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There are two previous diaries in this series: One  Two

John Maynard Keynes was a complex and very interesting man. He was a brilliant intellectual and the most prominent economist of his era. There is a vast body of literature about him and his economic theories. I am inclined to think that the single best source of information about him is the superb three volume biography by Robert Skidelsky. I read the whole thing and greatly enjoyed it. For people less ambitious, here's a link to the one volume abridged version.  

Keynes published his most important work The General Theory of Employment, Interest and Money in 1936. Shortly after that he became seriously ill with a cardiac infection and was hospitalized for an extended period. By the time that he had made a partial recovery Britain was engaged in the crisis of WW II. He devoted his remaining energies to being the principal adviser and negotiator for the Treasury for the remainder of his life until his death in 1946. An important result of this situation was that he never had the opportunity of participating in the discussion and debate about the meaning and implications of his theory. From then until now there have been a range of different versions of Keynesian economics like schismatic religious sects all claiming to be the true voice of the master. In the present day we have New Keynesians, Neo Keynesians and Post Keynesians along with some others.

There is a popular version of economic history that portrays Keynes as an apostle of welfare state social democracy. This tale ties his economic theories closely tied to the new deal in the US. Politically Keynes was a British Liberal. When he was elevated to the House of Lords he sat with the Liberals. His attitude toward the working class was one of mild support. His relations with the Labour Party were often bumpy. The document that launched the British welfare state in 1942 was written by William Beveridge, another Liberal. Keynes, in his capacity as treasury adviser reviewed it for its economic implications, but he was relatively detached about it as social policy. Keynesian economics does not require the existence of a strong social safety net. Keynes' primary focus was on managing capitalist economies to minimize major disruptions.

The major policy achievements of the new deal were all accomplished before Keynes published The General Theory. New deal economic policies were not operating on a Keynesian platform. They were basically fueled by pragmatic experimentation with the hope of avoiding the kind of revolutionary upheavals that were beginning to sweep Europe. In the process they injected significant government spending into the economy resulting in a stimulus effect. By 1936 the economy had returned to slight expansion. They then attempted to placate conservative opinion by reducing programs and it returned to recession in 1937. What eventually returned the US economy to robust prosperity was the war economy which began to pick up in 1938 as Europe began to rearm. The prosperity that much of the American workforce enjoyed during the 50s and 60s had as much to do with the fact that WW II had left the US as the only intact industrial economy as it did with economic policy.

By the late 1940s an American version of Keynesian economics developed under the leadership of Alvin Hansen  became established as a standard position for the management of economic policy. It continued to be the dominant view until the 1970s. When the Kennedy/Johnson administration took office it embarked on an economic policy of fairly aggressive expansion under the leadership of Walter Heller as chairman of the Council of Economic Advisers. With the further stimulus of the great society programs and spending on the expanding war in Vietnam the economy began to overheat. LBJ's economic advisers took an orthodox Keynesian approach and advised a tax increase to fund the war and balance the economy. LBJ was afraid of the political consequences of a tax increase and delayed it for an extended period of time. Some economic historians, including Robert Skidelsky mark this as the beginning of the inflationary crises that were to come.

Major economic crises do not result from single causes. That was true of the great depression and it was true of the stagflation crisis of the 1970s. This was a global crisis creating similar problems over the entire industrial world. The Arab oil boycotts and resulting price shocks are generally acknowledged to have been one major cause. The result was a situation of chronic price inflation coupled with persistent unemployment. Keynesian economics as then practiced had solutions for one problem or the other but not the two in tandem.  

Eventually Carter appointed Paul Volcker as chairman of the Federal Reserve. His approach was to deal with the inflation while making unemployment worse. He used the traditional tool of tight money by pushing up interest rates to unprecedented levels. The inflation eventually came under control. Volcker does not appear to have been an economist closely allied with a particular economic philosophy. From the Wiki article:

Nobel laureate Joseph Stiglitz said about him in an interview:

Paul Volcker, the previous Fed Chairman known for keeping inflation under control, was fired because the Reagan administration didn't believe he was an adequate de-regulator.  

He has now resurfaced with the Volcker rule that is part of the regulatory changes being adopted in the wake of the great recession.

The economic problems of the 1970s lasted over a 10 year period form about 1972 to 1982. They provided an entre for neoliberal economist led by Milton Friedman and his fellow monetarists. I think that it is important to note how closely developments in the UK during this period paralleled those in the US. The Labour government under James Callaghan was struggling with problems of high inflation and union demands for wage increases not unlike those faced by the Carter administration. In 1979 Callaghan's distress opened the door to Thatcherism while Carter's opened it to Reaganism in 1980. The neoliberals had arrived in positions of power.

Originally posted to Richard Lyon on Tue Dec 17, 2013 at 04:00 PM PST.

Also republished by Anti-Capitalist Chat and Community Spotlight.

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Comment Preferences

  •  I'm really enjoying (11+ / 0-)

    this series. Although I lived through much of this time (11% interest when I purchased this home) your clear description puts the times in perspective.

    Ceiling Cat rules....srsly.

    by side pocket on Tue Dec 17, 2013 at 04:18:39 PM PST

  •  You've amazingly managed to incite suspense... (8+ / 0-)

    ...into economic history! Thanks.

  •  this is an excellent series of diaries (6+ / 0-)
    Nobel laureate Joseph Stiglitz said about him in an interview:
    Paul Volcker, the previous Fed Chairman known for keeping inflation under control, was fired because the Reagan administration didn't believe he was an adequate de-regulator.  

    Warning - some snark may be above‽ (-9.50; -7.03)‽ eState4Column5©2013 "I’m not the strapping young Muslim socialist that I used to be" - Barack Obama 04/27/2013

    by annieli on Tue Dec 17, 2013 at 04:59:44 PM PST

  •  Non dismal diary concerning the dismal "science", (4+ / 0-)
    Recommended by:
    Richard Lyon, wintergreen8694, JVolvo, AoT

    Good work .  Thanks

    Rivers are horses and kayaks are their saddles

    by River Rover on Tue Dec 17, 2013 at 05:14:59 PM PST

  •  Wow, what you wrote about Volcker (8+ / 0-)

    sounds like it could have been written by me.  Also, I love the irony. He's credited with fixing the economy and Reagan shares in the praise, but it was Carter who appointed hm.  And to the Reaganistas, Carter was a worthless failure. Reagan actually kept Volcker for most of his administration till he got the boot.

    There is no existence without doubt.

    by Mark Lippman on Tue Dec 17, 2013 at 06:21:59 PM PST

    •  He wasn't fired (2+ / 0-)
      Recommended by:
      chuckvw, duhban

      his 7 year term ran out.

      •  He served longer than 7 years and (5+ / 0-)
        Recommended by:
        chuckvw, JVolvo, unfangus, Youffraita, native

        that's not the term length.  But even if Volcker was at the end of a term (he was) he could have been reappointed (he wasn't). There's no term limit.  

        To Stiglitz, the end of Volcker's service amounted to a firing by waiting till the end of his term and nominating someone else in his place.

        I suppose you have your own strict definition for what would constitute a firing in this situation.  If you want to go that route I can deal with technicalities.

        The Fed Chair can't be removed from office in the middle of a term. There's no provision for it in the Federal Reserve Act. It's a feature intended to prevent partisan politics from interfering when the Fed conducts monetary policy.

        There is no existence without doubt.

        by Mark Lippman on Wed Dec 18, 2013 at 07:00:58 AM PST

        [ Parent ]

  •  Thanks for this (5+ / 0-)

    I haven't run into these diaries before, but I'm as impressed as my limited functioning brain cells will allow.  Will bookmark for later savoring and edification.  Thank you, Richard.

    We have always been at war with al Qaeda.

    by Dallasdoc on Tue Dec 17, 2013 at 06:29:45 PM PST

  •  More, more.. (3+ / 0-)
    Recommended by:
    Richard Lyon, chuckvw, JVolvo

    Very good stuff, thanks.

  •  another good one :) thanks e/m (2+ / 0-)
    Recommended by:
    Richard Lyon, JVolvo
  •  A few things I NEVER see in economics books (13+ / 0-)

    I've spent most of my adult life reading, researching, and writing about political economy. There are a number of things accepted as common wisdom, that I have come to believe are wrong. Or things which are just plain ignored, but which must be included to fully understand the crisis we find ourselves in, and the nature of the elites who are responsible for driving us here.

    Among the errors of common wisdom is the belief that Paul Volcker did a great deed in breaking the back of inflation.

    He didn't. To put it in as few words as possible, and without stretching the use of allegory that much, what Volcker did was unleash the Biblical curse of usury upon the USA.

    Among the things that are ignored, is the legitimization of organized crime in the 1970s and 1980s. A huge part of the mergers and acquisitions boom, and especially the leveraged buyout craze of that period, was financed with dirty money. Gus Russo's 2006 book, Supermob: How Sidney Korshak and His Criminal Associates Became America's Hidden Power Brokers is one of the few that dares to even mention this issue. But back in the 1980s, talking to old-hand vice cops about how the new generation of mobster's kids were "going legit" could make your hair stand on end.

    Hand-in hand-with American organized crime was the British legacy of the opium war and trade. It is no accident that most of the world's hot money centers are located in British colonies and British protectorates, such as Bermuda and the Cayman Islands.

    Closely related to all this is the rise of the euro-dollar market, then the petro-dollar market.

    The unsavory role of the British empire through much of world history the past few centuries should give one pause to stop and question how decent a chap Keynes really was. But Keynes is not something I am that well versed on. Hopefully Jon Larson (techno) will drop in and leave us a few words. However, as for the British empire, I have read Peter Temin's and a few others work on the City of London's attempts in the 1920s to defend the gold standard, and the role of the British pound as a reserve currency, being one of the primary causes for the financial collapse of 1929. And, I have seen strong circumstantial evidence that the City played a crucial and similarly sinister role in the collapse of the Bretton Woods system in 1971, and in the collapse of Lehman Brothers in 2008.

    Finally, I am glad that you mention the refusal by Johnson to raise taxes to pay for the Vietnam War, which economists hardly ever discuss when talking about stagflation of the 1970s and 1980s.

    A conservative is a scab for the oligarchy.

    by NBBooks on Tue Dec 17, 2013 at 07:14:58 PM PST

    •  Oh, and Naomi Klein's book (14+ / 0-)

      Shock Doctrine: The Rise of Disaster Capitalism absolutely must be read by everyone trying to understand neo-liberalism and its power as an ideology and set of policy prescriptions today.

      A conservative is a scab for the oligarchy.

      by NBBooks on Tue Dec 17, 2013 at 07:20:34 PM PST

      [ Parent ]

    •  Yes indeed, I was educated by Keynesians (8+ / 0-)

      The econ department when I was at the University of Minnesota was chaired by Walter Heller and Alvin Hansen was one of the guys whose picture was up on the wall—he had done most of his important work at UM before he moved on to Harvard.

      As late as 1973, the Keynesians believed that they were going to run the world forever and viewed guys like Milton Friedman as profoundly retarded (which he was.)

      But lost in all this was the fact that Keynes was a banker so it was not especially surprising he proposed governments borrow money to fix depressions.  This put Keynes FAR to the right of American industrialists like Edison and Ford who believed that a government that could issue bonds could just as easily just print the currency necessary for fiscal stimulus.

      Of course, what really tripped up the Keynesians was their inability to comprehend the nature of energy and the fact that if we wanted to run an economy on commodities we imported and then burned, we were going to have to seriously adjust our thinking.

      Before the Keynesians even got around to thinking about the Arab Oil embargo, their day in the sun was over.  I would be very surprised if there is even one good Keynesian left at UM.

      •  Amazing to me that the impact... (2+ / 0-)
        Recommended by:
        techno, chuckvw

        ...of energy was somewhat trivialized. How much is due to them being "mental prisoners" of  the technology of their formative years?

        Change does not roll in on the wheels of inevitability, but comes through continuous struggle. --Martin Luther King Jr.

        by Egalitare on Wed Dec 18, 2013 at 02:11:25 AM PST

        [ Parent ]

      •  For quite awhile there were (0+ / 0-)

        "fresh-water" and "salt-water" economists.  A Keynesian at UM couldn't get published.

        I'm guessing here, but I think Keynes would have spun in his grave if so-called Keynesians had advocated fighting a war and increasing social welfare without increasing revenue some way.  

        Buying stuff and paying for it with IOUs was medicine to end the  Depression, not a prescription for all time.

        "Our problem is not that the glass is half empty or half full, but that the 1% claims that it is their glass." ---Stolen from a post on Daily Kos

        by jestbill on Wed Dec 18, 2013 at 11:39:15 AM PST

        [ Parent ]

        •  When Hansen was at UM, it was the USA center of (1+ / 0-)
          Recommended by:

          Keynesianism.  When Walter Heller was there, he certainly had celebrity power (as he described himself, "I am the man who taught Keynes to JFK")  So the problem was never that Minnesota was a backwater.  Plenty of neoliberals at UM still get published all the time.

          No, the problem was when the oil embargo hit, Keynesianism went intellectually bankrupt.  They had nothing in their toolkit for energy-driven stagflation.  Of course, the Friedmanites didn't either but at least they were different.  This country has never recovered from the Volcker disaster, which some people who should know better consider the neoliberal triumph.

          Forty years later and people in the streets, neoliberalism looks spent too.  In fact, it is so over the economics profession itself may never recover.  Ken Rogoff being outed for academic fraud on COLBERT, no less, is pretty hard to recover from.

          Of course, the absurd excuses for Keynesians we see running around these days have no answers either—it was like their ideas were frozen in amber when they lost influence in the 1970s.

          •  I did not say back water. (0+ / 0-)

            Neoliberalism is so different than Keynesianism that there isn't much to say about the rest of your post.

            Keynes wanted to get his economy going.  Neoliberals want rich people to make more money damn the consequences.

            Deregulation? Privatization?  Tax cuts when there is a budget surplus AND when it is in the red?

            "Our problem is not that the glass is half empty or half full, but that the 1% claims that it is their glass." ---Stolen from a post on Daily Kos

            by jestbill on Wed Dec 18, 2013 at 05:01:25 PM PST

            [ Parent ]

            •  Of course there are enormous (2+ / 0-)
              Recommended by:
              Superpole, k9disc

              differences between the Keynesians and the neoliberals.  But since both agree that the moneychangers should call all the shots in economic matters, those differences don't seem so large when compared to the real economic progressives that once walked the earth,  I mean, wouldn't you have just loved to hear Franklin or Edison debate Keynes on the nature of money or the reason for an economy in the first place?

              •  Oh yeah. (0+ / 0-)

                And people who make laws should not be lawyers.
                People who drill your teeth should never be dentists because they have a money making interest.

                All our diplomats should be amateurs.

                Education and experience are for elitists.

                Keynes, in advocating government borrowing was explicitly arguing against the bankers of his day.  They wanted to balance budgets no matter who it hurt and how long it would take for recovery.

                Countries that dumped the gold standard and the strictly balanced budget recovered.  The rest suffered until they either saw the light or were over run by Germans.  

                "Our problem is not that the glass is half empty or half full, but that the 1% claims that it is their glass." ---Stolen from a post on Daily Kos

                by jestbill on Wed Dec 18, 2013 at 08:40:47 PM PST

                [ Parent ]

    •  I prefer to say Volker just did the typical respon (0+ / 0-)

      se to inflation: a deep recession.  Historically, that has always 'broken' the back of inflation by forcing labor to eat it for as long as it can.  Add to that that the worst effects of the oil price shocks had worked their way thru the world economy by then, and you have the 'Volker miracle'.

      Not so much a miracle as 'yawn, same ol' same'.

  •  Thank you Richard (1+ / 0-)
    Recommended by:

    for this diary, and the time to explain some of the changes we have experienced.  It would seem that Thatcherism and Reaganism in 1980s changed so much of the economic landscape compared to life in the 1970s.  Do you think some of deregulation has added to the higher cost of products and even basic services which has also added to a more severe class divide?

    "During times of universal deceit, telling the truth becomes a revolution­ary act. " George Orwell

    by zaka1 on Tue Dec 17, 2013 at 07:57:07 PM PST

  •  The problem is (7+ / 0-)

    Economics is neither a science bound by scientific method nor a system of mathematics, but we treat it like it is bound by both. Empiricism hardly matters.

    Its true that historic crisis opened the door for Neoliberals to enter. Its also true that part of the historic  change was the shift to believing economics is a true science. The Neoliberal thrives on that belief. That we, the homo economicus, are nothing but homo economicus.    

    That we are discussing "facts" when Neoliberals discuss their theories. Not Neoliberals postulating theories.

     Neoliberals wouldn't be as powerful as they are without this historic shift in beliefs. The crisis wouldn't be as meaningful without it. if we want to root out what happened, I think part of that digging is to see how we changed intellectually and in belief systems about how we saw economics, not just in theories, but the entire subject matter

    Because that to me provides the fertile grounds for manipulation that we see now. If economics is fact, rather than theory. If models are reality, rather than really poor substitutes because of our own limitations, and every one beliefs that these are "truths", Conservative and Progressive alike, then that's a lot less ground to travel as far as saying Neoliberals speak fact.

    How would they have thrived if everyone thought they were just pushing theories?

  •  A follow up point about the "fact" bias (3+ / 0-)
    Recommended by:
    JVolvo, duhban, k9disc

    Because we see economics as science and "fact" it affects how we see data, and that's how Neoliberals manipulate.

    This is something I found on NC about how even real scientists with all their rigor have this problem, and its actually have more a claim to being fact based. Once you open the door for ignoring the bias, then you open the door to manipulation.

    The value of uncertainty about economics as "fact", as far as progressives are concerned or leftists, is that if we can't be as certain about what people's choices mean as the Neoliberals wants us to believe, and its more theory than fact, then you also start to enter into the idea that may be luck plays a role and if that's true then you got to have a system that accounts for that complexity rather than assuming it knows all the facts or that it can be gleaned through markets.

  •  political economy at Kos - count me in (5+ / 0-)
    Recommended by:
    ozsea1, katiec, NoMoreLies, JVolvo, Youffraita

    Thanks for all of it. I've added the books to my wish list. That history of the 70s working class sounds intriguing.

    I'll be following several of you on this site going forward - Richard Lyon, techno and NBBooks. In fact, if you check the blogroll at my page here, I've already bookmarked Real Economics. It's a terrific site and one of my daily must-reads.  Shock Doctrine already has a place of honor on my bookshelf.

    I'm doing reading of my own all over the place to try and understand our moment in history and our most probable immediate future.  I'm patching together selections from a variety of people writing about history and economic history in particular - Naomi Klein of course, Nixonland, some Kevin Phillips, some Barbara Tuchman  - among many others.

    Thanks for the fine framing in this post, the additional perspective from astute comments, and especially the links to further reading.

  •  Nice series. MMT and MMT informed (0+ / 0-)

    post Keyensians  seem the most promising to me.

    Here's 2 blogs I like:

  •  As a side note about the (5+ / 0-)

    economic problems of the 1970's. Out industrial plant was growing old. Our economic competitors who we destroyed in WW II had a newer more efficient industrial plant. This is normal. Germany's initial success in WW II owed a great deal to the destruction of it industrial plant in the aftermath of WW I.

    Join the War on Thinking. Watch Fox News- John Lucas

    by Jlukes on Wed Dec 18, 2013 at 03:50:11 AM PST

  •  neoliberalism and keynesian ideas are as dead as (0+ / 0-)

    supply side economics.  These systems do not work for the majority of people.  They work great for the 1%.  It's time to move on to a new model that is based on cooperative / caring economics.  The best part of it all is that we the people do NOT have to wait for a decision to be made from above.  We just need to think about building cooperative business.  Help is already there in some regions from existing networks.  Eventually, we can influence the political system to support these efforts.  Then it can grow to large scale.

    "The real wealth of a nation consists of the contributions of its people and nature." -- Riane Eisler

    by noofsh on Wed Dec 18, 2013 at 04:51:56 AM PST

  •  A couple of quibbles (4+ / 0-)

    I wouldn't say that Hansen was the founder of American Keynesianism-i would give that "honor" to Paul Samuelson. Or at any rate, I would say that Samuelson had more lasting influence on the direction of macroeconomic theory in the U.S. On the other hand, Hansen is usually associated with the early IS-LM interpretation of Keynes.

    Is Keynesianism and Keynes associated with a welfare state? I agree that The General Theory is primarily about how the aggregate level of output and employment is determined. So one could be logically a Keynesian and not necessarily a welfare state supporter.  On the other hand, there is a conclusion that one can draw out of the General Theory, which while not logically necessary, is consistent, and that is that you need a fairly large component of G in order to stabilize the macroeconomy, and I would associate Keynes with this.

    I also think this is very much in keeping with Keynes' views of generally "noblesse oblige". Keynes' primary argument was for full employment, and in a high employment econonomy (any worker can work as many hours as he or she chooses at the prevailing wage), the need for a welfare state diminishes. For example, if workers at Walmart can work 40 hours a week at 15 dollars an hour, there is less need for food stamps. In addition, though, I think Keynes did recognize that income distribution is sometimes "random" and unjust.

    Volcker's strategy for fighting inflation was an adaptation of Friedman's monetary rule-and it was a dismal failure. That is why in practice, when it comes to monetary policy, aside from a few fanatics advocating the gold standard, we are all Keynesians now in the sense that it is interest rates, not monetary aggregates that are targeted.

    I'll leave you with one last thought and that is Joan Robinson's famous quote (more of a paraphrase because I forget the exact quote): "we argued and argued with Maynard, but we could never get him to see the implications of his own theory."

  •  I think it is wrong (2+ / 0-)
    Recommended by:
    ozsea1, Youffraita

    to say the new deal was not a product of Keynesian thinking.  Keynes had enormous influence in the thinking of key people in his Administration including Marriner Eccles and Harry Hopkins (read Eccles's testimony before ongress in 33 - it is completely informed by Keynes).  Keynes himself wrote an open letter to FDR in the New York Times arguing that FDR was not spending enough.  Keynes was a very public figure in the early 30's - and had significant influence before the general theory was written.

    The decision by FDR to back off the stimulus in '37 was disastrous - and parallels the failure to follow on the 2009 stimulus package.  From the beginning the Keynesians in FDR's Administration battled with more conventional types like Henry Morgenthau (Treasury Secretary).  Books have been written about the decision in '37 - and whether it was a misreading of the strength of the economy or an ideological mistake - but by '38 FDR was firmly in the Keynesian camp.

    It is worth remembering the argument between Galbraith and Heller in 61 over the JFK's stimulus package.  Heller argued tax cuts were quicker stimulus than spending - an argument Heller won.  The point is Keynesian economics cared less about the type of stimulus than the fact that there was stimulus - though later Keynesians would argue spending was better than tax cuts.

    Volcker was not fired - he was not re-appointed. It is worth noting, though, that his tenure was certainly driven by Friedman's understanding of monetary policy (MV=PT).  It is fair to say that Keynsians accept at some level the observations of monetary theory - though certainly not the entire program.

    This is a good article - and these are really just nits.

    Milton Friedman, though, was never a neo-liberal in any sense of the word.  He never accepted any part of the safety net.

    •  The basic thrust of new deal policy (1+ / 0-)
      Recommended by:

      did not come about because of Keynes. He certainly had extensive interaction with people in the administration and spent much of the war in Washington as the lead negotiator for the UK in economic matters. He was a key participant in planning the Bretton Woods conference but he failed in his effort to shape its policy outcomes.

      My main point was that FDR didn't really have a coherent economic rationale for his programs. After his first term he felt that he had put the lid back on American society and began to shift his focus to international affairs.

  •  Well that makes sense (2+ / 0-)
    Recommended by:
    Youffraita, k9disc
    [Volcker] was fired because the Reagan administration didn't believe he was an adequate de-regulator
     Greenspan didn't believe his job was to regulate. So I guess Reagan got what he wanted (two housing busts later).

    None are so hopelessly enslaved, as those who falsely believe they are free. The truth has been kept from the depth of their minds by masters who rule them with lies. -Johann von Goethe

    by gjohnsit on Wed Dec 18, 2013 at 09:24:55 AM PST

  •  What generally never gets integrated (6+ / 0-)

    ...into the economic crisis of the 1970s is the overhanging war debt from Vietnam and the way that petrodollars created a money supply without controls called Eurodollars at the time.  That is, dollar-denominated deals concluded outside the sphere of that depended on the trust that the underlying dollar-denominated asset being leveraged actually existed.  Unwinding that bubble was part of what Volcker is credited with doing, but as is the usual case when paper economy bubbles and bust are unwound, the effects are place on the real economy through lack of actual investment and on downward pressure on labor costs.

    Dealing with war debt then becomes the excuse of austerity, which immerates ordinary people further.

    It is no accident that Reagan responded to this crisis with military Keynesianism in which even arithmetic mistakes got doubled.  "Morning in America" was established through ramping up the Cold War in all its boondoggling glory.

    50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

    by TarheelDem on Wed Dec 18, 2013 at 10:08:43 AM PST

  •  Forgot Nixon's wage-price controls? (2+ / 0-)
    Recommended by:
    Youffraita, k9disc

    Adopted primarily bc of the collapse of he gold standard (Bretton-Woods agreement) and to prevent feared increase of 5ish% inflation as US also abandoned gold crisis.  It was then kept in place during the 1972 election to allow Nixon to inflate the economy by huge (for the time) spending increases to ensure his re-elect.  Then came the oil embargo and deal with the Shaw, wherein Kissenger allowed oil prices to quadruple in return for the Shah being the US military proxy to defend the oil flow, with the controls still in place.

    The combination of inter alia falling exports, balance of trade pressures, rising prices as the dollar fell relative to other currencies, inflating a bubble in the '72 economy, and then adding a quadrupling of price of one of the more essential raw materials (growth and energy use had a pretty much 1 to 1 ratio at the time), was pretty much guaranteed to create stagflation.  Normal economic feedback would have worked thru those shocks by a what at that time would be considered severe recession.

    The result of the controls with the fiscal bubble, however, was that the world economy was so distorted what would have been a sharp but short spike in prices and unemployment was traded for a much longer lasting and ultimately much greater inflation and stagnant growth as the distortions added to a vicious cycle of wage-price increases.

    Or at least that's what I've read.

    •  I think you're correct (0+ / 0-)

      b/c as I recall, it was after the price controls were lifted that things really went downhill, fast. Clearly there were a lot of other factors that led to our lost decade in the 70s, but Nixon didn't do the economy any favors with that little strategem.

      Irony takes a worse beating from Republicans than Wile E. Coyote does from Acme. --Tara the Antisocial Social Worker

      by Youffraita on Wed Dec 18, 2013 at 12:31:20 PM PST

      [ Parent ]

      •  Yep, the King of F'g the Country for Nixon's short (0+ / 0-)

        -term gain.

        Never forget the approx. 35,000 US soldiers and untold Vietnamese, Cambodians and Laotians who died bc he had Kissenger sabotage the Peace Talks in '68 so he could beat Humphrey.

        And ever other evil frakking thing he did that earned him the honor of being the only President to be forced out of office.

  •  I'm going to paraphrase Keynes here .... (1+ / 0-)
    Recommended by:

    "Worldwide Republicanism is a threat to mankind and the world economies. It must be eradicated from Earth for all time.

    Instead use THIS as a guide to establish a science of Economics, based in reality using verifiable facts, to guide economic policies for our civilization." ... I'm done ... [drops mic]

  •  Another informative article... (1+ / 0-)
    Recommended by:
    Richard Lyon


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