At 19:54 09/05/2011, D&N wrote:
(D&N) There are two popular opinions on the efficacy of the New
Deal. The following article, by:
Charles W. McMillion, president and chief economist of MBG
Information Services, is the former associate director of the Johns
Hopkins University Policy Institute and a former contributing editor
of the Harvard Business Review.
<http://www.ourfuture.org/blog-entry/2009020603/fdr-failed-myth>http://www.ourfuture.org/blog-entry/2009020603/fdr-failed-myth
is one that addresses the unemployment rates of the time, as well as
the GDP and production rates from 1928-41. I think it gives a better
overview, and indicates that only with 1937 cutbacks to reduce
deficit was the unemployment rate once again dropping. When FDR
realized his mistake, and restored the program, things picked up
again in late 1938. By '39 GDP climbed to 10.9%, and industrial
production was up 23%. 1936 marked the end of the Great Depression.
There was double digit growth, a 44% rise in production within 3
months of the New Deal being implemented, surpassing the 1929 peak.
That jobs exploded at the start of the war only confirms that
government job creation works, not that the New Deal didn't
stimulate job growth, nor, of course, that war stimulates economies
in lasting terms. Should government act to spend on sustainable
industry and our planet's and children's future, rather than
disparate technologies chiefly related to military advantage, the
result will be real growth from innovation and environmental restoration.
Natalia
(KH) The years after the Wall Street Crash of 1929 is a very good
example of what I was writing yesterday -- that there needs to be
unbroken chain of available consumer goods from the cheapest through
to the most expensive in order for full demand, and thus employment,
to be maintained. The subsequent Great Depression had already
bottomed-out a year before Roosevelt took office and, even if he'd
done nothing by way of the New Deal, the economy would almost
certainly have started recovering. Buying power was once again
descending through the social classes even though it hadn't yet
reached the poorest. The public works employment of 3 million of the
poorest in the New Deal at very low wages did at least keep them
above starvation levels but wasn't enough to help them join the chain
of demand as consumers. What Charles W. McMillion doesn't mention is
that when the New Deal was terminated in 1937, Roosevelt also
increased taxation. This immediately weakened the goods-chain at a
higher level (that is, those who paid income tax) and industrial
production immediately declined by 40%, most of which affected consumer goods.
When economic recovery resumed a year later, at least two other
important factors were coming into play. Firstly, was the vast
extension of electricity grids and the stimulation it gave to smaller
more widely dispersed factories making a new tranche of consumer
goods (e.g. telephone, radio, gramophone, television etc), hitherto
available only to the rich and the well-off, but now coming
downstream. Secondly, Roosevelt was not only aware that war was
brewing in Europe, but also knowing that Japan was invading China and
re-arming like crazy. Roosevelt responded by aiding the American
Volunteer Group with planes (flying in support of China) but also
generally re-arming, particularly in expanding and re-equipping the
Navy in the Pacific. Although Roosevelt knew that the American people
would not have supported a declaration of war against Japan or the
looming one against Germany at that time, the government was already
quietly re-arming during the years 1937-41 -- warming up the economy.
After Pearl Harbour, when America finally entered the war, the
economy went into over-drive. Even so, it was not until about 1945
that the sort of full employment of the late 1920s had been regained.
When you write: "That jobs exploded at the start of the war only
confirms that government job creation works." this is a bit
disingenuous! It was not the same sort of public works job creation
that we normally understand by the term. During re-armament, the
government was actually acting as a consumer. It was a huge consumer
-- yes -- and it was for goods outside the range of normal consumer
goods -- yes -- but it was still a goods-led stimulus which brought
people into employment. It was an additional chain of demand, working
alongside the normal domestic one, differing only in that it
stimulated employment simultaneously from all classes -- from rich
manufacturers, through the professional and technical classes and
right down to low-skill factory workers. (Ironically, it was those
employed in the public services who lost out in terms of relative
incomes in those days. Many factory workers were out-earning
middle-ranking administrators and army officers.)
By all means I'm not against government-led employment schemes in
principle when there's a genuine consumer need, where only
governments can effectively act. Otherwise they can go badly wrong.
For example, in the UK over a period of 11 years, the last Labour
government doubled the amount spent in real terms on state education
with thousands of new brand-spanking schools with all the latest
gear, yet the literacy and numeracy standards of children at 11 are
lower now than they were previously. Half of our newly-graduated
teachers fail numeracy tests that used to be standard for 16 year-olds.
Keith
On 5/9/2011 1:26 AM, Keith Hudson wrote:
At 20:08 08/05/2011, D&N wrote:
(D&N)Thanks again, Keith,
Yes, Presidential Monetary Authority selection is a possible (say
likely) conflict of interests, and would likely be further
jeopardized by his or her lack of education. And I agree with you
that the Federal Reserve serves no public purpose.
With respect to your comment about the record levels of
unemployment and under-employment effect the Nat'l Employment
Emergency Defense Act is attempting to address:
(KH) But here we also have to take into account that the
industrial economy of the last 300 years is now becoming less
labour-intensive from year to year due to increasing automation
and (so far) redundant personnel can't be re-trained quickly
enough. This is a major structural problem for which no-one or
no-thing can be held primarily responsible (unless it be the
ever-innovative ability of the human mind!). Even in China, with
10% p.a. GDP growth, unemployment is now growing in the prosperous
coastal provinces. Not only are the 200 million temporary
migratory factory workers being sent back to the rural interior
but also a few million of the provinces' own graduates are without
jobs (even engineering graduates!) or have to take menial ones.
The great shift of low-skill employment from the West to China has
now probably largely ceased and China is now beginning to face the
same structural problems as the West.
Because a substantial number of jobs were lost to developing
nations, and presuming nothing would be done to address that, the
Act, in seeking to stimulate job growth by investing in American
infrastructure, should help to stimulate a great number of jobs
that would not require much retraining, and should also give rise
to re-hiring of teachers, medical staff, engineers, technicians,
etc., who lost jobs due to cutbacks.
Natalia
(KH) The aims as stated in the last paragraph are desirable ones
and I wouldn't want to quarrel with them. But whether they would
necessarily follow the passage of Kucinich's bill is another
matter. Having read through the proposed National Employment
Emergency Defense Act -- which is essentially about the creation of
government-controlled and -directed money -- I'm afraid that I
disagree with its basic premiss. This is that money itself can be
the stimulant for full employment and, presumably, economic growth.
Whether money is created by government (by printing) for worthy
aims and/or by banks (via credit) for possible business success it
still doesn't necessarily produce employment or growth. At best, it
can only produce slight alleviation of unemployment (as in
Roosevelt's New Deal of the 1930s); at worst, it produces inflation
(in which the savings of many are wiped out, and the debts of many
of the rich and comfortably-off are neutralized).
Money is only an intermediary, and the amount of it, and the value
of it, is only a byproduct of the demand of consumers for
particular goods and services. For full employment or for economic
growth (as defined notionally by GDP) there needs to be chain of
demand from the poorest to the richest. High-priced goods or
services initially affordable by the rich, if mass-producible, work
their way down through the social classes as they become cheaper.
As some low-priced goods become affordable by the poor then they
have aspirations to own and enjoy one or more items that the next
higher class already has. It's a two-way chain -- goods and
services working downwards, comfort and status working upwards. So
long as the chain is unbroken then people of all classes will work
voluntarily according to their abilities and the opportunities open
to them -- that is, full employment for all able-bodied adults.
It is this sort of two-way chain which has occurred in fits and
starts through all history, ever since we forsook hunter-gathering
and began to be civilized (that is, living in ever-larger dense
groups of people and having to modify our behaviour accordingly).
When the chain stops in any particular region or civilization, or
indeed goes backwards (for example, when invaded by vandals) then
that culture can be locked into a particular way of life for long
periods, perhaps centuries in many instances. The latest chain is,
of course, the industrial revolution which I would date roughly as
occurring between 1780 and 1980. I would maintain, however, that
this chain has now stopped and that economic growth -- as we
presently measure it -- has halted. In this view, the 2008/9 credit
crunch is not so much a temporary halt in the two-way chain's
progress but only one of several very weak links that must be
repaired. Even if Western countries don't achieve a resumption of
economic growth and remains in a new locked-in condition then
several other important reforms must also be achieved for full
employment quite besides the necessary stabilization of money and
putting the banks and financial services (fools or crooks to a
lesser or greater degree at present) in their place.
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/05/
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/05/
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