-volume Sleeping Pill, Das Capital.
The politically charged campaign of 2015-16 saw Piketty’s tome on every left-leaning coffee table. The basic premise of Piketty’s book was that capital growth outstrips economic growth, so the majority of wealth will end up in the hands of a small number of capitalists, who will then pass their wealth on to a select few through inheritance, increasing the distribution of wealth. Piketty’s solution to the unequal distribution of wealth is an integrated international tax of up to 80% in income tax on the rich and a 2% annual wealth tax on the rich.. (This was considered radical in 2014, but now some candidates are seriously presenting it as the only logical and moral path to “social justice”).
Today it seems that higher income taxes are not sufficiently punishing for the rich. Many politicians want an annual “wealth tax”, but Something as innocuous as a 2% wealth tax can have devastating economic consequences.. Many of the top 1% (richest) are business owners invested to the gills in people and equipment. They survive on low profit margins. Selling 2% of your assets each year would involve a huge drawdown. Even for passive investors, a wealth tax would involve a forced sale of assets, driving down prices. As far as income tax is concerned, the rich have a narrow pool. If you tax 80% of their income in year one, you might get $100 billion, but you’ll get much less in year 2, when the rich have built their tax havens..
Ironically, a moderate tax rate is your best weapon if you want to tax the rich more. Look at the Laffer Curve for proof.
Happy birthday, Karl Marx. Now, get lost.