Keynesian recovery of US economy in WWII

6 posts

CarlKrauch

Put 2 economists in a room and you get 3 opinions.

Since 1815, effectively the modern economic era, there have been multiple economic crisises in major power developed nations and/or states. Several of them rose to the level of existential crisises, most notably the 1930s in the US, UK, Germany, and France, the 1970s energy crisis, the 1980s USSR, and 2008 in general.

Each one of those was different, but they show that there are effective limits to economic theory, at which point all sorts of things can happen.

My personal view is that the post 1945 productivity boom was the result of the world, transitioning from the coal driven ( such as UK and Germany) Second Industrial Revolution model to the hydrocarbon economy, particularly with portable internal combustion engines fueled by oil products, plastics from oil products, and synethetic fertilizers from the maturing chemical industry. These effects were masked during the 30s and 40s because of the economic, political, and military situations.

However, as noted earlier ITT, this also had serious inflationary pressures, which were pushed elsewhere as long as politically possible, before ripping apart the world hyperpower's economy in the 70s and 80s.

Roody
For any enterprising economists on this board, you can make your career if you develop the next economic theory that justifies the new regime (which requires betting on who/what the next regime will be).

Currently we have no general economic theory guiding our policy. Liberalism was discredited with the Great Depression, Keynes was adopted as the new prophet. The 70s stagflation discredited classical Keynesianism, and what replaced it was the half-aborted theory of neoliberalism/monetarism. 2008 discredited that, and the policy "fixes" that have been implemented in the wake of that crisis have been confused and ad hoc (restriction of the Fed's emergency powers is one example).

It doesn't seem to me that any alternative theory has been well articulated or widely adopted yet. Does anyone with an ear closer to the ground have any insight as to what the next economic prophecy will be?
Broseph
Only a guess, but because of political pressures I think the left will try to justify Reaganomics and we'll see that come out of universities/colleges over the next 5-10 years. Really, anything that justifies American global hegemony.
CarlKrauch
The bet is not only on the future regime, but the new currency and/or the new resource limitation(s).

As my opener, I point out how complex the supply chain is for the modern agricultural feedstocks. We know from 1941-1945 what happens when that particular set of supply chains gets disrupted for several years. My namesake made his reputation on such things.
Jargon

Soon it won't matter, as all of these economic programs are predicated on the question of how to successfully reconcile labor markets with a competitive economy. The labor market of the future will not be stocked with humans, therefore the question of how to increase returns to labor will no longer be relevant; Keynesian macro-econ will no longer be necessary because it will be a post-economic era. Elites will no longer be able to find any use for eaters and thus will not be compelled to contrive a place for them in their worlds.

CarlKrauch
The current limit is not labor, it's the effective labor pool attached to a functioning economy under western influence. And functioning economies require some form of legal or customary property transfer, otherwise you get mobile bandits or pirates. The USSR had horrific difficulty supplying consumer goods to it's elite, let alone the bureaucracy and the officer corps. If not for the oil price shocks of the 70s, the USSR reliance on foreign consumer goods would have forced wrenching economic choices ( guns or butter?) A decade sooner. You can't supply an existing managerial elite with consumer goods without functioning stable counties, which is an increasingly precarious thing.