Genghis Khan said:
Krugman has his economics cut off from any sort of laissez-faire reality. Raising tariffs and increasing taxation is not any kind of laissez-faire, i.e. separation of state and economics.
Hoover was famous for pro-regulation when he was Secretary of Commerce and continued this policy as president, as you clearly stated by mentioning tariffs. Protectionism is the last thing you’d want under an economic recession, as this makes unemployment worse. He also was a big spender. See
here. You’ve either made a typo by calling Hoover pro-laissez-faire or you’ve got a big contradiction here. Your argument actually proves my point.
That's fair to say that Hoover isn't pro-laissez-faire as we now consider the term. But he wasn't a Keynesian as we understand the term, either. He was a protectionist - the worst choice - however I would suggest that he was very laissez-faire before the Depression, when he was cutting taxes. But I will agree that "protectionist" is the best term to describe Hoover in this situation.
(The New Deal) did not work. Unemployment stayed high. He spent money on infrastructure the government did not have, as per Keynesian economic theory. The Great Depression lasted over a decade and into WWII. At best FDR’s spending and public works projects could have served as a tie over until a real solution was found. Where would his policies have gone if there was no war to send a lot of the unemployed population to?
Either you did not understand my first link in the last post or you didn’t view it. The beginning of the 1920 depression was worse than that of 1929 and the following three years. The reason the depression was resolved relatively quickly was due to Harding’s lassiez-faire approach, i.e. he did not interfere in the economy. He cut spending. The economy improved in 18 months.
Firstly, I completely disagree with the analysis of 1920 vs 1929. While there was a deflation aspect of the 1920 depression that was significantly larger than the 1929 depression, the effects of 1929 were far more reaching. This is somewhat to do with Hoover (though I believe you and I can agree that Hoover's policies were the worst possible of choices), but also because unlike 1920, which was a necessary market correction, 1929 reflected a general panic and sell, a correction, and basically about 10,000 other factors which all came home to roost. 1929-30 is worse in GDP% lost in the United States and unemployment than 1920-21 had a hope of being.
If you will recall correctly, Harding's Secretary of Commerce was Herbert Hoover, so I don't think you can shit on Hoover earlier and say that he was famous for pro-regulation when he actually executed the same policies that you praised Harding for. The difference is that Harding was tooling the US economy down from a major war, whereas Hoover (as President) was trying to continue an era of decent economic success by lowering taxes and reducing regulation.
Regarding the New Deal, it's nonsense to say it didn't work. Roosevelt didn't run a full-blown Keynesian program, he submitted budgets that were not so far in deficit, and he cut unemployment. When he took office, unemployment was around 22%, and he reduced it to about 14% at the lowest point. In fact, when he reduced New Deal spending in 1936-37, it jumped right back up to 17.5%. To him, it seemed like the New Deal was working.
In the end, I don't think we can ever agree on the issue. I think the Austrian School is run by a bunch of idiots, and I tend to agree with Krugman, based on my interpretation of history and the facts. The Austrian School makes arguments that I don't believe have ever been demonstrated fully. The complex nature of the economy's growth over the past century makes Adam Smith moot, and I agree with Stiglitz that the invisible hand is a complete myth. The only time we really flirted with true laissez-faire nature we've been bitten, hard.
[/quote]Even if one is convinced that FDR really had no alternative during the Great Depression, prolonging his New Deal policies past WWII was a terrible mistake. While I think that Hoover’s plans were much worse for the 1930s; in terms of influence, FDR’s New Deal set a bad precedent. We’re still dealing with the problems of special “positive rights” which by their very nature contradict negative rights. The failure of health care in both USA and Canada, the abuse in EI which amounts to dependence over generations and lack of respect for productive work are just some of the problems. Some of the most adversely affected are the children of single mothers.
See here. Child povery is on the rise and so are gangs as a result of these special benefits. This is the legacy of the New Deal and similar laws practiced in the west.
If state planning worked, the Eastern Block countries would have been the richest countries in the world.[/quote]
I think the "failure of health care" is a bit of an overstatement. There are problems with health care, but at the same time, there are many states that have it right - France, for instance, has a robust national health care system, with no bankruptcies, high life expectancy rate, and no major taxation issues. We have to keep working at it until we make it better, yes, but we'll never get it perfect - human nature. I think that the "positive rights" vs "negative rights" thing is kinda bullshit. No judge in Canada has ever ruled that health care is a fundamental right. We, the people, made that decision through the government, and maintain it to this day.
Again, I agree that the system isn't perfect, but I don't think the alternative is any better. What do you think would happen if we ended EI, welfare, and the pension plan? I find it difficult to believe that the market will provide additional jobs for people who are out on their luck in a recession. It sounds like class warfare to me - allow the poor to remain poor, and if they lose their job and their home, tough fucking shit. Old? Your 401K was just destroyed in the recession? Keep working till you drop, poor bugger.
And you and I both know that the reasons why the Eastern Bloc collapsed has less to do with their services and more to do with the fact that they were dictatorships run through the myth of equality and communism. We try to balance real equality and freedom with the opportunity to advance to your abilities in the market, and we don't always get it right, but we've sure as hell lasted a lot longer doing it than the Eastern Bloc did.
Also war does not help the economy; not in any long-term goal. The fact that USA is having a hard time right now is partially as a result of too much money being invested into the war. The fact that Sweden's golden age of capitalism (1870-1950) occurred without any war also disproves the idea that war is beneficial to the economy. Sweden was better off economically than rest of Europe and better than the States in the early 20th century.
Sweden's economy in the earlier half of the 20th century was based on exporting weapons-grade iron ore to Germany. For some reason that was a particularly good way to make a living between 1914-1945. Hmm. Next, Sweden has the sort of state you criticize. They have massive social entitlement programs, and a very high rate of taxation (second highest in the world, in fact). Their employment is lower than Canada's and the United States's, and they pretty much avoided every post World War II recession, except for one of their own making (which they resolved and were able to keep most of their entitlement programs). Their highly regulated economy was the most successful of the 20th century, and their people live long, and extremely well. Sweden is the reason why we should have universal health care and welfare programs.
Exactly. Keynesianism in politics means fascism. He knew that the only way to bring socialism to the west is by coupling it with a strong state controlled economy. Politicians were delighted to hear a well respected economist telling them what they always wanted to hear. You must increase state control in order to save free market capitalism. Hegelian logic at its best!
This is the problem with Keynes. We have an intelligent man with no scruples. His theory of economics works in a vacuum. He does not have the depth to see economics within a wider context of human action. This is also the man that encouraged Nixon to raise taxes to pay for the hugely unpopular Vietnam War.
This is an ad hominem argument. You're associating Keynes with Nixon in order to create distaste for one of his theories. Smith's theory of economics only works in a vacuum as well. I have no problem with increasing some state control, because I believe that regulation of anything is important to prosperity. The market cannot account fairly for thieves and unfair practices. That's why we have a recession now. The rules were changed, and people took advantage of how the rules were changed and played a gamble with the economy. If we put the rules back where they were, we would have had less short term growth but any recession wouldn't have been nearly as bad as it was.
Stagflation is stagnant productivity, rising unemployment and rising inflation, something that cannot happen according to Keynes. The latter is caused by the Federal Reserve putting fiat currency into the economy, which devalues the currency further. Keynes was the economist to go to until stagflation of the 1970s. Friedman ended this by helping the economy during the Reagan years. The problem with Friedman is that by working through the state he helped the state grow larger.
I didn't say Keynes was God; I said he was right about deficit spending during a recession. Clearly, stagflation happened. Friedman didn't work out so well either, he created the mess we're in now with his ridiculous concepts. Reagan's government spending was larger than any previous administration, yet he paid for less of it than any previous administration. People who complain about public debt should look at the guy who started that debt - Ronald Reagan.
The interstate system, Hoover Dam and any other major public projects could have been done in the private sector. It would have cost tax-payers less.
Bullshit. The private sector had no interest in creating a national highway system, or a major dam. That's why they weren't there to start with. It's not like the government did all the work themselves. They contracted to private companies for this stuff, anyway. It put Americans to work, and the benefits of it remain to this day. Of both projects. The private sector has no interest in improving infrastructure, because they don't plan for the future. They care about the quarter. Very few companies would want to spend on public works.
I will admit I know little about the Federal Reserve System, but it seems most economists think it's the business. I tend to think Ron Paul is a moron, so I wouldn't vote for him. But, having said all of that, I am willing to learn, and I'll go ahead and start learning on it soon. Perhaps I will check a few books out of my local library (a government-run entitlement program designed to make knowledge available to people of all levels of wealth).
