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Don Lippincott


The Absent Specter and Pseudo-Keynes: on Posner’s The Crisis of Capitalist


Richard Posner's The Crisis of Capitalist Democracy takes as its starting point

the 2008 financial collapse and the (ongoing) economic depression which has

followed; with this as his starting point, Posner then weds a narrative of the financial

crisis to his own personal rupture with neoliberal economic thought. Posner, a

former member of the Mont Pelerin Society, utilizes the last two sections of the text,

What Lessons Have We Learned from the Crisis? and The Way Forward, to develop

his own particular understanding Keynesian economic thought, with a significant

focus on its application to the present circumstances. Thus it his own break with

neoliberal economic thought, taken together with the financial crisis itself, which

forms the thaumazein guiding him in his exploration of the possibilities and failings

of capitalist democracy.

On the first page of the text, Posner states:

I first analyzed the crisis in my book A Failure of Capitalism: The Crisis

of '08 and the Descent into Depression... The title alarmed some

readers who thought I meant that capitalism has failed us and we need

something different. That was not my intention. I believe in capitalism.

But capitalism is not a synonym for free markets (Posner 1).

His own reconception of capitalism, echoing Keynes as well as the Ordoliberals,

"...includes[s] a system of laws for protecting property and facilitating transactions,

institutions for enforcing those laws, and regulations designed to align private
incentives with the goal of achieving widespread prosperity" (Posner 2). What

Posner unironically lays out for the reader is a capitalist utopia with slight but

significant changes to the capitalist utopia of the unregulated free market (which he

indicates was, prior to the crisis, the basis for his economic beliefs); the

fundamental assumption, that the market is the best (or perhaps only) way of

organizing the social existence, remains unchanged. In this regard, he does not

diverge much from Keynes, who believed a strongly interventionist form of a market

economy could "save" capitalism from itself.

What separates the thought of Posner and Keynes is, quite bluntly, the

Russian Revolution, the specter of which haunts Keynes and animates him to

conceive of a "better" capitalism which strives toward social welfare and minimized

class conflict; for Posner, the specter is American hegemony displaced by China and

the possibility of slowed economic growth (Posner 377-380). The "better" capitalism

for Posner is one where the U.S. can maintain its place in the global economic order

and avoid large-scale future fiscal crises. The difference, when viewing the two side-

by-side, is drastic: for Keynes, the era of free-trade had unequivocally passed away

and something was urgently needed to replace it, while Posner feels no such

pressure to resurrect liberalism in some new iteration and instead plays the role of

mortician seeking to make-up and perfume the corpse of the market utopia.

The irony, of course, is that beginning in Chapter 8 (titled "Keynes Redux")

and continuing throughout the rest of Part II, Posner consistently seeks to invoke

the 'animal spirit' of Keynes, aping Keynes' theories whenever they would seem to

corroborate his own. Thus while Posner seeks to ground himself in what he sees as

being in the true spirit of Keynes, he misses the meaning of Keynesian economics

entirely: namely, that economics cannot discount the social factors it unleashes
which are capable of destroying market society itself. What Posner has learned from

the crisis, then, is only a half-lesson: unregulated market capitalism (particularly

within the financial sector) is fully capable of destroying itself and therefore must be

regulated, while the other component - that Keynes saw and Posner does not - is

the possibility for the social disruption caused by market capitalism to eventually

destroy market society. The genius of Keynes' intervention was this two-fold

understanding of the crisis, something Posner seems unable to grasp. To Posner's

credit, the necessity for a truly radical shift in the social organization of capitalism in

2010 is nowhere near the point of urgency reached during Keynes' writing of The

General Theory of Employment, Interest and Money, and thus the limited

conception of Keynesian thought which Posner employs is not due solely due his


The question that emerges, then, is that if "Keynes Redux" really means

"Keynes Lite", is Keynes a valid reference point at all for Posner? The neoliberalism

of Posner's Mont Pelerin Society days is not particularly far removed from what he

laid out on the second page of the text as being the basis for a "better" capitalism,

namely "... a system of laws for protecting property and facilitating transactions,

institutions for enforcing those laws, and regulations designed to align private

incentives with the goal of achieving widespread prosperity." Is this not simply a

"better" neoliberalism? Perhaps some sort of neo-Ordoliberalism? The irony here is

acute - and somewhat painful - that in his "Keynesian turn," Posner has made no

headway (or even effort) in distancing himself from the failures of neoliberal

thought in regards to social organization, and that his answers to all problems

inevitably fall back on the same market mechanism (albeit "fixed") that he believed

in before.