Keynesian economics: is it time for the theory to rise from the dead? Good Read

[malaise]

https://www.theguardian.com/business/2016/dec/11/keynesian-economics-is-it-time-for-the-theory-to-rise-from-the-dead
<snip>
Imagine this. In late 1936, shortly after the publication of his classic General Theory, John Maynard Keynes is cryogenically frozen so he can return 80 years later.

Things were looking grim when Keynes went into cold storage. The Spanish civil war had just begun, Stalin’s purges were in full swing, and Hitler had flouted the Treaty of Versailles by remilitarising the Rhineland. The recovery from the Great Depression was fragile. It was the year of the Jarrow march and Franklin Roosevelt’s second presidential election victory.

Waking up in 2016, Keynes wants to know what’s happened in the past eight decades. He’s told that the mass unemployment of the 1930s finally came to an end but only because military production was ramped up by the great powers as they came to blows for the second time in a quarter of a century.

The good news, Keynes hears, is that lessons were learned from the 1930s. Governments committed themselves to maintaining demand at a high enough level to secure full employment. They recycled the tax revenues that accrued from robust growth into higher spending on public infrastructure. They took steps to ensure that there was a narrowing of the gap between rich and poor.

The bad news was that the lessons were eventually forgotten. The period between FDR’s second win and Donald Trump’s arrival in the White House can be divided into two halves: the 40 years up until 1976 and the 40 years since.

Keynes discovers that governments deviate from his ideas. Instead of running budget surpluses in the good times and deficits in the bad times, they run deficits all the time. They fail to draw the proper distinction between day-to-day spending and investment. In Britain, December 1976 was the pivotal moment. Matters came to a head in early December when a divided and fractious cabinet agreed that austerity was a price that had to be paid for a loan from the International Monetary Fund, which was needed to prop up the crashing pound.

Subsequently, Keynes is informed, there was a paradigm shift. Labour had been reluctant converts to monetarism; the Thatcherites who followed were true believers. Controls on capital were lifted, full employment was abandoned as the prime policy goal, trade union power was curbed, taxes for the better off were cut, inequality was allowed to widen, finance waxed as manufacturing waned.

Plenty more at link

[Greybnk48]

1. Yes! Long past time!

Trickle-down, voodoo economics is a 30 year failure for all but the very top tier.

Great article, thanks Malaise.

[yallerdawg]

2. Keynesians are about to go ballistic again!

8 years ago when we needed massive deficit spending and infrastructure projects and full employment, the Republicans made obstructionism the priority, and hurt 99% of us.

Now, with a recovering economy, full employment, and increasing Federal revenue - the jackass they just elected wants to do just what Bush 2.0 did. Cut taxes, increase defense spending, start massive infrastructure investment - Bush had a couple wars, but it was massive deficit spending combined with significant tax cuts.

JMK is rollin' in his grave.

In 4-8 years, the US will again need Democrats to clean up the mess.

[malaise]

3. Four years ? You mean next year this time

[tableturner]

4. A very readable, thought-provoking, and efficiently written exposition of Keynesian economics.....