Didn't Keynesian economics pull us out of the Depression?

[sfwriter]

I've heard wingers dispute this fact by saying "World War II" ended the depression, but wasn't that just Keynes on steroids? I mean we put half the country to work building bombs and uniforms for the other half which we hired to go kick Hitler's ass. All industries nationalized. We had massive controls and expansion. After a few years, as we eased controls, we launched into one of the greatest economic expansions in our history.

It would seem the World War II argument is one for more control, not less. Let's replace Hitler's ass in our current situation with a Carbon Economy and crumbling infrastructure and go to it. I'd love to leave a legacy of new parks, bridges, roads and a carbon neutral footprint to my kids.

Wait, we can't do what we did in World War II, that was socialism. My bad.

[FBaggins]

1. Even if it was, I think you'll find that...

...hitler was a bit more compelling a motivation than a carbon economy is.

[Captain Hilts]

2. Yes and no. It arrested it at times, but did not solve it. WWII was the ultimate Keynesian

policy.

FDR saw the Depression just as much as a political crisis as an economic one.

In 1939 Eleanor Roosevelt said, "The New Deal gave us time to think." It also bought off the groups most likely to make trouble in tough economic times: WWI veterans, young people and artists.

[Liberal Veteran]

3. No. Reagan did it!

April fools!

[RKP5637]

4. Oh, good to know, I always thought it was George Bush that brought us the

best of economic times, you know, wars and all to make us more prosperous. And also very clever profit making for those on the take, for example, Halliburton. And the wise wisdom of Greenspan. :rant:

[RKP5637]

5. America just does not seem to want to do anymore what is right and best for

the nation now and for the future. I agree so much. ..."(create) a Carbon Neutral Economy and (fix) crumbling infrastructure and go to it. I'd love to leave a legacy of new parks, bridges, roads and a carbon neutral footprint to my kids." Maybe it will get better, I hope so, but for now the majority of the citizens are getting screwed by the very small percentage controlling the wealth and power of this country.
:rant:

[OHdem10]

6. It was Keynesian Economics. This is why Bernake followed the

FDR Model. As a scholar of the Great Depression Bernanke had
learned that FDR had the correct approach but most present
scholars believe he had been too cautious in the amount of
money he put toward bailing out the banks.(Or Congress would
only permit him so much money.) This slowed down the process.

Therefore Bernanke and Paulson knew they had to throw large
amounts to stabilize the Financial Industry. Yes, it is
Keynesian Economics --When in such a crisis, the only Institution
large enough to help is the Government. George Bush is
a real conservative and I am sure things had to be terrible
for him to agree to this process.

If they had not used Keynes, GWB would have been the 2ond
Herbert Hoover.

[Cleita]

11. Funny, I still think of him as the second Herbert Hoover and that

is one of the kind things I think of him.

[RKP5637]

12. +1, n/t

[Odin2005]

7. WW2 WAS the Keynesian stimulus.

FDR didn't spend enough before WW2 because he never accepted Keynsianism.

[socialist_n_TN]

8. And it looks like it MIGHT be.....................

bailing us out of the Great Recession too. We're not out yet, but it is looking better.

[notesdev]

9. No

Keynesian economics kept us in the Depression. What brought us out of it was being the only ones left with productive capacity undiminished by war, while all our international competition had theirs demolished.

The part none of the Keynes supporters like to mention is that it is a key part of his system that the money he advocated spending during down times should be saved up during boom times. We saved nothing - in actuality we saved less than nothing, we had an actual negative savings rate for quite a while before the crisis hit. Keynes had no advice for the scenario we are in now.

Advocacy of Keynesianism is popular among people who don't understand economics (and the occasional flack who does) and want to justify spending that cannot be justified by any proven economic theory (nor by common sense).

The key things to understand are a) that this crisis is a debt crisis, and b) that we have passed the 'zero hour' of debt accumulation and the addition of new debt (private or public) into the economy diminishes rather than adds to overall GDP. If you have serious interest in this topic, search on the phrase "marginal productivity of debt".

In the current context, advocating more borrowing as a way to dig out of a hole caused by too much debt is exactly like trying to cure alcoholism with a bottle of whiskey.

The cure is to live within our means, difficult as that may be for some to come to terms with.

[RKP5637]

14. "The Marginal Productivity of Debt." I was not the OP, but I did come across the

following paper on a Google search that I thought explained in more detail what you are discussing if anyone wants some more detail. I found it quite interesting. It also address some of the concerns I have had mulling around in the back of my mind...

http://www.financialsense.com/editorials/fekete/2009/0330.html

[Cleita]

10. Yep, but there are some

who study that era who believe that WWII actually slowed down the recovery that had been started by FDR. I was a small child then and I remember the shortages and the need for rations and other belt tightening programs. When the war ended then we had real economic growth. The GI bill enabled families to buy homes and I never remember us having a ration book after that. Also I remember that the wartime jobs created were filled by women until the men came home. Also, all they did was make equipment for war, but once the war ended, most industries went back to what they had started doing, making cars, making appliances and doing domestic manufacturing. Unfortunately, the aircraft industry, not only created newer and better commercial airplanes, but also started the black hole of military aviation along with the government contracts that did create jobs but also created the need to justify what we were doing.

[melm00se]

13. the economic growth post WWII

was driven by:

- the pent up economic demand of almost 15 years; 10 of which folks had no $$ and 5 of which there was strict rationing
- the swift conversion of a war time economy to a peaceful economy
- the dramatic drop federal spending and budget (1945: $92billion; 1947: $34.5billion)
- The GI bill allowed for returning veterans to go back to college thus slowing their return to the workforce allowing the economy absorb the trickle of workers rather than a massive flood (that federal gov't screwed up post WWI which was one of the building blocks of the depression)
- the USA had the only heavy industry economy that was undamaged by the war and all of Western Europe and all of Japan as markets for the goods produced.

Entry into WWII was the final piece of the puzzle that pulled the US out of the Depression. WWII created a vast demand for a wide range of goods and services (thus providing jobs), shrank the available labor (making those workers more valuable) and was an event that unified the country in a way that focusing the American people on an external, identifiable and fightable threat.

[sfwriter]

15. Don't forget war bonds...

We carried our own paper instead of the Chinese.