Dear Editor:While I do agree with last week's article's sentiments about the failure of accepted economic orthodoxy, I disagree with the Keynesian-Hayekian paradigm on three important counts. ("Keys Vs. Hayek," 7/29/10) Firstly, I disagree that Keynes or his ideology had any significant impact on the development of the post-Depression New Deal. In the words of economic historian Patrick Renshaw, "counter-cyclical spending was really a conservative option which implied 'sustaining government contributions to general purchasing power while the obstacles to private spending are cleared away." The basic structure and values of capitalism, the ownership and control of the system, would not be disturbed in the long run if such policies were adopted. Yet despite such spending to make good the failure of private investment and so reduce unemployment in 1933-35, and again in 1938-39, almost one in six Americans were still out of work in 1939. In that sense, as Herbert Stein has argued, "It is possible to describe the evolution of fiscal policy in America up to 1940 without reference to Keynes." Secondly, Hayek's Austrian school, which probably finds the most adherents at George Mason University, is a heterodox (unorthodox) tendency with only marginal influence on modern economics, and much of that influence coming through Hayek, who deviated from many of the Austrian tenets devised by his teacher and associate, Ludwig von Mises. It's not accurate to juxtapose Austrian economics with Keynesian theory, when its true mainstream competitor is the neoclassical (or "Chicago") school, though adherents of Keynes have an unquestioned dominance over the macroeconomic realm. Thirdly and most importantly, the neoclassical synthesis that dominates mainstream economics simply contains a limited spectrum of solutions for the inevitable failings of capitalism. The historical dependence of the capitalist economy on government intervention (an integral provider of macroeconomic stabilization), means that Keynesianism does work…if the goal is to sustain capitalism. But the aptest criticisms of capitalism are still found in Das Kapital and theoretical work on Marxian crisis theory. Now, I am not a Marxist, but within the theoretical confines of a successful analysis of the workings of the capitalist economy that still rings true today, the solution is to look beyond Hayek and Keynes (or more accurately, Friedman and Keynes), and back to Marx. -- Julian Gutierrez, Downey

********** Published: August 5, 2010 - Volume 9 - Issue 16