Ed, At 09:05 20/11/01 -0500, you wrote:
I'll cut the previous down a bit to keep discussion manageable: (KH) >> But surely, Ed, the wartime and post-war reconstruction spending was an >> enormous stimulus, far beyond anything that even a fanatical Keynesian >> government could or would do in peacetime. And, of course, there was a >> price to be paid for it all -- rampant inflation during in the 60s and >70s. (EW) >I agree, but only partly. World War II and post-WWII conditions represent >something of a "paradigm shift" from normalcy. But then so did the Great >Depression, the roaring twenties and WWI. True enough! (EW) > Perhaps the error of Keynesians, >and perhaps all modern economists and many other social thinkers, is the >assumption that society, including the economy, proceeds along a steady, >progressive, predictable trajectory, whereas the reality is a series of >unexpected lurches that governments try, but often fail, to control. During >the Great Depression, when politicians finally caught on to what Keynes was >saying, government spending did help to get things moving a little, but it >is doubtful that it could have had more than a moderate impact given the >depth of what was being dealt with. Yes to your first sentence. As to the second, surely the politicians (or, rather, the Treasury mandarins) didn't really absorb what Keynes was getting at until until well after the Great Depression -- that is, after WWII. (EW) Similarly, following the war, >governments did their best to moderate the inflationary boom, but the boom >had to peter out before inflation came under reasonable control. I can't comment on other countries, but I'm not at all sure that the UK governments bothered much about inflation until the early 80s when it was becoming ridiculous. For most of the 60s and 70s, inflation was making the government's job easier. Union wage demands were easily satisfied and tax was rising at a faster rate than inflation (because people were moving into higher tax brackets) and so government spending could be increased pari passu. (EW) >> I'm fascinated by how so many commentators (usually economists employed by >> investment funds, mutual funds, stockbrokers, and the like who want to >drum >> up business) are now saying that, because the American consumer spending >> went up by 7% last month, then we're now through the worst, and that all >> will be booming again before too long. (EW) >They may be right. We may be into an era of relatively short "boomlets" >that satisfy a particular type of demand, like dot.com and fibre optics, >make a particular group of people rich (temporarily), but leave the rest of >the economy behind -- perhaps further and further behind. Well, we'll have to see. Somehow I don't think we have any suitable candidates for boomlets in the nearish future. The big ones I see for the future such as solar technologies, biogenetics, are probably some long way off (though technology booms are not really foreseeavle I suppose). But underneath it all that I feel intuitively that a deflation is underway (which should be spelled "underweigh" -- but nobody ever gets it right, and it seems pedantic to use it!). The evidence seems to be pointing in that direction. (KH) >> Steering the economy -- which is what governments have been trying to do >> during the whole course of the last century since they nationalised their >> currencies -- only really amounts to swinging between one long crisis and >> another. Our parents suffered a long period of massive deflation in the >20s >> and 30s (after which the poverty trend line didn't stabilise to low levels >> until 1970) and then, after another intervening world war, a period of >> massive inflation in the 60s and 70s. These changes are far more extreme >> than the normal sorts of self-correcting trade cycles which characterised >> the 19th century. My guess is that we're now heading towards another long >> period of deflation. (EW) >I don't disagree here. However, I would suggest that we take another look >at the 19th Century. The latter half of it was undoubtedly more stable than >the 20th Century. But stable in whose interest? And what made the lid blow >off as violently as it did during the 20th Century? > >I suggest that the apparent stability masked a tremendous social seething >and change. Marxism became a pervasive driving force for revolution. Vast >numbers of peoples migrated from Europe to the New World. Ancient empires >rotted and crumbled. All it took was the assassination of an archduke to >touch off the bloodiest century in history. I can only write of what I know (or don't know) mainly about this country during that period. My impression is that although there was a great awakening of the working man in that period, it was going along fairly peaceful channels (tremendous development of self-education via the Mechanics' Institutes and the like, the growth of Non-conformist churches, considerable increase in factory wages, considerable growth in sports and past-time activities) and it was really the social effects of WWI (the way the ordinary soldier was treated by the officer class -- of course, the terrible sufferings of the ordinary soldier in the trenches) that accelerated a violent awareness of class injustice (almost bringing about caused the possibility of revolution in 1920 during the General Strike). I don't think Marxism as an ideology came into it at all in this country (even though Marx had been living and writing here!). And in Europe I don't think that Marxism influenced more than a microscopic number of intellectuals. The Russian Revolution was not so much an uprising by the people but an opportunistic coup d'etat by Lenin and co -- and almost the same in Germany. (KH) >> Trying to control the economy by means of small changes in the interest >> rate is quite unlike driving a car, whereby small movements of the >steering >> wheel produce immediate changes in direction. Interest rate changes >> actually produce long-delayed changes rather like the effect of the tiller >> in a slowly moving barge. Because of the apparent non-effect of a small >> touch to the tiller, the novice helmsman usually makes a succession of >> small changes -- and then finds, after a delay, that the barge changes >> direction straight into the bank! (EW) >I would suggest that the barge can be controled as long as the engine keeps >going at a pretty constant rate. If it breaks down, or speeds up >excessively, control is far more difficult, perhaps impossible. I tried steering a barge once! (Until the petrified owner took the tiller from me.) It's much more difficult than you can imagine. The point I was trying to make was that, if anybody has the chutzpah to try and control an economy, then there are time-delays built in -- as well as the "unexpected lurches" that you mention above. Keith Hudson ___________________________________________________________________ Keith Hudson, General Editor, Calus <http://www.calus.org> 6 Upper Camden Place, Bath BA1 5HX, England Tel: +44 1225 312622; Fax: +44 1225 447727; mailto:[EMAIL PROTECTED] ________________________________________________________________________
