Things Keynes did not say

Bill Mitchell:

In Chapter 24 of The General Theory of Employment, Interest and Money, Concluding Notes on the Social Philosophy towards which the General Theory might Lead, John Maynard Keynes confronted the issue of the “arbitrary and inequitable distribution of wealth and incomes” in capitalist economies. The argument he advances in that Chapter of his 1936 book contains guidelines for the progressive left that some just cannot seem to grasp. In short, governments (as our agents) do not need the savings of the rich to ensure that society prospers.

Wow. I never quite got that from Chapter 24.

I stopped reading Bill Mitchell's post at that point, and went back to Keynes. I re-read the whole of Chapter 24, with Mitchell's statement in mind. I found something relevant to Mitchell's opening. Turns out, it is the same that Bill Mitchell quoted. I shorten it and split it in two, here:

Since the end of the nineteenth century significant progress towards the removal of very great disparities of wealth and income has been achieved through the instrument of direct taxation .... Many people would wish to see this process carried much further, but they are deterred ... partly by the fear of making skilful evasions too much worth while and also of diminishing unduly the motive towards risk-taking, but mainly, I think, by the belief that the growth of capital depends upon the strength of the motive towards individual saving and that for a large proportion of this growth we are dependent on the savings of the rich out of their superfluity.

In other words, we have sometimes used taxation to reduce the inequality of income. But not often and not much, because we thought the economy needed the saving of the rich in order to grow.

We thought wrong, Keynes says.

... But ... we have seen that, up to the point where full employment prevails, the growth of capital depends not at all on a low propensity to consume but is, on the contrary, held back by it... Moreover, experience suggests that in existing conditions saving by institutions and through sinking funds is more than adequate, and that measures for the redistribution of incomes in a way likely to raise the propensity to consume may prove positively favourable to the growth of capital.

In other words, Keynes says he has shown that the economy does not need the saving of the rich in order to grow. (Except in conditions of full employment, of course.)

Okay. So I think, when Bill Mitchell says "Governments do not need the savings of the rich" (in the title of his post) I think he means the economy does not need the savings of the rich. That makes sense to me.

From the full title of Bill Mitchell's post

Governments do not need the savings of the rich, nor their taxes!

I originally thought he meant that governments can just print the money they need; they don't have to get it by borrowing or by taxation. My impression of Mitchell is that he is liable to say that. Keynes, of course, most definitely did not say that.

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Mitchell follows his Keynes quote with these remarks:

In other words, the high saving of the rich actually undermine the capacity of the economy to achieve full employment and if they spent more then the government would not have to spend as much to achieve that aim.

Yeah, exactly.

And these remarks:

But the idea that these savings were essential to fund government spending and could be accessed by taxing the rich was clearly understood by Keynes to be flawed reasoning.

Oh. Mitchell *is* thinking in terms of taxing the saving of the rich "to fund government spending", and how this is not necessary. And he is putting those words into the mouth of Keynes -- things Keynes did not say.