07 April 2009

The Real War

I know that some readers will label me as an "economic determinist", which those of a rightest persuasion label as a communist. This is because Marx and Engels postulated that "economic factors underlie all of society's decisions."

One need not be a communist to recognize the validity of the theory as it applies to governments. And herein is the real war being waged in America. The struggle isn't really about labels such Republican and Democrat or Conservative and Liberal, although each cohort subscribes to one of two very different economic theories.

And that is my point. The issue is economics and whether or not our government should pursue Keynesian economic practices or "Friedmaniac" economic theory. One promotes regulation and government spending while the other totters on a three-legged stool of privatization, deregulation, and eliminating government spending on social programs. The other promotes government spending and regulation as a means to control voracious, unrestrained capitalism wielded by greedy self-interests and to insure that wealth does not become concentrated in fewer and fewer hands.

That is the struggle, and if you're one who thinks Milton Friedman was on the right track, I offer you our current situation. And the experiences of Indonesia, Brazil, Chile and Argentina in preceding decades. We Americans don't do well with history. Ours or any one else's. So to elucidate, each of these countries were treated to the joys of Friedman's University of Chicago's School of Economics theories in practice. Each suffered rampant inflation, run away unemployment, dire social upheaval, and coporatist juntas, brutal dictatorship with torture, disappearances, and mass murder. All resulted from application of Friedman's theories by zealous, right-wing ideologues backed by the CIA and American corporations.

If you doubt this assertion, it behooves you do some research into the role Friedman's economics, the CIA and American corporations played in the turmoil and deconstruction of each of these Latin American nations not too many decades ago.

The unattractive thing about Friedman's economic theories in practice is that they act to concentrate more and more wealth in the coffers of the rich, eliminate a middle class, and increase the number of expendable poor people. Sound familiar?

On the other hand, John Maynard Keynes achieved his greatest prominence during the depression. He recommended to the Roosevelt administration that an increase in government spending along with price controls and other regulations, even if that resulted in deficits, would stimulate consumer demand and thereby reduce unemployment. He argued that cutting government spending or reducing production were not productive and would act to keep prices high and prolong the depression. History has shown him to be absolutely correct.

Some of us, old enough to remember, were the beneficiaries of Keynes' economic theories as we came to maturity in the sixties, which many cite as the best economic times of our nation's history. Certainly there were societal ills; institutionalized racism and sexism, lack of health safety nets for the poor and elderly, and pockets of extreme poverty. I won't drift off into the Great Society and how Republicans attempted and in some cases succeeded in hamstringing programs aimed at correcting these ills, my point is that Keynesian economics works, and demonstrably works quite well.

This is the battle in Washington right now, Keynes versus Friedman. It would appear that the Obama administration has come down on the side of Keynes. Some naysayers claim he is gambling with our future. I'd point them to history and suggest that it dictates that this path is the only intelligent way to go into the future.

1 comment:

Dr.T said...

Thanks for a great post on the economic mess that we were lead into by Reagan and his followers who worship Milton Friedman.For 29 years we have been controlled by this crazy view of the economy. We and our children will pay for the greed of these people for years to come.