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The Forum > Article Comments > Time to cast Keynes adrift > Comments

Time to cast Keynes adrift : Comments

By Richard Laidlaw, published 20/2/2009

The Rudd Government identifies a problem and throws dollars at it while hurling abuse at anyone who presumes to quibble about it.

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I'm not sure which history shows that Britain recovered first and most strongly from the Great Depression of the 1930s. The history I learned in school was that the British economy was pretty much in the doldrums from the end of WW1 until the late 1930s, improved due to government investment in armaments (a bit Keynesian there), then went through a slump in the post WWII years until Marshall Aid gave it some impetus again. Then very Keynesian economics during the 1950s and 60s led to massive growth before it all came crashing down in the 1970s.

I can't talk for Australia.
Posted by Cazza, Friday, 20 February 2009 9:58:30 AM
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I think the anti-consumerist message is the one that should have been adopted at the height of the boom.
It may be true that Britain recovered from the depression without pump priming. I'm not sure this is correct because from 1935 onwards Britain embarked upon a substantial program of re-armament (pump priming by another name). But what effect did pump priming elsewhere have upon Britain's terms of trade? Did it benefit from the resurgence in America?
This article offers no strategies for dealing with the current crisis other than extreme pain. It is so easy for academic economists to sit back and talk about pain in the abstract. But that pain = wholesale social dislocation, families torn asunder, a potential resurgence in fascism caused by resentment at the economic collapse?
Not only is this politically unacceptable. It is socially and morally unacceptable.
And the author gives himself away when he says that you should legislate against malfeasance and stupidity in order to regulate capitalism. So the free market works but you have to protect it from itself? Some system!!
Posted by shal, Friday, 20 February 2009 10:16:28 AM
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The author makes a mistake often made when evaluating Keynes. Keynes prophesised that people would still be applying his remedies when the problems have changed. His views were everlasting; look at the current problems and devise solutions to them.
He foresaw the long term problems likely to flow from having a single currency (the $US) as the reserve currency or the currency of international trade. For that reason at Bretton Woods he wanted a derived currency for trade in real goods.
The American standard of living, particularly of the wealthy classes, has been based on printing money. The $US ceased to be a sensible basis for international trade when the USA passed peak domestic oil production in about 1970. An Australian, Neil McInnnes, drew attention to this at that time. Since that time actions have all be designed to push out the day of reckonning.
Posted by Foyle, Friday, 20 February 2009 11:58:05 AM
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Author's note: Foyle's point is apt. It is precisely the politicized rescripting of Keynes' theory that should be cast adrift. I had thought that implicit in the article, but clearly, I could have been clearer.
Posted by Scribe, Friday, 20 February 2009 3:12:38 PM
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Shal, I'm sorry to have to say this, but your statement "But that pain = wholesale social dislocation, families torn asunder, a potential resurgence in fascism caused by resentment at the economic collapse? Not only is this politically unacceptable. It is socially and morally unacceptable" is naive to say the least.

Foyle, I agree. Unfortunately, the day of reckoning is upon us and whatever Rudd, Shal and his/her friends may think, will be with us for a considerable time. The depression of the twenties lasted for the best part of two decades. The U.S. is currently already involved in a couple of wars which have stretched their resources, so the option of starting another one to boost the economy is not a feasible solution, so we will all have to muddle along at the bottom of the cycle for however long that it takes for confidence in the capitalist system to be restored.

As for Rudd's solution, there is no point in priming a pump when you don't have a nett positive suction head and the pump is still sucking air.

David
Posted by VK3AUU, Friday, 20 February 2009 3:32:32 PM
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I find it amazing how these historical revisionists now say that FDR did nothing to help save the US from the depression despite the landslide wins and popularity of FDR making him one of the most significant politicians of the 20th century. It reminds me of holocaust or climate change denial. Lets look at the facts. US GNP was 34% higher in 1936 than in 1932 after FDR's new deal. Unemployment fell in FDR's first term, from 25% when he took office to 14.3% in 1937. I am glad Richard Laidlaw was not US President during the great depression or PM in Australia now.
Posted by Keith in Perth, Friday, 20 February 2009 3:55:28 PM
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