Great analysis, but I'm not sure I entirely buy it.  To explain the demise of Keynesianism  and the rise of monetarism through the rise in energy prices in the 1970's doesn't say much for Keynesianism - even though you do highlight its other flaws - a blindness to the cost of the externalities which fueled its growth.

Its most fundamental flaw, surely, was that it taught the rich that it was in their own interest to look after the poor.  When things got tighter the rich simply decided they could take it all for themselves - and let the devil take the hindmost.  Any ideology which depends on the enlightened self-interest of the rich ignores the begger-my-neighbour attitudes of the majority.

The failure of Keynesianism was not that it wasn't relatively enlightened compared to the monetarist fundamentalists, but that it depended on the continued enlightenment of society and polity to survive. The problem with being a middle-of the road centrist is that you get hit from all sides.

A more fundamentalist political analysis would conclude that only when the political systems empowers the less well off to ensure that social democrat or new deal policies are pursued which are in everybody's interests and when those policies and institutions cannot be hijacked by the rich for their own benefit.

The problem isn't simply, as Heller said, that Capitalism when left to its own devices doesn't work, but that it can't work so long as all political power is concentrated in the hands of the rich.  The crises of capitalism in the meantime - as Naomi Klein - has demonstrated, have not delegitimised such rule, but rather reinforced it - by progressively disempowering the middle classes.

Keynesian liberals are still dependent on the enlightenment of the rich to be allowed yto do their work, and will only ever be tolerated for so long as their non-zero-sum game also enriches the rich even further.  Anything less than that will result in a retrenchment into blatant class war, as fought by the monetarists.

The only solution is the building of democratic political movements strong enough to withstand the power of the "markets" i.e. the rich - in the media, academe, and in the political system itself.  That the new deal never achieved.  The US will need a much more fundamental political revolution this time around if it is to recover its leadership role - and middle-of -the-road Keynesians cannot make that happen.  They are ultimately beholden to the rich and their sense of enlightened self interest - a very barren field to plough in indeed.

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