Thoughts on Keynsian Economics

Think about it.  When enough people are presented with opportunity, there are many who do not ignore it.  Under the right circumstances, they  cannot ignore it.  Statistically, this tends to cause a shift in whatever macro dynamics are in play.
An obvious case is the question of the implementation of Keynsian Economic Theory.  It was used, with impressive effects, to pull the world out of the great depression.  FDR was a skeptic of investing in “something for nothing”, but his gamble in creating the WPA paid off big time.  What really did the trick was the “forced” government investment in the war machine in the late 1930’s.  The tragedy of WWII also led to the greatest period of prosperity in modern history.  Investment in war is always questionable.  Investment in manufacturing infrastructure worked beautifully.

The “gilded age” of the 1920’s yielded to the “golden age” which lasted into the 1970’s.

It’s simple.  During the depression, what everyone wanted, and needed, was a job.  The WPA filled that need.  During WWII, all the stops were pulled, with seismic economic results.  it seems that when money is flowing, people cannot resist spending it, which is a direct stimulus to growth and prosperity.  Fear subsides and the economy soars.  Of course, it’s not a trivial problem.  Too much spending beyond growth can cause inflation, as was witnessed with “stagflation” in the 1970’s.

Rather than adopting sane fiscal safeguards against inflation, which are known to the Keynsian Economic model,  President Reagan chose to reintroduce fear into the equation with his “trickle down” proposition, which has been a persistent impediment to economic growth to this day.  “Trickle down” is not a theory, it is a voodoo trick intended to persuade people to believe that the monied interests will take care of everybody.  Just ask yourself which is more likely:  Will more people spend more money when they have more money without the fear of being destitute, or will wealthy people invest more of their wealth to build something for everyone’s benefit?  The former makes no assumptions.  It’s a fact, proven by history.

The latter is loaded with assumptions:
Wealthy people are philanthropic – some of them are
Big business is willing to put its wealth at risk without the assurances of a monopolistic sure thing – its stockpile of trillions of dollars shows otherwise.  Most recent investments have only gobbled up smaller enterprises and reduced competition, indicating one goal – a consolidation of wealth into fewer more powerful interests.  More cash in their pockets won’t change this.

President Reagan weaponized fear, and its legacy has been adopted by all of his followers and apologists.

We were privileged to see the Keynsian model at work again when President Obama and Congress passed the Recovery Act in 2009.  Its only problem is that it was an anemic gesture that should have been ten times bigger.  Of course, there was enormous opposition by the usual suspects.  It saved the world economy, but did not set us on a path to prosperity.  FDR experienced the same problem with his initial efforts to save the world from the depression.  It took the the War to seal the deal.

Other examples of public policy that have led to overall prosperity:

Mandatory free public education (mandatory that it must be offered) includes an enormous talent pool whose education has led to unprecedented achievement in all possible ways. Science, technology, arts, global relief from disease and other suffering and even diplomacy that has trumped tribal instincts.  Imagine a world where only Trumps are educated (54% of Republicans think that college education is a bad thing for the nation)

Investment in the humanities.  Where would we be without our culture and entertainment?  (No philharmonic, no Spiderman?

Veterans Administration and the GI bill: the only real compensation given to veterans for their sacrifice.

NASA:Today’s private space enterprise and our private lives owe a debt to public policy (JFK’s moonshot, velcro).

What is common to all public policy is that everyone contributes to it, and everyone is the beneficiary.

Chinese Snowballs at Huntington Gardens

Chinese Snowballs

For a few hours our minds are happy prisoners
of plants and trees in full April bloom,
recent rains returning a truer green
to our LA landscape, even the cacti
grateful for the plentiful showers
which broke years of drought.
We forget the danger that fills our nightly
news, the warnings from journalists,
that feeling of being bombarded
from every direction with no escape –
yet we do, set free in these gardens
seeded from every continent.
Who would guess there are so many
types of aloe, both local and as faraway
as Madagascar and Brazil?
The Japanese maples are peaking
in bright red and crimson, while
Chinese snowball trees burst
with festive white pom-poms.
So much beauty, enough for
all who pay attention – whether
hummingbird or freeway driver,
honey bee, lizard, or goose –
the world raging outside impossible
to bring into this conversation.
Amy Uyematsu

Amy Uyematsu

 

Raul, Hari Nam, Ellen