The highest deficit in the 30s was 5.5% of GDP, in the face of ginormous
unemployment.
In 1940s it was as much as 30% of GDP. Now that's some pump priming.
Louis Proyect wrote:
Jim Devine wrote:
Obama's $250 scheme is definitely too weak. But what is wrong with a
_larger_ priming of the pump? (for instance, how about the idea of not
just extra unemployment insurance benefits (and the like) but also
government investment in infrastructure and "green" technology?)
If pump-priming did not work in the 1930s, why should it work today?
Here's a useful reminder:
A Letter to a Contributor:
The Same Old State
by Harry Magdoff
The substance of what follows is contained in a letter to the author of
an article we will be publishing in a later issue. The editors, who were
shown copies of the letter, thought that the content would interest MR
readers and they asked me to fix it up for publication. In doing so,
some points were expanded to support the argument and footnotes were added.
Dear Chris,
As mentioned over the phone, we like your article very much. It needs to
be shortened, and we will be suggesting some editorial changes.
Meanwhile, I would like to get your thinking about my disagreement with
this statement in your conclusion: "Today's neo-liberal state is a
different kind of capitalist class than the social-democratic, Keynesian
interventionist state of the previous period." I can't see any
significant difference in either the state or its relation to the ruling
class, even though clearly there is a considerable difference between
the functioning of the capitalist economy during the so-called golden
age and the subsequent long stretch of stagnation. I do not mean the
absence of any change at all in the capitalist class. Thus, the growing
influence of the financial sector (not necessarily a separate sector) is
noteworthy. But that is hardly a measure of a major change in the state.
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.
full: http://www.monthlyreview.org/198hm.htm
