Outside Nobel Prize winning economist Paul Krugman, it seems the favorite pastime of most folks discussing how to fix our economic woes is to beat up on the ideas of John Maynard Keynes. I am not going to get too much into the details of Keynes’ work here, but it boils down to the notion that in order to keep the wheels of economy turning, government has to be willing to spend money. It is a simple enough idea, right? One can also see why those who want to shred the social safety net want to undermine this idea.
The thing is, Keynes’ work applies to far more than the safety net, though that is a big part of it. Yes, he believed a healthy welfare state was necessary. If the people on the bottom of the pyramid have no money to spend, then industry is not selling products, which means they are not producing products, which means they are not paying people in the middle of the pyramid to work producing those products. This was not the only pillar of his thought though.
Keynes thinking could also be applied to work projects. In maintaining a nation’s infrastructure as a means to keep people working. This work of course had the benefit of helping the employees individually, both financially and psychologically, but it also, again, kept them spending. It also had the added benefit of keeping the means of production more affordable as poor infrastructure can be a detriment to industry. More of your product is going to make it to the shelf, and therefore less production wasted, if the trucks aren’t being jostled by massive potholes. This particular theory, by the way, was well-tested and helped lift the Western World out of the Great Depression.
Finally there is the pillar conservatives love. See, Keynes was all for military spending as well. A robust military needs support and that support means jobs. It means jobs in munitions plants. It means jobs in research, and it means jobs in the various industries that individual soldiers rely on. As mentioned at the beginning of the paragraph, when it comes to this part of his thinking, cons think Keynes was a genius, apparently.
Because whether they attribute him or not, they quote him like mad when it comes to our bloated military budget. It is OK to spend more on a single project that does not work than we do on welfare because it will create jobs. It is OK to spend trillions on adventurist wars because a) we need to fight them over there or we will be fighting them over here, and b) jobs. It is OK to talk about lobbing missiles at an already internally embattled populace because that means we will have to make more missiles, which will be good for the economy (not that we would admit that out loud.)
It is kind of funny how much these guys love Keynes when they are not hating him. Apparently his theories magically only work when it is military spending, which is particularly amusing when you considered the increased automation, and therefore dwindling need for employees, in the military-industrial complex. Mind you that automation is everywhere, but big toys, like cars, tanks, planes, and bombs lend themselves more to the use of automation so the big toys the military wants need fewer hands than say, that wind up dog the woman on welfare will buy her kids.
I understand that we want a military for more pressing reasons than boosting the economy. Until we have true global unity it would be unwise to not have a military. When the military accounts for over half our budget (which it does, and then some, when you account for all the various departments’ discretionary spending allowances) then economics comes into play. Because while I do believe Keynes was right that military spending boosts the economy, I am also sure he was right in the other areas. Which means we need to make sure that military does not gobble up our entire budget.
We need welfare as well, and not just because it is the humane thing to do, though I hope that would sway you at least a little. We need infrastructure investment, to keep people working and to keep our communities safe. Which means we need to stop listening to people who trash Keynes without any support for it. We need to stop listening to people who get rich fleecing our economy while doing little to support it. We need to wise up, or we are going to fall down, and sooner than most of us realize.
- Krugman gets it right on ‘sticky wages’ – as did Keynes 80 years ago (rwer.wordpress.com)
- Krugman, Keynes, and war (cafehayek.com)
- Paul Krugman: Keynes Was Right (economistsview.typepad.com)
- World Affairs Council: Olli Rehn (delong.typepad.com)