TigerSoft News Service 8/3/2011
www.tigersoft.com
Our Tiger/Peerless HOTLINE
Called The 2011 Top.
Just as in 1987, 1998, 2000, 2002, 2007
and 2008. Don't be a deer in the
Hotline.
IGNORING ECONOMIC HISTORY
AND KEYNESIANISM
PUT AMERICA IN GREAT PERIL
A
MASSIVE PROGRAM OF PUBLIC WORKS IS NEEDED NOW
THE
"MULTIPLIER EFFECT"
TARIFFS and PROTECTIONISM - "They Do The
Trick"
READ KEYNES
IN THE ORIGINAL.
AMERICA'S LOCUST YEARS NOW
PARALLEL THE
UK's, 1919-1937
By William Schmidt, Ph.D. (Columbia Univ.)
THE LESSONS OF HISTORY
UK - 1919-1937
UK's GNP fell 25% between 1918 and 1921 and did not recover from
this until 1939.
Millions were unemployed for a
generation. It Did Not Have To Be This Way.
Hoover
- 1930-1932
FDR - 1937
Germany -1932
France - 1930-1932
Tea Party Terrorism Show How Vulnerable
The Stock Market Is To Minority Terrorism
Our
Peerless HOTLINE Got It Right.
7/22/2011
"The Volume Fuel for An Extension of The Summer Rally is
Running Low... The research I have just done for the S9vs suggests
we are at or near a top, in which there is a 45% chance for a decline
below the lower band."
IGNORING ECONOMIC HISTORY
PUTS AMERICA IN GREAT PERIL
By William Schmidt, Ph.D.
(Columbia Univ.)
UK - 1919-1937
The theme of my 1972 dissertation at Columbia, The Role of the
British Chancellor
of The Exchequer in British Cabinet Politics: 1919-1937" was that Chancellors
invariably fought government spending proposals, no matter their merits, no
matter how much joblessness was caused by his spending cuts, no matter
how unprepared the RAF was as Germany rearmed. The deflationary
consequence of 18 years of austerity, balanced budgets and "No"s to
all new spending programs was that Britain languished for years with chronic
high unemployment and a declining infrastructure. It did not have to be this way.
Churchill's Admits His Biggest Mistake
Churchill said that the biggest mistake of his long political career was trying in 1924
to push up the Pound in the middle of an economic slow-down and trying then to cut
government spending to balance the budget.
See http://en.wikipedia.org/wiki/Winston_Churchill
It took 25 years, but Churchill came to see that an adviser who opposed him on
this, the economist JM Keynes, was correct. Keynes penned in the "Consequences
of Mr. Churchill" (1926) that taking England back on the Gold Standard would
eventually cause a Depression. It did three years later.
John Meynard Keynes
Keynes' seminal "The General Theory of Employment, Interest and Money" (1936)
grew out of this setting. Keynes already knew the Treasury and its orthodox
fiscal
thinking all too well. He had worked there in WWI. In fact, he was one of
Lloyd George's
key economic advisors at the Paris Peace Conference of 1919. He totally disagreed
with the harsh terms placed on Germany. In college, we had to read his
The Economic Consequences
of the Peace (1919) It was a lesson in how prescient
someone can be and yet still not be listened to by policy makers who have a
stake in status quo thinking.
Ex PM Lloyd George, March 1, 1929
"If
the nation entrusts the Liberal Party at the next General Election with
the responsibilities of Government, we are ready with schemes of work which we can put
immediately into operation, work of a kind which is not merely useful in itself but
essential
to the well-being of the nation. The work put in hand will reduce the terrible figures of
the workless in the course of a single year to normal proportions, and will, when
completed,
enrich the nation and equip it for competing successfully with all its rivals in the
business
of the world. These Plans will not add one penny to national or local taxation. It will
require
a great and sustained effort to redeem this pledge, but some of us sitting at this table
have
succeeded in putting through even greater and more difficult tasks in the interests of the
nation."
Extract from Mr. Lloyd George's
address to
Liberal Candidates on 1st March, 1929.WE CAN CONQUER UNEMPLOYMENT
"THE word written to-day on the hearts of British people, and graven on their
minds is Unemployment. For eight years, more than a million British workers,
able and eager to work, have been denied the opportunity. At the end of 1928 the total
reached a million and a half; a quarter of a million more than a year before. These
workers with their dependents, represent four or five million souls. They are a very
nation, denied the opportunity to earn their daily bread, condemned to hardship, to
wearing anxiety and often to physical and mental demoralisation. What a tragedy of human suffering; what a waste of fine resources; what a bankruptcy of
statesmanship! This is by far the biggest single issue before the country. All parties
will claim to have a solution, It is the task of the electors to decide which solution is
the most likely to achieve success. In making a decision, they must consider not only the
superficial attractiveness of the various proposals, but the extent to which they are
based on sound reasoning and patient enquiry, and will be backed by driving power and by
experience. This is a brief outline of the proposals of the Liberal Party. They have been
developed as the result of enquiries of the most exhaustive character, lasting over years;
indeed, even political opponents have paid tribute to the thoroughness and the ability put
into the work of investigation. |
Public Works Advocates in British Cabinet, 1919-1930
Even before Keynes became known to Americans, there certainly were Cabinet
ministers who saw what a dead-end laissez-faire policy-making was, most notably
Liberals Dr.
Chistopher Addison in 1919, Alfred Mond in
1920 founder of Imperial
Chemical Industries) ex-Prime Minister Lloyd George in 1924 as well as Labour Party
maverick Oswald Mosely in 1930. In 1929,
Keynes himself made numerous speeches mocking the balance-the-budget
Treasury bureaucrats and the City's orthodoxy above all else.. He showed that
putting
a man to work would make needed improvements to the country's
infrastructure
and would only cost the government half of what it paid him,
because
the Treasury was already paying him an unemployment "dole".
"The
Multiplier Effect"
The
new employee, he argued, would spend all his money, as would the
merchants
that he then made purchases from, thus producing a chain of
additional
economic activity which would boost country's economy. This was
the
famous "multiplier effect".
As
merchants' profits rose again, so would the revenue the to the national
Treasury. That would, in turn, boost business confidence and interest rates
would
not go up, as the Treasury's pundits warned. For details see
http://www.personal.kent.edu/~edechena/1929%20Multiplier%20Arithmetic%20by%20Keynes%204-06.pdf
Keynes was not advocating socialism or
central planning. He simply wanted to
find
ways to restore full employment and business confidence when, left to laissez-faire
alone,
all he could see was economic stagnation, poor housing, high unemployment
and
a worsening public infrastructure. Britain's locust years, 1919-1938, increasingly
sound
like America after 2009.
BUDGET BALANCING MADE
THINGS MUCH WORSE UNDER LABOUR PARTY.
Sadly, Labour's Chancellor, Phillip
Snowden, bought "hook, line and sinker" the
anti-Keynesian orthodoxy put out by Treasury officals, the Bank of England and the
"City" (London's financial community. His September 1931 Budget
severely cut
public spending and public sector wages while raising income taxes on average
workers from 22.5% to 25%. These measures failed terribly. Unemployment
rose
to 3,000,000. There was a Mutiny in the Royal Navy. And there was a run on
Gold and
Britain had to leave the Gold Standard, with the Pound falling 25%.
http://en.wikipedia.org/wiki/Great_Depression_in_the_United_Kingdom
Labour apparently wanted to prove that they were worthy of the trust of their
"betters"
when they were called to form a government. They also did not want to credit the
Liberal Party with its earlier call for massive public works to reduce the high
unemployment. In addition, the Chancellor was not experienced enough or wise
enough to take Keynes's advise at the time. It was easier for him to espouse the
the
"departmental" view of the Treasury and the "City", who gave advise in
the
course
of raising revenue.
The
Labour Government formed a special government committee in 1931, the May
Committee,
to make recommendations about the growing Depression. Labour
rejected
Keynes and Keynes rejected the Committee's Report as being "the most
foolish
document I have ever had the misfortune to read".
From http://www.spartacus.schoolnet.co.uk/TUkeynes.htm
Keynes' Advocacy of Public Works
Was Ignored by Policy-Makers In 1925 John Maynard Keynes married
the ballerina, Lydia Lopokova,
and moved to Tilton, a farmhouse near Firle
in East Sussex. The marriage proved
a great success and when apart they wrote every day. The
couple had no children.Other members of the Bloomsbury Group, including Virgina Woolf, Leonard Woolf, Vanessa Bell, Clive Bell, and Duncan Grant also lived in
the area.
Keynes became increasingly interested in what he called "the management of the economy". According to Alec Cairncross:
"Two forms of economic instability preoccupied him. Of these the first was
instability of prices, inflation, deflation, and all that went with them; the second was
unemployment and the fluctuations in economic activity giving rise to it. The two were, of
course, interconnected since the movement of prices reacted on the level of activity: but
the analytical approach to the problem of inflation, for example, was very different from
the analysis necessary for an explanation of unemployment."
Keynes visited the Soviet Union
in 1926. He was interested in the economic measures being taken by
the communist regime and when he returned to England he wrote The
End of Laissez-Faire. After the onset on the Great Depression in 1929, Keynes
began to address the problems of unemployment. In a series of articles, The Means to Prosperity, written in The Times, Keynes
argued that the government should "spend its way out of the depression".
During this period he
was a member of the Liberal
Party and worked closely with its leader, David Lloyd George. In 1929
Lloyd George published a pamphlet, We Can Conquer Unemployment,
where he proposed a government scheme where 350,000 men were to be employed on
road-building, 60,000 on housing, 60,000 on telephone development and 62,000 on electrical
development. The cost would be £250 million, and the money would be raised by loan.
Keynes also published a pamphlet supporting Lloyd George's scheme.
These views
impressed Richard Tawney
who wrote a letter to Ramsay
MacDonald, the leader of the Labour Party, about the
forthcoming election: "If the Labour Election Programme is to be of any use it must
have something concrete and definite about unemployment... What is required is a definite
statement that (a) Labour Government will initiate productive work on a larger scale, and
will raise a loan for the purpose. (b) That it will maintain from national funds all men
not absorbed in such work." MacDonald refused to be persuaded by Tawney's ideas and
rejected the idea that unemployment could be cured by public works.
In the 1929 General Election the
Conservatives won 8,664,000 votes, the Labour Party 8,360,000 and the Liberals 5,300,000.
However, the bias of the system worked in Labour's favour, and in the House of Commons the party
won 287 seats, the Conservatives 261 and the Liberals 59. MacDonald became Prime Minister
again, but as before, he still had to rely on the support of the Liberals to hold onto
power.
The election of the Labour Government coincided
with an economic depression and Ramsay MacDonald was faced
with the problem of growing unemployment. In January 1929, 1,433,000 people were out of
work, a year later it reached 1,533,000. By March 1930, the figure was 1,731,000. In June
it reached 1,946,000 and by the end of the year it reached a staggering 2,725,000. That
month MacDonald invited a group of economists, including John Maynard Keynes, J. A. Hobson, George Douglas Cole and Walter Layton, to
discuss this problem.
In March 1931 Ramsay MacDonald asked Sir
George May, to form a
committee to look into Britain's economic problems. The committee included two members
that had been nominated from the three main political parties. At the same time, John
Maynard Keynes, the chairman of the Economic Advisory Council, published his report on the
causes and remedies for the depression. This included an increase in public spending and
by curtailing British investment overseas.
Philip
Snowden rejected these ideas and this was followed by the resignation of Charles
Trevelyan, the Minister of Education. "For
some time I have realised that I am very much out of sympathy with the general method of
Government policy. In the present disastrous condition of trade it seems to me that the
crisis requires big Socialist measures. We ought to be demonstrating to the country the
alternatives to economy and protection. Our value as a Government today should be to make
people realise that Socialism is that alternative."
When the May Committee produced its
report in July, 1931, it forecast a huge budget deficit of £120 million and recommended
that the government should reduce its expenditure by £97,000,000, including a
£67,000,000 cut in unemployment benefits. The two Labour Party nominees on the
committee, Arthur Pugh and Charles Latham, refused to
endorse the report. As David
W. Howell has pointed out: "A committee majority of actuaries, accountants, and
bankers produced a report urging drastic economies; Latham and Pugh wrote a minority
report that largely reflected the thinking of the TUC and its research department.
Although they accepted the majority's contentious estimate of the budget deficit as £120
million and endorsed some economies, they considered the underlying economic difficulties
not to be the result of excessive public expenditure, but of post-war deflation, the
return to the gold standard, and the fall in world prices. An equitable solution should
include taxation of holders of fixed-interest securities who had benefited from the fall
in prices."
The cabinet decided to form a committee consisting of Ramsay MacDonald, Philip
Snowden, Arthur Henderson, Jimmy Thomas and William
Graham to consider the report. On 5th August, John Maynard Keynes wrote to MacDonald, describing the May Report as
"the most foolish document I ever had the misfortune to read." He argued that the committee's recommendations
clearly represented "an effort to make the existing deflation effective by bringing
incomes down to the level of prices" and if adopted in isolation, they would result
in "a most gross perversion of social justice". Keynes suggested that the best
way to deal with the crisis was to leave the gold standard and devalue sterling.
Two days later, Sir Ernest Harvey, the deputy governor of the Bank of England, wrote to
Snowden to say that in the last four weeks the Bank had lost more than £60 million in
gold and foreign exchange, in defending sterling. He added that there was almost no
foreign exchange left.
Philip
Snowden presented his recommendations to the MacDonald Committee that included the
plan to raise approximately £90 million from increased taxation and to cut expenditure by
£99 million. £67 million was to come from unemployment insurance, £12 million from
education and the rest from the armed services, roads and a variety of smaller programmes.
Arthur Henderson and William Graham rejected the
idea of the proposed cut in unemployment benefit and the meeting ended without any
decisions being made.
The cabinet met on 19th August but they were unable to agree on Snowden's proposals. He warned that balancing the budget was the only way to restore confidence in sterling. Snowden argued that if his recommendations were
not accepted, sterling would collapse. He added "that if sterling went the whole
international financial structure would collapse, and there would be no comparison between
the present depression and the chaos and ruin that would face us."
The following day MacDonald and Snowden had a private meeting with Neville Chamberlain, Samuel Hoare, Herbert Samuel and Donald MacLean
to discuss the plans to cut government expenditure. Chamberlain argued against the increase in taxation and called for further
cuts in unemployment benefit. MacDonald
also had meetings with trade union leaders, including Walter Citrine and Ernest Bevin. They made it
clear they would resist any attempts to put "new burdens on the unemployed".
At another meeting
of the Cabinet on 20th August, Arthur Henderson
argued that rather do what the bankers wanted, Labour should had over responsibility to
the Conservatives and Liberals and leave office as a united party. According to Malcolm MacDonald, the
opposition to the cuts in public expenditure was led by Henderson, Albert Alexander
and William Graham.
MacDonald went to see George V about the
economic crisis on 23rd August. He warned the King that several Cabinet ministers were
likely to resign if he tried to cut unemployment benefit.
After another
Cabinet meeting where no agreement about how to deal with the economic crisis could be
achieved, Ramsay MacDonald
went to Buckingham Palace to
resign. Sir Clive
Wigram, the King's private secretary, later recalled that George V
"impressed upon the Prime Minister that he was the only man to lead the country
through the crisis and hoped that he would reconsider the situation." At a meeting
with Stanley Baldwin, Neville Chamberlain
and Herbert Samuel
MacDonald told them that if he joined a National Government it "meant his death
warrant". According to Chamberlain he said "he would be a ridiculous figure
unable to command support and would bring odium on us as well as himself."
On 24th August 1931
MacDonald returned to the palace and told the King that he had the Cabinet's resignation
in his pocket. The King replied that he hoped that MacDonald "would help in the
formation of a National Government." He added that by "remaining at his post,
his position and reputation would be much more enhanced than if he surrendered the
Government of the country at such a crisis." Eventually, he agreed to form a National
Government.
John Maynard Keynes was extremely active in his campaign to encourage the government to
take more responsibility for running the economy. In 1931 he agreed an amalgamation of the
Nation with the New Statesman, a
journal owned by the Fabian
Society. Keynes now became a regular contributor to what was now Britain's leading
intellectual weekly.
In 1936 Keynes published his most important book A
General Theory of Employment, Interest and Money. It revolutionized economic
theory by showing how unemployment could occur involuntarily. In the book Keynes argued
that the lack of demand for goods and rising unemployment could be countered by increased
government expenditure to stimulate the economy. His views on the planned economy
influenced President Franklin
D. Roosevelt and was a factor in the introduction of the New Deal and the economic
policies of Britain's post-war Labour
Government.
During the Second World War
Keynes was an unpaid advisor to the Chancellor of the Exchequer and wrote the influential How
to Pay for the War (1940). He attended the Bretton Woods Conference in
1944 and the Savannah
Conference in 1946. He was also involved in the negotiations on Lend-Lease and the US
loan to Britain. |
Hoover - 1930-1932
Much too late, towards the end of his life,
President Hoover rued following the
lassez-faire advise of Andrew Mellon, his Treasury Secretary, as they
dealt with
the gathering Depression. Tragically, Hoover ran a Federal Budget surplus in
1930
and engaged only in paltry increases (under $257 million / year) in federal
government
spending in 1930 and 1931, just when private investment and government revenue
were collapsing. 1932 did see a big increase in government spending, but
the next year Hoover's budget again reduced government spending, despite
national unemployment levels of 25%.
Tea Party types champion Keynes critics like Freidrich Heyek. They seem not
to understand that Hayek was essentially, a hands-off liquidationist. Hayek argued
it was "difficult to see what lasting good effects can come from credit expansion.
The
thing which is most needed to secure healthy conditions is the most speedy and complete
adaptation possible of the structure of production.If the proportion as determined by the
voluntary decisions of individuals is distorted by the creation of artificial demand
resources [are] again led into a wrong direction and a definite and lasting adjustment is
again postponed.The only way permanently to 'mobilise' all available resources is,
thereforeto leave it to time to effect a permanent cure by the slow process of adapting
the structure of production." http://www.j-bradford-delong.net/tceh/slouch_crash14.html
Keynesianism -1936
The economist JM Keynes in 1936 wrote that in a
panic, the government must
intervene directly to create jobs with public works' programs. In that way, the
booms
and busts of a capitalist, market driven economy could be greatly reduced.
He warned of the "liquidity
trap", when monetary policy is unable to stimulate much
of an econoimic recovery. (Sounds very contemporary, doesn't it?)
A Depression, Keynes showed, is self-perpetuating and self-accelerating, in
large part
because the working class has so little money and cannot buy what is produced.
The wealthy, of course still have money. But the savings of the rich do not always
translate automatically into investments and jobs. In a panic and recession, there
is just too much fear.
He introduced the term, the "multiplier effect" and made much of how the
"rates of
marginal consumption" vary enormously according to where the Government
spends its money and on whom. Bribing officials in Afghanistan has very few,
if any downstream economic benefits in the US . Paying a poor person to dig
ditches in a depression has a high multiplier effect. Each additional dollar of income
for the poor person is immediately spent. The recipient of the money this spent,
then has monet to spend and so on.. On the other hand, the rich person may just
save his extra dollar and put it into a bank that is too scared to make loans.
Accordingly, Keynes reasoned that the best way out of the Depression would be
for the government to hire the unemployed in massive Public Works programs.
he people hired would spend 100% of their money and this would stimulate
business, such that a Dollar in public works' wages would bring three to four
dollars in new buying. The additional business produced by a massive public
works program would restore confidence and unfreeze spending and private
investment. In the end, Government Revenues would rise much more than the
initial government expenditures.
Wikpoedia writes: "In the 1930s,
Keynes spearheaded a revolution in economic
thinking, overturning the older ideas of neoclassical
economics that held that free
markets would in the short to medium term automatically provide
full employment,
as
long as workers were flexible in their wage demands. Keynes instead argued that
aggregate
demand determined the overall level of economic activity, and that
inadequate aggregate demand could lead to prolonged periods of high
unemployment.
Following the outbreak of World War II, Keynes's ideas concerning economic policy
were adopted by leading Western economies. During the 1950s and 1960s, the success
of Keynesian economics resulted in almost all capitalist governments adopting its
policy recommendations,..."
http://en.wikipedia.org/wiki/John_Maynard_Keynes
Keynes is often over-simplified, the better to tear
him apart. He did not believe
in hiring men to dig a ditch and others to fill it in. Carefully planned public
works
repair the nation's infrastructure and provide badly needed jobs. Who now
challenges the benefits of TVA or Boulder Dam?
Supplyside economics is not Keynesian. Cutting taxes to grow the economy
and ultimately to increase federal revenues works well if it induces investors
to create and expand US enterprises. But if it only serves to increase speculation
in Gold and Commodities, make other countries' economies grow at the
expense of American jobs or lets millionaires take more excursions abroad,
then there is no "trickle down". Keynes did not believe that tax breaks
for
investors would build schools.
FDR - 1937
Keynesian thinking was not widely accepted in 1932.
FDR even campaigned
in 1932 that he would balance the budget. Fortunately, once in office his
federal budget decocts were much bigger than Hoover's. As the stock
market roared back from 50 to 170, between 1933 and 1937, his Treasury
Secretary put the fear of "over-speculation" and "inflation" in FDR's
ear.
Despite the warnings from his Brain Trust, who were familiar by then with
Keynesianism, FDR in the spring of 1937 decided to get southern Democrat
support for his policies by announcing new spending cut backs and a desire
to balance the budget despite the unemployment of 14%. This meant drastic
reductions of WPA and other New Deal jobs' and public works' programs.
The fragile economic recovery immediately stalled out, the stock market fell 47%
in six months and unemployment rose sharply.
To his credit, FDR in early 1938 saw his mistake and no longer sought to
balance the budget in the middle of the Depression.
See http://www.tigersoftware.com/TigerBlogs/Obamas1937/index.html
The Federal Budget
and The Unemployment Rate: 1929-1945
Tax Federal GNP Unemp.
Year Receipts Spending Growth Rate
-------------------------------------------------
1929 -- -- -- 3.2% < Hoover era, Great Depression begins
1930 4.2% 3.4% - 9.4% 8.7
1931 3.7 4.3 - 8.5 15.9
1932 2.9 7.0 -13.4 23.6
1933 3.5 8.1 - 2.1 24.9 < FDR, New Deal begins; contraction ends March
1934 4.9 10.8 + 7.7 21.7
1935 5.3 9.3 + 8.1 20.1
1936 5.1 10.6 +14.1 16.9
1937 6.2 8.7 + 5.0 14.3 < recession begins, May
1938 7.7 7.8 - 4.5 19.0 < recession ends, June
1939 7.2 10.4 + 7.9 17.2
1940 6.9 9.9
1941 7.7 12.1
1942 10.3 24.8
1943 13.7 44.8
1944 21.7 45.3
1945 21.3 43.7
(Source: http://www.huppi.com/kangaroo/Timeline.htm )
Germany - 1929-1932
Successive German Chancellors tried to balance the budget as the recession got
worse by cutting government expenditures. This increased unemployment and
lowered still further government revenues, thereby causing a new political crisis,
which brought in a new Chancellor who followed the same policy of cutting government
spending. In 1932, Hitler rose to power in large part because of the failure of
the moderate parties to adopt a pragmatic Keynesian approach. His policies
put Germans back to work by the millions, most notably by building the Autobahn
and massively rearming.
http://histclo.com/essay/war/ww2/tol/ger/seiz/ger-dep.html
Chancellor Hermann Muller (1928-1930) headed a very broad and unweildy
coalition of his own Social Democrats, Centre Partyand the nationalist German
Peoples' Party.
Brüning (1930-1932) as chancellor said he wished to free Germany from
Reparartions, but would have to tighten credit, raise taxes, reduce government
spending and roll back wage increases. Working people were hit the hardest.
His policies only served to increase the popularity and Reichstag voting strength
of the Nazis and Communists.
France - 1930-1935
Keynes
counter-cyclical fiscal writings were not translated int French until 1942.
The Third French Republic featured a parliamentary system of government with
a high degree of political fragmentation. Coalition governments were inherently
unstable and had no power to boldly provide government employment or
taxation of the rich. This increased discontent, bred more extremeism and
hurt business confidence further.
|
From http://en.wikipedia.org/wiki/Great_Depression_in_France
France The
distress of the population had political consequences. A riot on 6 February 1934 led to
the fall of the government and a nation which had traditionally leaned to the right
elected the socialist Popular Front government in 1936.
The Popular Front, an alliance of Socialists and Radicals with support outside the
government of the Communists, was led by Léon Blum. The Popular Front introduced many measures such as the
40-hour working week and holidays with pay, but Blum felt handicapped in introducing more
than limited changes to the economy because of his dependence on the more right-wing
Radicals. This did little to placate a population anxious for change and a wave of strikes
broke involving two million workers [9]
Factories were occupied and membership of the Communist party rose to 300,000 in 1937.
In the night of 7–8 June 1936, employers and unions signed the Matignon agreement by
which they raised wages by seven to 15 per cent to increase workers' buying power, to
stimulate the economy and to bring an end to the strikes. Blum brought in measures to
control cereal prices, to insist that the Banque de France place the national interest
above that of the shareholders, and nationalised the armaments industry. That upset the
Left, which saw too much legislation, and did nothing to please the Right, which believed
that state involvement in a capitalist economy would bring about disaster.
The Radicals would not accept currency controls and the result of the unrest was that
capital fled abroad. That weakened the economy and employers tried to minimise the results
of the Matignon agreement, which created more social tension and in turn a further flight
of capital.
Devaluation of the franc by 30 per cent became inevitable, despite government
assurances that it would not happen. In January 1937, Blum went further and announced
"a pause" to social reforms. The Senate refused to give him emergency powers to
cope with the recession and he resigned on 20 June 1937 and the first Popular Front began
to fall apart. A second had even less success.
The President,
Lebrun, called on the Radical leader Édouard
Daladier to form a new government without the Socialists. Daladier relied on liberal
economics to rescue, or at any rate keep afloat the economy on a worldwide sea of
financial difficulties. Employers and police acted harshly against strikers and determined
to root out "troublemakers". In 1938 the Senate gave Daladier the emergency
powers that Blum had been denied and the government favoured employers over workers in
industrial disputes, particularly in companies which had come close to coming under the
control of their workers.[10] |
Sweden - 1935
"Sweden's quick recovery was astonishing.
By 1934, real output had
recovered to 1929 levels. By 1935, it was 7 percent above it. Growth would
continue well into World War II. Sweden's success owed everything to its liberal
government. In 1932, Labor returned to power. The Swedish Finance Minister was
heavily influenced by a group of economists led by Gunnar Myrdal, who had been
advocating Keynesian-like solutions for years. The Labor government promptly
ran large deficits, and within two years had spent itself out of the Depression. "
http://www.huppi.com/kangaroo/Sweden.htm
Keynes' Multiplier Now Is Smaller.
America's Manufacturing Base Needs Restoration
In the 1930's international trade was not nearly so important
as now. Cheap
imports
were not so plentiful as today, when if a worker is hired to help build,
say,
a public high speed transit system with federal governent money, he might
well
spend some of his stimulus-paycheck at Target, Walmart or Home Depot,
where
so many things are imported, especially from China. In this, the Public Works'
expenditures
boost the Chinese economy, and to that amount, less the American
economy,
What's
worse, if the steel to be used for the cars and rails is not American made,
the
multiplier drops some more. In fact, the US Federal Government is very lax
compared to other industrialized countries when it comes to requiring special
efforts
first be taken to buy American. Again the Keynesian multiplier is reduced
in
our times, compared to the 1930s.
Another
factor that reduces the Multiplier, is that some of those hired in this
Public
Works project would very likely have been hired by a private employer
somewhere
else in, say, 3, 6 or 12 months. To consider this worker's employment
to
be completely due to public infrastructure expenditures, one would have to
have the Public Works project heavily employ the unskilled and untrained. In
fact,
"creaming" of the of the unemployment pool would be quite common. To
the extent,
that this is so, the multiplier is made smaller and GNP does not grow so fast as one
might hope because of these projects..
Obama's modest 2009 stimulus, used "shovel-ready projects" which State
and
Local Governments were intending anyway to undertake in the not too distant
future.
Obama's stimulus did have the positive effect in these cases of
speeding up the expenditures and hiring. But it is less clear that it helped
employ
the less skilled and untrained or made any dent in the problem of the
long-term
unemployed. At least half of the current unemployed have been so for
more
than 6 months.
Wars and military bases are hugely expensive. Literally, trillions are spent
overseas where there is relatively little secondary or tertiary benefits to the US
economy. Private contractors like Blackwater and Halliburton have even become
foreign based. From the view point of increasing jobs and GNP, it would be hugely
beneficary
to shift from Military Spending to Public Works. The financing of
a
massive
public works program might slightly serve to increase interest rates.
But
since 1/2 of all Federal Expenditures is for the military, any conceivable
shift
of priorities and spending on Public Works would not be much of a threat
to
the bond market or inflation, except perhaps locally where skilled workers'
wages
might go up. And if the Dollar were actually weakened, because of more
public
sector spending, it would serve to reduce imports of manufactured goods
and
increase their exports fromt he US. Presently, the slack in the economy
is too
great
to cause any chance of wage inflation.
From
this, it is clear that if Obama really wanted to increase US employment
and
help the economy the best way, he would act quickly to prevent the flight of
investment
capital overseas. He should impose tariffs and rethink all those trade
agreements
that have allowed foreign imports to supplant domestic manufacture.
KEYNES SWITCHED TO
PROTECTIONISM
WHY
WON'T OBAMA?
In 1932, Keynes
told a Parliamentary committee that "The thing about tariffs is -
they
do the trick" . He grew to
consider tariffs to be vital to smooth the economic
cycle
and provide greater employment through government intervention.
(
See - http://www.jstor.org/pss/2120714
) Keynes considered tariffs to be necessary
where
the government sought to maintain its currency and at the same time
increase
employment at a time when wages were falling.
His
Favorite Solution
"(D)omestic
investment could be indirectly subsidized to increase domestic output and
reduce
foreign lending. Keynes called this "my own favourite remedy," which could be
accomplished
by a tax on foreign bonds, by changes in the banking system to increase
domestic
lending, or even by direct capital expenditures by the government."
http://www.go2cio.com/articles/index.php?id=3668
OBAMA - 2011
Mr. President, Community Colleges Are Not The
Problem
Obama naively asserts that American workers don't have the skills
to compete.
That
is not the problem. It is how easily corporations can locate overseas
where
wages and safety conditions are much lower. In this, he is the mouthpiece
of
the free traders on Wall Street, who are only interested in coroporate profits,
not
in American workers or even American consumers.
Obama will not release his college transcripts. So,
maybe he did study
history and economics at some point. What is clear, is he shows NO awareness
whatsoever of these economic lessons or the general theories of Keynes.
Instead, to get campaign contributions, he has called himself a Free Marketeer
of the Chicago school. Milton Friedman is his hero, not Keynes. Friedman's
position on the Depression is that it was caused by tight Fed monetary policies.
Obama and Bernanke have made interest rates about as low as possible. Wall
Street has benefited, but Main Street has not. Low interest rates do not ensure
that banks will loan money or that those who do borrow will invest in job-creating
ventures in the US. Instead, the low interest rates have fueled American
investments overseas and speculation in stocks and commodities. The
only nod Obama gave to Keyes was his drop-in-the-bucket sized public works
programs in 2009. These did create some jobs, but not nearly enough of them.
Obama ignored Keynes completely, In not insisting on new taxes on the wealthy
and corporations in 2010 when his party had a majority. He keeps relying on
on the self-serving advise of his Wall Street-based advisors. I see no evidence
that he understands the basics of Keynes, taught in every ECON-101.
The 1930's All Over Again.
History seldom gives us a second chance.
The tragedy is that Obama has lost
a perfect opportunity to use the Presidential "bully pulpit" and raise the
public's
knowledge of Keynes'arguments for a massive public works program. Instead,
he accepts completely the premise that comes from the right-wing talk show hosts,
that government spending is inherently wasteful, that government is a "barren
whore"
and the Feneral, State and City budgets must be balanced by lay-offs and
reduced spending. I fear this will be desastrous, even calamitous in the years to
come.
And that is what the stock market is now saying.
Tea Party Terrorism Show How Vulnerable
The Stock Market Is To Minority Terrorism
Newsweek's Queen of Rage has said she would vote to bring the
government down, rather than increase the Debt limit. She is
a
leading candidate for President, even though she sees it
in
wholly negative ways.
The Tea Party people are entitled to their opinions, but not to their own
facts. They also not entitled to threaten the default of the US Treasury
when the country is at war. That
is treason. They are lucky they are dealing with
the spineless Obama. Lincoln would have had them arrested. He jailed and
suspended habeas corpus for far less grave offenses to the nation in the Civil War.
Wilson put pacifists and union strikers in jail in World War I. He would not have
tolerated the tea party putting a dagger at the US government.
Congress voted the very appropriations that have rung up the debt. They can
vote to increase taxes or not, and to stop spending, as they wish. But they ought
not
come back and threaten to bring down the entire government when their deficits
reach a certain point, and certainly not while the country is at war. That is
contemptible.
What's worse, the deficits occurred, first, because of Republican tax cuts for the
wealthy These have cost $800 billion over the last 10 years, not including the
reduction in the Estate Tax. And second, the deficits have occurred because of
the wars started by a Republican President. The most expensive war, the Iraq War,
was started with utter lies about WMDs and to serve the personal interests
of Bush and Cheney. Bush who needed a nice little war to save his Presidency
from defeat in 2004 because of the collapsing economy. VP Cheney sought to
help his former company Halliburton which was badly faltering in 2002, just before
the war. The Iraq war probably saved it. And it made billions off
the war as the #1
inside-track contractor that never even had to bid to get billions of open-ended,
cost-plus Iraq war contracts. The Iraq War will cost the US more than 3
trillion.
Bush-Cheney did nothing to raise the revenues to pay for this war!
I wrote at the time, the Bush-Cheney plan, all along, was to bankrupt the US Treasury,
so that the social programs of the New Deal, The Fair Deal and The Great Society,
for the elderly and the needy would each have to be shredded.
Right wing corporate ideologues like the Koch brothers seem quite ready to take us
back to the Gilded Age of robber barons, bullies, moguls and monopolies. They
seem to actually want us to go back to an era of dangerous 12 hour work-days,
poverty wages, banned unions, child employment, water and air pollution,
contaminated food and unsafe drugs. To the Tea Party cultists, government is a
barren whore and the free market solves every thing. They are closet fascists who
believe in Ayn Rynd's superman. In the
Fountainhead’. One
of her heroes boasts
that
he is the polar opposite of Robin Hood: “He
was the man who robbed the rich
and gave to the poor. I’m the man who robs the poor and gives to the rich, or to be
more exact, the man who robs the thieving poor and gives back to the productive rich.”
CONCLUSION
Obama is trapped by his Chicago free market thinking and Wall Street advisors.
He desperately needs to read some American history. And he needs to grow a
backbone and realize he is dealing with liars, thugs and bullies. They should not be
appeased or coddled. They should be called out for what they are, fanatical,
know-nothing, cultist pawns of the predator super-rich.
Obama's failure to show backbone and lead the country will have a devastating
effect on all Americans in 2011 and 2012. In serving his rich political
camapign financiers, Obama actually threatens capitalism, as FDR never did.
Further
Reading - http://dagblog.com/reader-blogs/buffet-and-bank-america-connundrum-11414
http://us.macmillan.com/thekeynessolution