In my lifetime I have seen our economy go from a prosperous Keynesian-based economy, which built the middle class and had almost conquered hunger in this country, to a kind of free-market that leaves most people ( who can't afford investments) out in the cold and creates widening gap between rich and poor. Keynes (and the Depression!) showed clearly that there is no wage so low
that it can eliminate unemployment during a downturn or crisis. Hence it is
simply wicked to blame those out of work for their predicament. Keynes said
that prosperity depended on the aggregate demand, i.e. on the total spending of
consumers, business investors and public agencies. When the aggregate demand was high, times were
prosperous. When the aggregate demand was low, sales dropped off and jobs
disappeared. Because consumers can not spend more than they make, (Keynes wrote
in the days before the credit card) they were not the source of the ups and
downs of the business cycle; instead, those fluctuations could be laid at the
feet of business investors and the government. During depressions the thing to
do was to beef up private investment, or if investors proved
frightened,---which they often did; it was one of the causes of depression in
the first place, ---the government needed to create public substitutes for the
missing money of the hoarding rich.
Without Keynes there would have
been no Marshall Plan, no European Economic Miracle, no postwar consumer boom,
and perhaps not even substantial government investment in defense, which sped
up our technological progress until it became too focused on weapon systems. The Reaganites simply swept worries about
taxes and public investment under the rug for a while and kept on borrowing and
spending (mostly on the military) running up HUGE deficits and calling their
policies “supply side” rather than “demand side.” Reagan carefully never answered questions
about what such huge deficits meant for the country in the long run.
Since
then in the US and around the world, “free market” economists have been gaining
control, again talking about balanced budgets, lower taxes to stimulate private
investment (which has never worked!) and doing away with public spending. And
again, politicians and economists were blaming the poor for being poor. For
them Keynes had become demonized, and the kind of entitlement programs his
theories had engendered were being held responsible for all current economic woes.
Lest we forget. There were economic downturns
and severe depressions long before there were entitlements, and so far, the
only thing the dismantling of the Keynesian-inspired US economy has produced has
been a growing gap between the very rich and the very poor and a disappearing
middle class.
