Politically Speaking – April 23, 2023
This week’s column is being written by a guest columnist, Ludwig, who has been a valuable contributor to Politically Speaking in the past. Thank you, Ludwig.
“The evil that men do, lives after them. The good is oft interred with their bones.”
(From Julius Caesar, spoken by Mark Antony in Shakespeare’s play, Act 3, Scene 2)
Most of our current misery seems to be the result of beliefs and actions of those who lived and died a century ago. When will we learn the truth about economics and war?
John Maynard Keynes, the British economist, theorized that government could create miracles by stimulating the economy with government spending, including war. He advised President Wilson and the leaders of Europe, and later, President Roosevelt, who modeled the New Deal after Mussolini’s corporatization in Italy. Keynes’ ideas encouraged the expansion of government power using individual taxes and the power of a central bank. Governments expanded their power over their citizens. The more governments intervened, the worse the economy performed. The Weimar Republic of Germany tried to print their way out of debt in 1923, but it resulted in devastating hyperinflation and social chaos. The people yearned for stability and this enabled the rise of Hitler and the national socialists.
In the United States, the roaring twenties were chilled by protective tariffs that throttled the global economy. The stock market collapsed and bank failures created panics. People turned to government for relief as unemployment approached 25%. Governments became more centralized and powerful in every country of the world in the twentieth century. In the 1930s, a Great Depression engulfed the entire world, creating desperate times for humanity everywhere. And then came war in Asia and Europe, eventually including the US.
Keynesian economists would claim that the second World War dragged us out of the Great Depression. But the truth is, World War II did not end the Great Depression; the END of the war ended the depression.
Why does this matter now? The postwar economy was good for the victors: the “Greatest Generation” (Tom Brokaw). The demobilized soldiers were able to use the GI bill to get training and education. We scrapped the tanks and built cars and appliances to supply the post-war demand. Television began to replace the newspaper as a means of shaping our attitudes and desires. The 1950s brought us the Cold War and Rock and Roll music. The 1960s brought us assassinations, race riots, Vietnam, the “Great Society” and counter-culture. In the 1970s, Nixon ended the Gold standard, and resigned in disgrace. The Arab oil embargo triggered a frightening period of inflation and unemployment, that we would call “stagflation.”Then the Federal Reserve System raised interest rates to excruciating double digits. (Sound familiar?) Jimmy Carter was held hostage by the Ayatollah of Iran, crippling his chance for re-election.
The election of Ronald Reagan in the 1980s changed the trajectory of politics in the direction of conservatism, which included austerity, military expenditures, hard work and political compromise with Tip O’Neil and the Democrats. Marginal tax rates came down and industries were de-regulated. We outspent the Communists. Behind the scenes, a congressman from Texas, Charlie Wilson, promoted a secret war in Afghanistan, that led to the collapse of the Soviet Union. Problems remained in Central America, the Middle East and Africa. Relations with China improved.
When the Berlin Wall came down, it seemed that an age of World Peace was dawning and we began to utilize the internet. The American blitzkrieg in Iraq, Desert Storm, proved that the American military was second to none. The digital age of the 1990s and the rise of Silicon Valley gave us new hope. Divided government between Bill Clinton and Newt Gingrich resulted in balanced budgets. We seemed to be getting the National Debt under control. There was a lot of hope for the millennial generation. But then, the darkness came with 9/11.
Now, we are living in the shadow of wars in the Middle East and Eurasia that threaten world peace and consume our energies.
The millennial generation entered adulthood during the disastrous retreat from Afghanistan. We face an uncertain forever war in Ukraine, which resembles a Cold War 2.0. At the same time, we have experienced massive global government lockdowns, forced genetic injections, and expansions of central authorities. Our complex economic relations with China are clouded by suspicion of bioweapons and cyber espionage.
The United States maintains global hegemony by military threats and by printing dollars. The progressive concept of modern monetary theory (quantitative easing, or just plain counterfeiting) had proved a disaster in 1923 Weimar Germany, but we are doing it again! Inflation is caused by excess government spending in pursuit of the zombie policies of Keynes. The Federal Reserve is now strangling the economy with ever higher interest rates. Banks are collapsing from holding long-term fixed instruments that are heavily discounted. Educational systems are failing students as teachers’ unions exploit their political power. Young adults and children are distracted by electronic toys. We seem to have a scarcity of adults with common sense.
The baby boomers are retiring in numbers that threaten to bankrupt Medicare and Social Security. The work ethic of the Greatest Generation has faded. The current generation increasingly depends on government for subsidies and entitlements. The Great Society has failed. The Administrative State and the public unions are growing in unchecked power. The lobbyists in Washington are writing policy instead of Congress.
In the 12th Century, King Canute demonstrated that his secular authority was not omnipotent when he sat his throne on the shore and commanded the tide to stop. He got his feet wet.
The Biden EPA does not possess such humility. Recently, 1475 pages of proposed rules were issued that will destroy the established automobile industry and force the manufacture of expensive electric vehicles that are scientifically questionable and not economically feasible.
We are wandering into War again.
The fatal Keynesian conceit continues. Both the neoconservatives on the right and the progressives on the left believe that war is not only normal, but is necessary for a market economy to thrive. We keep teaching these bad ideas to every generation. We pretend that our future grandchildren will be able to pay the bill.
It is time to change our attitudes and our leaders.
Our children and our children’s children deserve better.
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