The term “Keynesian state” has become a catchword that covers a variety
of concepts and is usually misleading. It may have some meaning for the
Scandinavian countries and elsewhere. But the United States? Although
the concept is often applied to the New Deal, the deficit spending of
the New Deal had nothing to do with Keynes (nor did Hitler’s recovery
via military expenditures). It’s true Washington economists were
delighted with the appearance of Keynes’s/The General Theory of
Employment, Interest, and Money/because it gave them theoretical handles
for analysis and policy thinking (e.g.,the offset to savings concept and
a framework for gross national product accounts). Nevertheless, despite
a promise of heavy government spending, and Keynes’s theoretical
support, the New Dealers were stumped by the 1937-38 recession, which
interrupted what looked like a strong recovery. There was then as there
is now an underlying faith that capitalism is a self-generating
mechanism. If it slowed down or got into trouble, all that was needed
was a jolt to get back on track. In those days, when farm life supplied
useful metaphors, the needed boost was referred to as priming the pump.
The onset of a marked recession after years of pump-priming startled
Washington. Questions began to be raised about the possibility of
stagnation in a mature capitalism, the retarding effect of monopolistic
corporations, and other possible drags on business. These concerns faded
as war orders flowed in from Europe, and eventually they disappeared
when the United States went to war. The notion of the “Keynesian Welfare
State” has tended to disguise the fact that what really turned the tide
was not social welfare, Keynesian or otherwise, but war. In that sense,
the whole concept of Keynesianism can be mystification.
https://monthlyreview.org/1998/01/01/a-letter-to-a-contributor/
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