>>> Jim Devine Thanks for your reply
^^^ A little. But mostly it was a passive matter: it was the balance wheel on the economy that the large government budget (warfare/welfare state) creates. In addition, financial reforms such as the creation of bank deposit insurance (along with strict banking regulations) in the 1930s helped stabilize the economy. ^^^^ CB: I'm in the habit of thinking of the welfare spending as Keynesian fiscal policy (?) or an application of "economic science". Increasing effective demand is a point of overlap of Keynesianism and Marxism; or at least, Marxist understanding of capitalism would expect that Keynesian welfare spending that increased mass consumer/working class spending would ease/help avoid recession, no ? So, Marxists would see welfare spending as a reform measure that not only relieves poverty, but one that is likely to ameliorate the business cycle downturns. To me, this is the main progressive aspect of Keynesianism. In Capital Vol. III ( I lost track of the cite and exact quote) Marx says the ultimate cause of recessions is that the total number of commodities produced is as if the mass consumers/workers have enough wages to buy them all ( obviously my rough paraphrase). The idea is that since workers are not paid for everything they produce, they don't have enough money to buy all they produce. The capitalist who takes the surplus isn't going to buy all the commodities for personal consumption. The capitalist isn't going to buy the surplus product of 20,000 cars, or pairs of shoes or hamburgers. In other words, exploitation of surplus value creates the basic contradiction that makes recessions inevitable. Credit can paper it over for a while. "Underconsumption" , inability to consume all the commodities produced because the masses don't have enough money to buy all the commodities of personal consumption produced is the ultimate cause of all recessions. So, welfare payments can ameliorate this some, because basically welfare is giving some of the surplus value ( which is paid in taxes) to some of the mass consumers, who then buy some of the commodities "piling up in the warehouses" , so to speak. ^^^^ For fiscal policy, economic science (Keynesianism) was applied in the early 1960s to justify tax cuts (mostly for the rich) to stimulate the economy -- and then for a temporary tax hike in 1968 to (unsuccessfully fight inflation). For monetary policy, economic science was applied in the early 1980s to fight inflation (and to break the back of the labor movement). Then, Greenspan applied "economic science" (and gigantic dollops of intuition) to steer the economy until last year. He helped create two speculative bubbles.
