Forum Post: The Destructive Keynesian Continuum -Part 2
Posted 12 years ago on Oct. 23, 2011, 10:43 a.m. EST by Republicae
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In order to sugarcoat the reality of this massive management system the government bureaucrats invented various labels such as "Compensatory Fiscal and Monetary Policy", it simply sounded much better than Government Managed Economy, but the name doesn't change the meaning. The drift into a socialized system of economic, social and political management began during the 30's and the march toward a full-fledged, systematic socialistic government has continued unabated. Once implemented, the system became self-perpetuating.
As J. Kenneth Galbraith said:
"There is a widespread notion that one of the most primitive of modern ideological choices is whether a government shall be Keynesian or not . . . no present or future administration really has the non-Keynesian choice."
Regardless of which political party is in office, the nature of this political economic system, once it was implemented, became self-perpetuating. It moves the country toward a self-socializing form of government regardless of the desires of the People of this country and even our elected representatives. The revolution in economy thought during the 30's was far more than economic in nature; it was also completely revolutionary in the political and social arenas as well.
There should be no doubt as to the direction the Keynesian, Neo-Keynesian and Post-Keynesian ideologies are taking this country. As Paul A. Samuelson stated: “[Fascist Regimes] have often passed socialistic measures. This is not a paradox at all, for fascism was (or is) a form of socialism similar to British socialism, or to the managed-currency, welfare state proposed by American Keynesians.”
By the 1940's this revolution in "new economics" had infiltrated the universities of this country and permeated economic thinking to the point that all opposing views were effectively rooted out of the higher educational system in this country. Generations of economic students were completely indoctrinated in the essentials of this new economic catechism. By 1950, the majority of universities and professors were teaching this new economic doctrine, textbooks reflected the accepted doctrine and the students were oblivious to just what they were being taught since it was the only accepted school of economic thought presented.
The truth of the matter is that so-called new economic theory was not new at all, but a revival of core socialist patterns of economic thought that were formulated during the second half of the 1800's. This core socialist pattern involved government intervention into economic affairs that would gradually lead to government intervention into social affairs; the outcome of which would be a transformation of the entire political structure of the country.
One of the ideas that arose from The Great Depression was the idea of "social-consumption expenditures", sounds innocuous enough until we understand what it means and the purposes behind such expenditures.
Lawrence Klein, in his book "The Keynesian Revolution" provided the meaning and the purpose behind such expenditures: "We need a non-profit institution like the government which can provide a comprehensive, minimum program of social security in order to reduce the propensity to save. This program must cover the entire population, and it must cover all those contingencies which cause people to save on a large scale for the future."
While maintaining the label of free-market capitalism and individual freedom that is associated with it, we have a system that both confiscates and redistributes the labor property of people in order to reduce savings. In a managed economy, savings is an anchor that weighs down the movement of the entire system of this political economy. Under this managed system savings must either be drastically reduced or eliminated all together in order for other aspects of control to take place; it is easy to see that the reduction of savings in this country has been achieved.
Please, everybody read the below article (link) for a much more comprehensive and accurate view on Keynes' ideas, and how they brought us through the last depression. In any case, this Austrian resistance to Keynes will fade as it gets worse - I just wish we didn't have to wait for more suffering before we clue in (again).
http://www.newyorker.com/reporting/2011/10/10/111010fa_fact_cassidy?currentPage=1
It should be of interest to note that our current situation is due, primarily to policies that were based upon Keynesian Economic Theory. You are lauding Keynes when it is Keynesian thought that had brought this country to the point of Corporatism, crony capitalism and a government patronage system. Of course, those economists who follow Keynesian economics or Neo-Keynesian economic theory are the very ones who not only didn’t see the Bubble and Panic of 2008, but it was their policy advise that assisted in producing those events.
If deficit spending, as Keynes theorized, worked then surely the 8 years of George W. Bush combined with three years of Obama should have brought this country into prosperity instead of where we find ourselves today. If Keynes was right, if Krugman with his Neo-Keynesian slant, is correct then shouldn’t the massive amount of stimulus and deficit spending that has taken place have a far more impressive result than it has. Imagine, Bush spend more than all the Presidents from George Washington to the end of Bush’s term combined and Obama has spent more than any other President, including Bush and yet, what has been the results of such spending, such massive accumulation of debt? It has certainly not been very positive. Yet, there are still those who praise Keynes and his false assumptions. Deficit spending is clearly not a cure-all, in fact it is just the opposite. Krugman, following a Keynesian lead, suggest not only more deficit spending, but lifting the legal restrictions on the Federal Reserve so it may print, print and print more money...it appears that Krugman, in his Keynesian delusion, is offering a Zimbabwean solution.
Keynes idea of a government “multiplier” is another non-sense theory, if it were true then why even have a private economy, socialism should work, but as we know it doesn’t work, it has never worked and can’t because it countermands economic principles. The estimate for the government “multiplier” effect is 1.5, now, do the math, how much economic growth should have occurred when you combine all the deficit spending from the Bush Administration to the Obama Administration? Obviously, there is no such thing as an actual “multiplier” effect of government spending, indeed if money was the source of productivity and prosperity then we should all be extremely wealthy and productive, poverty should have long ago been wiped out, but that is the problem, most government politicians have been suckered into believing Keynesian Economic Theory. Money is not the problem, the problem is, in a large part, a government which intervenes into the markets and uses a crazy fiat monetary policy to breed a system of government patronages, mercantilism and corporatism. By the way, Keynes was definitely an advocate of Fascism, what we can call Corporatism, the mixture of government patronage and intervention into the corporate sector. After all, in the 1938 German Edition of Keynes’ General Theory he wrote:
"Nevertheless the theory of output as a whole, which is what the following book purports to provide, is more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output under conditions of free competition and a large measure of laissez-faire."
So, sure, heap praise on Keynes and his ideology....
For like the 1000th time:
1.) Deficit spending across business cycles is not Keynesian. Blame the politicians for decades of debt since Reagan, not Keynes. Stimulating aggregate demand with fiscal policy during severe recessions and then paying down the accumulated debt during the upswing is Keynesian, anything else is not. He knew it was not a "cure-all" and deficit spending should only be applied when the economy's in real trouble (not when your rich buddies want a tax cut or you have an evil empire to outspend, for example).
2.) The multiplier effect cannot be seen as applying to all spending. If the spending is not carefully targeted then it does not apply. http://en.wikipedia.org/wiki/Keynesian_economics#.22Multiplier_effect.22_and_interest_rates
All government policy theoretically works better in a totalitarian state. It's disingenuous to suggest that's anything to do with what Keynes advocated.
Gosh, I love it when people quote Wikipedia for their sources. The problems with Keynes is Keynesian Economists, as Keynes himself began to recognize later in his life. The problem with Keynesian Economists is found in the fact that Keynes General Theory contains such vague implications concerning his actual thoughts, it appears that such vagueness was intentional.
Now, you state that Keynes didn’t advocate deficit spending during the “good times”, yet as FDR and this country found out after using Keynes theory and even some of his wording, the promised results did not follow the theory. FDR stated, after Keynes, that deficit spending must be regarded as an investment in the country’s future, but it didn’t happen, unemployment remained alarmingly high despite all the efforts of FDR to follow the advice of Keynes. Of course, like the Keynesian adherents today, those during FDR’s time merely blamed the lack of results on what they said was not spending enough, it was a good excuse, just as good then as I’m sure it will be today. Keynes was a long-time member of the Fabian Socialists, and that ideology was readily accepted by both the Fascist and Marxists. If you read the works of the various contemporaries of Keynes, all of whom were also members of the Fabian Society, you will find an ideology that can hardly be considered anything but horrifying in terms of individual liberty and economic freedom.
Unemployment dropped every year of FDR's administration except the one that he tried to balance the budget. There was nothing cross-cyclical about any of the spending, btw. And it DID work. Austrian heterodoxy disagrees but I could care less. You can argue with the GDP charts and unemployment tables on wikpedia all you like: http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#Economic_environment
Your point on the propensity to save is very interesting. Are you suggesting that the Keynesian model is solely responsible for peoples' current debt problems due to social care mechanisms, i.e. they have no need to save because the gov. has already done it for them? I would think that popular culture's acceptance of instant gratification and envy play a significant role as well, but perhaps that is simply a symptom or disorder as a result of the bigger problem.
Right wing drivel.
Really, then please provide your point of view instead of a babble of nonsense that is meaningless. I would say that unless you can provide an adequate argument for your position then it is much wiser to avoid commenting. Essentially, you have said nothing of value to promote your position. I mean if you can provide an argument that supports the results of Keynesian economic thought today then by all means do so.
Well ok, I'll give you a point of view. The current problems do not stem from Keyensianism, but rather from 30 to 40 years of neoliberalism. Keyensian principals served us quite well in the 50s and 60s and somewhat into the 70s. Then enters neoliberalism. Neoliberalism, like its' predecessor, liberal or laissez faire began the destruction of the middle class, the engine of consumerism.
Really, well let's take a look:
The first part of the 1950s was building back the capital structure in the US economy. Look at the Down Jones, it did not get back to its 1929 high until 1953. Note that WW2 did not end the Depression but the release of productive soldiers and sailors into the real goods producing economy really ended the Depression but even that took several years.
The boom of the 1950s and 1960s yielded the bust of the 1970s. Again looking at Dow Jones history you can see that the Dow Jones had a high in 1972 of 1020 and did not make it back to that level until 1983. And what happened in the 1970? Stagflation, there was lots of money creation and high unemployment and growing government.
The bust of the 1970 was worse for some but not others, the South and West were not hurt as bad as the North East and North Central parts of the USA. I grew up in Pittsburgh where there were massive problems with unemployment. There were towns around Pittsburgh that had over 30% unemployment.
I don't think anything you have said refutes what I asserted. I think you put too much emphasis on the stock market. The stock market is doing fine now. Many of the rest of us are not. The 70s had the oil crisis. In fact there were two, which mucked things up a bit.
Let's take the following quote from Keynes: "The right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps and thus keeping us permanently in a quasi-boom." Of course, if you take this theory to its logical conclusion then in order to accomplish a permanent state of quasi-boom business cycle then the amount of government monetary intervention must artificially keep the market rate of interest low and credit easy. That however, as we have seen is not sustainable nor is it desirable when considering the missallocation, mal-investment and economic distortion resulting from such policies. It is therefore, impossible to create wealth, full employment or prosperity by continually printing money, borrowing money and spending it with no possibility that it can be paid.
It should also be evident that unemployment resulting disturbances in the price and profit structure within the economy and the government cannot, through its policies that are definitely based on some form of Keynesian thought, help the situation by using the same or similar policies that further distort that price and profit structure. Additionally, the idea that employment just for the sake of employment is not necessarily a good thing, especially when such employment is not productive but merely a placation of a political necessity. Thus, the Keynesian ideal of full employment can, in itself, create a degree of distortion, when combined to an artificially created bubble or as Keynes put is a quasi-bubble, the results can be very economically damaging.
Yes, but he was a clever fool and nothing is more dangerous than a clever fool...our government is full of them!
You know, there is a certain element here of self fulfilling prophecy that all neglect. The surplus of labor, the stagnation of economy, often times is a direct reflection of the prevailing sentiment that there are no jobs, there is no opportunity, no point then in exerting ourselves to make the required effort. When the reality is that opportunity in a free world exists all around us; it is everywhere, at all times. It's such optimism that drives an economy.
No one in this country fails to save as a result of social security. In fact, what it does is just the opposite - it spurs us to think in terms of bettering ourselves, or better preparing ourselves, for the possibility of an advanced age with too few resources. The reason Americans are less frugal is very simple: there is no reason to be. The money I spend today, I can immediately recoup tomorrow... there is this abundance of supply, especially in light of inexpensive products and easy financing. This was far less true of past generations and it is far less true of third world countries... their very survival is dependent on some level of frugality.