The way I see it is a little bit like the way I see Keynes. He was trying to save capitalism from the capitalists. Had Keynesian economics not succeeded in showing that you could restore near-full employment, the attacks on capitalism would have been virulent. Had the so-called “capitalists” had their way and engaged in budget cutting, there would be no capitalism. I guess I feel a little bit the same way…Robert Higgs has explaoned what really went down during the supposed Keynesian recovery:
When I began to teach U.S. economic history at the University of Washington in the late 1960s, I quickly realized that this tale of the wartime “Keynesian miracle” could not withstand critical scrutiny once one went beyond the barest account of it in terms of the elementary Keynesian model and the standard government macro measures, such as GDP, the consumer price index, and the rate of civilian unemployment. Almost immediately I saw that unemployment had disappeared during the war not because of the beautiful workings of a Keynesian multiplier, but entirely because about 20 percent of the labor force was forced, directly or indirectly, into the armed forces and a comparable number of employees set to work in factories, shipyards, and other facilities turning out war-related ”goods” the government purchased only after forcing the public to pay for them sooner (via wartime taxes and inflation) or later (via repayment of wartime borrowing). Thus, the great wartime “boom” consisted entirely of (1) some people’s mass engagement in wreaking death and destruction and (2) other people’s employment in producing supplies for these warriors after the government’s military labor drain, turning out ”goods” never valued by consumers or private producers in voluntary transactions, but rather ordered by government functionaries and priced completely arbitrarily in a command-and-control economy. In no sense was the alleged ”wartime prosperity” comparable to real, normal prosperity.
Yet, Stiglitz is not only supporting the fallacy of a Keynesian recovery, but wants to expand the notion. He continues in the interview:
...to put it even more “modestly”, I have a broader agenda. Keynes had one issue on his mind: full employment. I have many more issues. Keynes and his successors argued that once you were at full employment, markets were efficient. My claim is that even at full employment, markets can be inefficient, and even when they’re efficient, they may not be fair.This is nothing but a call for more government stick-handling of the economy, with the government handing out taxpayer money and Fed printed money to those in cahoots with the government.
Stiglitz then says that the financial crisis is:
... an opportunity to, at the very deepest level, reform capitalism. Capitalism before the great depression and after was very markedly different. We need another change to the rules of capitalism. The flaws have been brought out into the open and therefore there’s an opportunity to focus on those and to do something about them.Yeah, that's it Joe. Crony capitalism and Fed manipulation of the money supply has crashed the economy once again, so let's give more power to the Fed and the overall government. How do you sleep at night, Joe?
"I have a broader agenda. Keynes had one issue on his mind: full employment. I have many more issues. Keynes and his successors argued that once you were at full employment, markets were efficient. My claim is that even at full employment, markets can be inefficient, and even when they’re efficient, they may not be fair."
ReplyDeleteThis is the stupidest thing because the last time I checked, the Keynesians don't have a successful record of keeping the economy at full employment. So to even venture on to your next goal is pretty audacious. What will be the response of the Keynesians? It's capitalism's fault that the economy downturned. We're only responsible for the good stuff.