Sunday, July 24, 2011

Harry Magdoff on "Keynesianism"

From a 1998 edition of Monthly Review:
The term “Keynesian state” has become a catchword that covers a variety of concepts and is usually misleading. It may have some meaning for the Scandinavian countries and elsewhere. But the United States? Although the concept is often applied to the New Deal, the deficit spending of the New Deal had nothing to do with Keynes (nor did Hitler’s recovery via military expenditures). It’s true Washington economists were delighted with the appearance of Keynes’s The General Theory of Employment, Interest, and Money because it gave them theoretical handles for analysis and policy thinking (e.g.,the offset to savings concept and a framework for gross national product accounts). Nevertheless, despite a promise of heavy government spending, and Keynes’s theoretical support, the New Dealers were stumped by the 1937-38 recession, which interrupted what looked like a strong recovery. There was then as there is now an underlying faith that capitalism is a self-generating mechanism. If it slowed down or got into trouble, all that was needed was a jolt to get back on track. In those days, when farm life supplied useful metaphors, the needed boost was referred to as priming the pump. The onset of a marked recession after years of pump-priming startled Washington. Questions began to be raised about the possibility of stagnation in a mature capitalism, the retarding effect of monopolistic corporations, and other possible drags on business. These concerns faded as war orders flowed in from Europe, and eventually they disappeared when the United States went to war. The notion of the “Keynesian Welfare State” has tended to disguise the fact that what really turned the tide was not social welfare, Keynesian or otherwise, but war. In that sense, the whole concept of Keynesianism can be mystification.
Make sure to read the rest here (hat tip to Louis Proyect).

1 comment:

Karl Franz Ochstradt said...

excuses, not "theoretical handles."