the 1970s and the end of Keynes
From WW2 to
the end of the 1970s Keynesian economic policies by Labour and Conservatives
led to increased living standards like never before. It went with the feeling
‘we’ll never let (the poverty of the 1930s) happen again.
Certain
problems that arose in the 1970s mistakenly gave rise to the end of Keynesian
economics.
Inflation
and unemployment rose
It was
wrongly thought that Keynesianism was dead
It was
wrongly thought that something else was needed
Global
factors that would quickly pass were ignored and the wrong actions were taken
regarding them.
The main
factor was two oil price hikes
The oil
price hikes caused other prices to rise
Unions
sought pay rises to match the price rises.
Government
panicked and made things worse. It wasn’t Keynes that failed it was government
actions regarding the oil crises and price and wage rises that failed. (and is
still failing)
1in 1971 the
world dropped the link to the gold standard
The Bretton
Woods international money agreement formed in 1945 came to an end.
Everything
went OK with this but. The British government tried to over value the pound. It
was this combined with the oil price shock, price rises and corresponding wage
rises that caused inflation.
It was not
the Keynesian economic policies – they were working OK. If the government had held it’s nerve the crisis would have passed like a wave underneath. The same things were
happening in America.
Unknown
persons acting as advisors were able to influence Margaret Thatcher and Ronald Regan. Or Thatcher and Regan were stumped as what to do and asked unknown advisors what to do. Or both.
I think it
was Oliver Letwin in Britain that more or less said why don’t you try a ‘Free
market’ approach. Whatever happened a major mistake took shape that has caused
ongoing damage that is still going on today.
The economic
fringe ideas, (that were considered crackpot ideas) of Milton Friedman suddenly
became popular and the go to ideology in Britain and America. Then it spread
across the west, more slowly and less completely across Europe but stronger in
the UK.
These new
ideas said…
- State spending was (and still is) too high
- Free markets are good Public sector is bad
- Private sector spending is good
- Government spending is bad.
- High profits are good
- Wage rises are bad
- Entrepreneurs and business in general is good
- Unions are bad
Keynes ran
the UK economy behand the scenes in both WW1 and WW2. Keynes was a major
influence in winning both of these wars. Keynes was as much a factor in winning
the wars as Churchill for example.
State
intervention and state action was required during the wars.
Keynes knew
that inflation was a result of three interlinking factors.
Government consumers capital
There’s a
kind of power battle between these three economic groups
Governments
are the most powerful and can influence the whole economic activity. Under the
influence of Friedman governments dropped their level of economic influence and
forced the level of influence of consumers down in favour of capital (or
profits). This is where it all went wrong. This is where and why things are
still going wrong!
Dennis
Healey was the first chancellor to get it wrong by not controlling resources.
Reeves is
continuing the errors that started in the 1970s
Wages are still forced
down and low pay is the main underlying problem with the UK and the US economies.
Thyere is no such
thing as free markets so oligopolies formed along with capitalist oligarchs.
Yes they are here as well as Russia.
Low paid
rentier economy emerged and is still growing.
Pay is going
down.
YES pay is
actually going down. Prices are going up. Small number of people are profiting
most are suffering real income reduction.
The Friedman so called free market
ideology was originally called Thatcherism but is popularly called
neoliberalism.
The move
away from Keynes turned the economy from being demand or consumer led to supply
or business led. where profits are the most important consideration over and
above consumer spending. This benefits a small number of oligarch type
millionaires and now billionaires but leaves the majority suffering low pay and no
ability to spend. It leads to the inevitable decline seen in western economies,
especially the UK and the USA.
The supply driven economy
· Drives inflation up
· Drives wages down
· Governments are making the same mistakes
· Making things worse.
Giving
markets more and people less is plain stupid but it still goes on. Neoliberalism
tries to cure the problems by cutting public spending and enforcing austerity.
Exactly the opposite of what is needed. Most people fall for the neoliberal
spin.
spinning a false, fake, phoney free market economy
The solution is a return to Keynes, socialism
or fascism when the economy collapses and the UK and American economies are in
meltdown.
Reclaim Keynes
with:
- · Economy based on consumer demand
- · Consumers more, markets and profits less
- · State investment on a huge scale
- · Politics of care
- · Wide distribution of benefits
- · Role of government is to help consumers prosper not to boost profits.
Economic failure started in the 1970s
and is
continuing today because governments
abandoned Keynes for fringe ideas
that are failing you and failing me
bring back Keynes
Source
information Richard Murphy https://www.youtube.com/watch?v=OcrGuICZUWc
No comments:
Post a Comment