Monday, 9 August 2010

Keynes, Stiglitz and what is the real waste: not the stimulus package

Thank you, John Maynard Keynes

Brick bats to those who brought us neo-liberalism Greed is Good

Milton Friedman being interviewed by Phil Donahue in 1979

It was back in the time of power of Reagan and Thatcher that Milton Friedman reached the height of his influence - socially, politically, economically.  You see, Networkers, you vote every day - with your dollar.  Every dollar spent is a vote cast for what the dollar is spent on.  You can vote for socially and economically constructive political parties at the ballot box but your spending choices can and, more often than not, belie your expressed beliefs.  If you want a world that is not dominated by the politics of self-interested consumption and then spend your dollars on plasma television, nic-nax and jewellery, then guess what...? The powers that be in our society will use for political fodder - your actions, not your words.

There is an old saying that You might forget your actions but your actions don't forget you.  Or, as Ingersoll once said: In nature there is no such thing as punishment or reward - only consequences.

Seventy-four years ago, the seminal work of John Maynard Keynes - The General Theory of Employment, Interest and Money - was published. This new way of economics came into a world wracked with the economic pain of The Great Depression.  The world was only nineteen years out from the Versailles Treaty which allegedly brought to conclusion The Great War.  Stalin was in power in the USSR.  Hitler was in power in German and preparing for the summer Olympics.  A few weeks after the publication of The General Theory, Hitler made a major "peace" speech.  Few realised that the world was on its way to war once more.

Two factors were paramount in the conclusion of The Great Depression:  The General Theory and the Second World War.

Here in Australia, a not-yet-famous H.C. "Nuggett" Coombs was employed as an economist in the Commonwealth Bank of Australia. In his autobiography, Trial Balance - issues of my working life, Coombs wrote:
The publication in 1936 of John Maynard Keynes' General Theory of Employment, Interest and Money, was for me and for many of my generation the most seminal intellectual event of our time.  It was not an easy book.  Many of the ideas on which it was based were then unfamiliar, and the book itself showed evidence of haste in composition so that its structure did not emerge sharply from initial reading.  Nevertheless, it did not fail to generate excitement from first contact, and soon I had become convinced that in the Keynesian analysis lay the key to comprehension of the economic system.
In 1943, with Australia feeling the humiliation of defeat because of the fall of Singapore and Australia's defeated troops there becoming prisoners of war of the Japanese in Changi, the Burma Railway or Japan itself; and Australians having been through the horror and anxiety of the Kokoda campaign, the Department of Post-War Reconstruction was established.

In the midst of the greatest and most horrific drama of war and the threat of invasion, Australia under Curtin established a policy making body under Ben Chifley which spoke of hope and a future for Australians.

Coombs became Director-General of a department bursting with intellectual talent.  The work of this department - in spite of being axed by an incoming Liberal government when Menzies came to power in 1949 - undergirded so much of  Australia's development and economic history in the years to come (see White paper on full employment in Australia).

Its work and its economics - in spite of the drift during the Hawke-Keating years to neo-liberalism - has been intertwined with the Australian Labor Party ever since.

Why this potted history, Networkers?  Because I am a firm Keynesian.  I believe it is the only system of economics that has runs on the board when it really counts.  The inevitable conclusion of Friedman/Hayek economics is seen is its corruption of morals that accounts for what has happened in the subprime mortgage crisis and the world-wide depression it has brought about.  

Australia - even the international experts say - has weathered the Global Financial Crisis (GFC) well, in fact probably best.  And, in this election year of 2010, the Liberals are again decrying Keynesian principles and seeking - in the face of world-wide praise for Australia which Australians usually love - to diminish and dismantle all the good work that has been done - just as Menzies destroyed the Dept of Post-War Reconstruction!

Please look and listen to what Nobel Prize winning economist, Joseph Stiglitz has told the world about what happened in Australia.  Tony Abbott and his Liberal cohort keep trumpetting waste.  Check out what Stiglitz says about waste - and the real waste of the Global Financial Crisis.  

Come off it MisteRRabbit!  
Own up to be being a Friedmanite 
and that you detest anything 
remotely resembling Keynesian influence!  
Even when it gets our nation out of trouble 
in a way that no other nation has managed!

And if you want to hear a similar assessment made in plain Australian English - please check out what Ross Gittins has to say today.

So cut the cackle, Tony.  
Labor did what you never-ever would - 
and Australia is on a solid footing for what comes next.

Related reading:
The General Theory of Employment, Interest and Money

John Maynard Keynes

The End of Laissez-Faire: The Economic Consequences of the Peace

The Big Three in Economics: Adam Smith, Karl Marx, And John Maynard Keynes

Keynes: The Return of the Master
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