As prolongation of the 1930s Depression and stagflation in the 1970s demonstrated, Senator Obama’s announced policies are a prescription for economic disaster.
Keynesian economic doctrine, not under that name, but in substance, is back in the news in a truly menacing way. Senator Obama proposes to repeat the policies of Franklin Roosevelt’s New Deal that turned an ordinary two-year recession into an eight-year disaster, with unemployment rates continuously in the high teens.
The key elements of Senator Obama’s proposed economic policies, as in the New Deal and the stagflation of the 1970s, are much higher taxes, along with a pervasive increase of business regulations and price controls in healthcare and energy (which sharply depress business activity and employment rates), full-frontal embrace of labor unions (which will push up wages and benefits to levels deterring profitable expansion of industrial production), and massive new government deficit spending (which will accelerate the already dangerously high rate of inflation and devaluation of the dollar). Carried out as he proposes, Senator Obama’s polices will lead us again into the swamp of stagflation.
The basic thrust of Keynesianism is the belief that control of the economy must be collectivized at the Federal level, because private business is incapable of providing full employment, and because the proper goal of economic policy must be thwarting greedy businessmen to attain so-called social justice: equal distribution of income and wealth, without regard to merit, capability, or hard work.
Not surprisingly the New York Times editorial board and the Times’s propagandist Paul Krugman are prominent Keynesian enthusiasts.
In practice (in the 1930s Depression and in the 1970s stagflation) Keynesian economics caused devastating harm to every citizen. In the stagflation of the 1970s not only was unemployment distressingly high, particularly in Midwestern industrial areas, which became known as the Rustbowl, but inflation wiped out roughly 57% of the purchasing power of every citizen’s lifetime savings.
For an eminently readable analysis of Keynesian economics, the economic bedrock of liberal-progressive worship of the socialist religion, read Professor Murray Rothbard’s 1947 critique, Spotlight on Keynesian Economics.
One caution: when Professor Rothbard speaks of liberal economists, he is using the classic terminology of 18th England that referred to true freedom: laissez-faire economics, free from government intervention, not to today’s American sect of the international religion of socialism.
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