There is no free in liberty.


Friday, July 8, 2011

Keynesians in Search of a Success Story in WW2 Find Only Their Argument's End...


I find it interesting that when one asks for an example of Keynesian solutions having pulled our nation from recession we are never referenced to any of these recessions ...

recession of the early 2000's
recession of the early 1900's
recession of the early 1980's
recession of the mid 1970's
recession of the late 1960's
recession of the early 1960's
recession of the late 1950's
recession of the mid 1950's
recession of the late 1940's
recession of 1945
recession of 1937

Many were relatively small and presumably more manageable but they are all ignored.

No. One is almost ritually taken back to the Great Depression to find proof of Keynesian success. But was the Great Depression a Keynesian success?

Under Hoover government expanded by around 30% (Keynesian before Keynes was chic); the recession continued. Under FDR there was a tepid recovery but further Keynesian meddling likely produced one of the worst recessions in the period from the Great Depression to today, the recession of 1937.

With over a decade of Keynesian solutions attempted from 1929 to 1941 the lasting result was a structural recession. Keynesian solutions had stalled the economic cycle at the worst possible point and what had once been a recession had garnered the status of The Great Depression.

Enter WW2.

(It is interesting to recognize that sometime in the past 20 years a shift occurred such that references to Keynesian success lead less frequently to the Great Depression than they once did and more frequently to WW2. This, I believe, represents the slow recognition that Keynesian solutions failed to usher our nation from the Great Depression.

As a result Keyneians now more frequently turn to the argument ending contention that WW2 represents a Keynesian success story.)

Lets assume for a moment that WW2 was a Keynesian success. That Keynesians now rely on WW2, a wartime economy in which Government spending accounted for over 50% of GDP, as an example of Keynesianism pulling America from the grip of recession shows how far Keynesians will stretch to find a single success story. Really, Keynesians now argue with a straight face that recessions should be fought with the equivalent of not just wartime spending but World War spending when no such response was needed in recessions prior to the Great Depression.

Of course, I question if even WW2 was a successful Keynesian experiment. If stimulus spending is intended to prime our economy as Kenynesians argue, then how does gearing industry for war help? The recession of 1945 answers that for us. It does not. At the war's end all the priming of the pump represented by WW2 resulted in ... wait for it ... the 1945 recession, not a Keynesian boom.

Just imagine the state of our nation after the recession of 1945 had we not had a world of devastation to sell our wares to, a world that payed not just for our goods, but for the retooling of all that industrial wartime "stimulus" more accurately described as bad investments for a peacetime economy. Imagine if those broken nations had not been there to make our war debt manageable by offing us their markets. Imagine the state of our nation after the recession of 1945 had we been required to compete with even one functional industrial economy or if our cities and towns had been brought to the waste of theirs.

When being asked to believe that WW2 represented a Keynesian success, I am being asked to believe that Keynesian solutions require us not only to raise national spending to over 50% of GDP, but that we must also destroy the industrial capabilities of friend and foe alike, destroy their infrastructures, destroy their homes and cities, kill off a large part of their workforce, have them kill off a large portion of our workforce, and then have them pay for retooling our economy so that we may sell them goods, climb back from recession and give Keynes a pat on the back for a job well done.

Really? We have to do all this to make Keynesianism work? Really?

If it takes rehashing WW2 for Keynesianism to work, I want no part of it. And when Keynesians have only WW2 to rely on as an example of a Keynesian success story, they have lost their argument.


No comments:

Post a Comment