There is an interesting piece on Keynes and Marx in Real World Economics today on the role of material interest in distorting economics in ways that Marx would understand but Keynes could not. Robert Skidelsky, Keynes’s biographer, presents a useful criticism of Keynes:
The idea that economic outcomes could be impacted by class power was beyond his ken. Essentially, unmanaged capitalist systems failed to maintain full employment because classical economics gave the wrong message. It assumed away uncertainty, and thereby mandated a high degree of laissez-faire. Light-touch regulation of the financial system was all that was needed because banks were optimally self-regulating.
In short, the flaw was theoretical, not structural. What was needed was a more accurate theory, not a redistribution of power. As Keynes famously put it at the end of the GT, ‘ideas’ are more powerful than ‘vested interests’ (GT, 283). The almost contemptuous dismissal of the non-ideational elements of the economic system as ‘vested interests’ shows that he lacked proper cognizance of them.
Keynes’s re-definition of the economic problem of his day as a technical problem in economics was politically very convenient. Practical businessmen are quite receptive to new ideas providing they allow them to keep their profits and managerial prerogatives. In the interwar years deficient demand leading to mass unemployment was a threat to both, not least because it aroused social hostility to capitalism. Keynes was definitely preferable to Marx. So they were happy for the state to look after demand and protect them from the unions, even to acquiesce in modest measures of redistribution to keep the people happy.
However, the state proved unable to protect the Keynesian revolution itself from the consequences of the continuing full employment it guaranteed. Full employment strengthened union power; unions used their position to push wages ahead of productivity; wages started to encroach on profits. So the business class demanded an end to the full employment commitment, lower taxes, and freedom to export capitalism.
The same criticism would seem to apply to many economists who, in recent years, have rediscovered Keynes