John Maynard Keynes and Polish Jewish Economist Michal Kalecki predicted in 1930s that the Keynes breakthrough would be reversed once business became ‘’boom tired’’ and there would be no shortage of economists to justify business’s anti-deficit spending prejudice

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Canadian Economist tells how it is :

Analyis of the Big Economic Crash of 2008 and the wrong Conservative ( Republican ) Solutions. -




After the Crash: Rediscovering Keynes and the origins of quantitative easing (2nd posting)
By Harold R. Chorney
Professor of Political economy, Concordia University, Montréal, Québec
June 3, 2011


Rediscovering Keynes and the origins of quantitative easing


Some excerpts :

Preface:

More than twenty five years ago I began to write about problems of public finance.( Chorney, 1984) At the time that I began to do so, I never would have believed that I would still need to be writing a critique of fiscal conservative dogma almost twenty five years later !

The staying power of previously discredited bad ideas was much greater than I surmised at the time. The staying power of herd behavior based on shallow derivative analysis was stronger than I understood. It was not for nothing that John Maynard Keynes once stated that if his revolution in economic thought were ever to be reversed it would be extraordinarily difficult to reinstate it. Not because he believed he was wrong, but because he knew that the forces of reaction and stubborn resistance to progressive economic thought were so deeply entrenched.

Sadly, he and Michal Kalecki who predicted that the Keynes breakthrough would be reversed once business became ‘’boom tired’’and there would be no shortage of economists to justify business’s anti-deficit spending prejudice were both very right about this.(See, M. Kalecki, Essays in Economic dynamics, The politics of the trade cycle; Kalecki was the Polish Jewish economist who ought to be considered the co-discoverer of Keynesian economics because of his essays on the investment process, unemployment and economic dynamics that he published in the early 1930s before Keynes’ General Theory which contained the essence of Keynes’ own argument.

In addition as I shall show Kalecki also advocated the use of monetary policy to acquire debt during a deep slump in order to ensure that interest rates were kept as low as possible. )

He was eclipsed by Keynes , in part because he published his work in Polish, but also, of course, because Keynes was already a world famous economist because of being at Cambridge and having authored the Economic Consequences of the Peace which had made him world famous in 1920.Keynes to a small extent and certainly Joan Robinson later acknowledged the significance of Kalecki’s work.(See in particular,A.Asimakopulos, ‘’Kalecki and Robinson’’ in Mario Sebastiani, Kalecki’s Relevance Today, London: the Macmillan Press, 1989.See also Michael Kalecki, ”Political Aspects of Full employment, Political quarterly,Vol. 14, 1943, pp.322-331 reprinted in E.K.Hunt & Jesse Schwartz, eds. A Critique of Economic Theory, Harmondsworth:Penguin , 1972, pp.420-30.)

Kalecki and Keynes both influenced Hyman Minsky who in a series of books and critical essays developed a model of financial instability and crisis tendencies in advanced financial capitalism that turned out to be incredibly accurate foreshadowings of the current crisis.( Hyman Minsky, John Maynard Keynes, N.Y.:Columbia University Press, 1975; Stabilizing an Unstable Economy, N.Y. McGraw Hill, 2008 0riginally published 1986; Can it Happen Again ? Essays in Instability and Finance, M.E.Sharpe, 1982; Simon Johnson and James Kwak,13 Bankers:The Wall Street Takeover and the Next Financial Meltdown, NYC; Vintage, 2010/2011. )

I first began to write about quantitative easing, which I called temporarily monetizing a greater portion of the debt in the early 1980s. I did so as part of research I did on behalf of leading Canadian public sector trade unions and a left of center liberal social democratic think tank called the Canadian Center for Policy Alternatives. As far as I know I was among the first, if not the first economist and policy specialist that advocated this approach apart from its original advocates back in the early 1930s, in the modern era.

I wrote several monographs and articles , presented the idea and the evidence before conferences of business economists and other academics and held public press conferences in Ottawa on Parliament Hill. But instead of the idea being accepted it was rejected and even denounced as reckless inflationary policy.At that time the idea and the policy recommendations that flowed from it were fiercely resisted by the Canadian central bank experts and Department of finance officials. Now more than twenty years later the idea has been welcomed in influential circles and celebrated as having helped the global economy from slipping into a deep and prolonged depression. What happened to change the reception. The policy clearly works. There is no evidence that it leads to inflation in the short to medium term as opposed to lower rates of interest and a faster economic recovery.

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