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All my instincts and intuition tell me that the theories of John Maynard Keynes were necessary in 1930-1940 and are still necessary today. ....
Economics is a very dangerous subject to be left only to Economists - There is a Human and Moral Component in Economics - Left to the Extreme Far Right the Economy would develop into Social Darwinism and a kind of Racism and Nazism, they would wish and desire strongly the death of the Poor, the unfit in the struggle for life, or the lower races unfit for survival, the effects would be catastrophic and are the best recipe for the Decline, Declination, Decadence, Degeneration, etc ... of an Empire.
Besides that who says that these Right Wing Guys are very illustrated or Intelligent ?? .... Are the Republican Candidates Great Geniuses of the Economic Science ??
These pages in Wikipedia seem to have some little slant towards Conservative and Republican Political Philosophy, but if you read between lines, you see how Government spending saved the Nation from worse horrors and hunger of the poor.
The story after 1938 and the defeat of Franklin Delano Roosevelt in the midterm elections of 1938 ( FDR lost more House Seats in 1938 than Mr Obama in the 2010 midterms ) tell us that FDR did well in persisting with his Keynesianism and the War Efforts of Great Spending and Great Increase of Debt were sheer Keynesian Policies.
When the Japanese attacked Pearl Harbor in December 7 of 1941, the recovery was in full swing !
The New Deal in Wikipedia
Some excerpts :
Fiscal conservatism
Julian Zelizer (2000) has argued that fiscal conservatism was a key component of the New Deal. A fiscally conservative approach was supported by Wall Street and local investors and most of the business community; mainstream academic economists believed in it, as apparently did the majority of the public. Conservative southern Democrats, who favored balanced budgets and opposed new taxes, controlled Congress and its major committees. Even liberal Democrats at the time regarded balanced budgets as essential to economic stability in the long run, although they were more willing to accept short-term deficits. Public opinion polls consistently showed public opposition to deficits and debt. Throughout his terms, Roosevelt recruited fiscal conservatives to serve in his Administration, most notably Lewis Douglas the Director of Budget in 1933–1934, and Henry Morgenthau Jr., Secretary of the Treasury from 1934 to 1945. They defined policy in terms of budgetary cost and tax burdens rather than needs, rights, obligations, or political benefits. Personally the President embraced their fiscal conservatism. Politically, he realized that fiscal conservatism enjoyed a strong wide base of support among voters, leading Democrats, and businessmen. On the other hand, there was enormous pressure to act — and spending money on high visibility work programs with millions of paychecks a week.
Douglas proved too inflexible, and he quit in 1934. Morgenthau made it his highest priority to stay close to Roosevelt, no matter what. Douglas's position, like many of the Old Right, was grounded in a basic distrust of politicians and the deeply ingrained fear that government spending always involved a degree of patronage and corruption that offended his Progressive sense of efficiency. The Economy Act of 1933, passed early in the Hundred Days, was Douglas' great achievement. It reduced federal expenditures by $500 million, to be achieved by reducing veterans’ payments and federal salaries. Douglas cut government spending through executive orders that cut the military budget by $125 million, $75 million from the Post Office, $12 million from Commerce, $75 million from government salaries, and $100 million from staff layoffs. As Freidel concludes, "The economy program was not a minor aberration of the spring of 1933, or a hypocritical concession to delighted conservatives. Rather it was an integral part of Roosevelt's overall New Deal."[75] Revenues were so low that borrowing was necessary (only the richest 3% paid any income tax between 1926 and 1940.[76]) Douglas therefore hated the relief programs, which he said reduced business confidence, threatened the government’s future credit, and had the "destructive psychological effects of making mendicants of self-respecting American citizens".[77] Roosevelt was pulled toward greater spending by Hopkins and Ickes, and as the 1936 election approached he decided to gain votes by attacking big business.
Morgenthau shifted with FDR, but at all times tried to inject fiscal responsibility; he deeply believed in balanced budgets, stable currency, reduction of the national debt, and the need for more private investment. The Wagner Act met Morgenthau’s requirement because it strengthened the party’s political base and involved no new spending. In contrast to Douglas, Morgenthau accepted Roosevelt’s double budget as legitimate — that is a balanced regular budget, and an “emergency” budget for agencies, like the WPA, PWA and CCC, that would be temporary until full recovery was at hand. He fought against the veterans’ bonus until Congress finally overrode Roosevelt’s veto and gave out $2.2 billion in 1936. His biggest success was the new Social Security program; he managed to reverse the proposals to fund it from general revenue and insisted it be funded by new taxes on employees. It was Morgenthau who insisted on excluding farm workers and domestic servants from Social Security because workers outside industry would not be paying their way.[78]
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Recession of 1937 and recovery
The Roosevelt Administration was under assault during FDR's second term, which presided over a new dip in the Great Depression in the fall of 1937 that continued through most of 1938. Production declined sharply, as did profits and employment. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938. Keynesian economists speculated that this was a result of a premature effort to curb government spending and balance the budget, while conservatives said it was caused by attacks on business and by the huge strikes caused by the organizing activities of the Congress of Industrial Organizations (CIO) and the American Federation of Labor (AFL).[58]
Roosevelt rejected the advice of Morgenthau to cut spending and decided big business were trying to ruin the New Deal by causing another depression that voters would react against by voting Republican.[59] It was a "capital strike" said Roosevelt, and he ordered the Federal Bureau of Investigation to look for a criminal conspiracy (they found none).[59] Roosevelt moved left and unleashed a rhetorical campaign against monopoly power, which was cast as the cause of the new crisis.[59] Ickes attacked automaker Henry Ford, steelmaker Tom Girdler, and the superrich "Sixty Families" who supposedly comprised "the living center of the modern industrial oligarchy which dominates the United States".[59] Left unchecked, Ickes warned, they would create "big-business Fascist America—an enslaved America". The President appointed Robert Jackson as the aggressive new director of the antitrust division of the Justice Department, but this effort lost its effectiveness once World War II began and big business was urgently needed to produce war supplies.[59]
But the Administration's other response to the 1937 dip that stalled recovery from of the Great Depression had more tangible results.[60] Ignoring the requests of the Treasury Department and responding to the urgings of the converts to Keynesian economics and others in his Administration, Roosevelt embarked on an antidote to the depression, reluctantly abandoning his efforts to balance the budget and launching a $5 billion spending program in the spring of 1938, an effort to increase mass purchasing power.[61] The New Deal had in fact engaged in deficit spending since 1933. Now they had a theory to justify what they were doing. Roosevelt explained his program in a fireside chat in which he told the American people that it was up to the government to "create an economic upturn" by making "additions to the purchasing power of the nation".
Business-oriented observers explained the recession and recovery in very different terms from the Keynesians. They argued that the New Deal had been very hostile to business expansion in 1935-37, had encouraged massive strikes which had a negative impact on major industries such as automobiles, and had threatened massive anti-trust legal attacks on big corporations. All those threats diminished sharply after 1938. For example, the antitrust efforts fizzled out without major cases. The CIO and AFL unions started battling each other more than corporations, and tax policy became more favorable to long-term growth.[62]
"When the Gallup poll in 1939 asked, 'Do you think the attitude of the Roosevelt administration toward business is delaying business recovery?' the American people responded 'yes' by a margin of more than two-to-one. The business community felt even more strongly so."[63] Treasury Secretary Henry Morgenthau, angry at the Keynesian spenders, confided to his diary May 1939: "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and now if I am wrong somebody else can have my job. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started.[64] And enormous debt to boot."
World War II and the end of the Great Depression
The Depression continued with decreasing effect until the U.S. entered World War II in December 1941. Under the special circumstances of war mobilization, massive war spending doubled the GNP (Gross National Product)[65] Civilian unemployment was reduced from 14% in 1940 to less than 2% in 1943 as the labor force grew by ten million. Millions of farmers left marginal operations, students quit school, and housewives joined the labor force. The effect continued into 1946, the first postwar year, where federal spending remained high at $62 billion (30% of GNP).[66]
The emphasis was for war supplies as soon as possible, regardless of cost and efficiencies. Industry quickly absorbed the slack in the labor force, and the tables turned such that employers needed to actively and aggressively recruit workers. As the military grew, new labor sources were needed to replace the 12 million men serving in the military. These events magnified the role of the federal government in the national economy. In 1929, federal expenditures accounted for only 3% of GNP. Between 1933 and 1939, federal expenditure tripled, but the national debt as percent of GNP hardly changed. However, spending on the New Deal was far smaller than spending on the war effort, which passed 40% of GNP in 1944. The war economy grew so fast after deemphasizing free enterprise and imposing strict controls on prices and wages, as a result of government/business cooperation, with government subsidizing business, directly and indirectly.[67]
A major result of the full employment at high wages was a sharp, permanent decrease in the level of income inequality. The gap between rich and poor narrowed dramatically in the area of nutrition, because food rationing and price controls provided a reasonably priced diet to everyone. White collar workers did not typically receive overtime thus the gap between white collar and blue collar income narrowed. Large families that had been poor during the 1930s had four or more wage earners, and these families shot to the top one-third income bracket. Overtime provided large paychecks in war industries.[68]
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