Transcript Rise of Keynesian State (nation)
The Rise of the Keynesian State - I
Nationally
“Keynesian” State
The term “Keynesian” derives from the name of the economist John Maynard Keynes Keynes developed an economic theory of the planning state for active government intervention Even when policy makers were not consciously Keynesian, his theory dominated policy for 30 years As Keynesian policies failed in the late 1960s both the Keynesian state & his theories entered crisis
Keynesian “State”
“State” usually understood as “nation” state
i.e., national government But “state” can be understood more broadly
governments, plus
set of all institutions organizing a particular social order Keynesian “state” exists at several levels:
sub-national (regional, muncipal)
national
supra-national
Elements of Analysis in this Section
Historical Sketch of Emergence & Development Social & political character of Rise See how “economic” is
rooted
political in social & See how “economic”
is
social & political
Prelude & Source: Great Depression
Great Depression = crisis of earlier order Earlier order involved:
Business cycle as growth regulator
Taylorism, Fordism to control labor
Repression of trade unions
More limited government regulation of economy
More laissez-faire
Quasi-gold standard (at int’l level)
Business Cycle as Regulator
when wage
exceeded
of productivity, profits dropped (often generated financial crisis) business cut back on I
total output downturn
increased unemployment downward pressure on wages
restoration of profits, investment & growth
Crisis of Business Cycle
In Great Depression downturn didn’t produce an upturn Downturn produced Stock Market Crash of ‘29 Economic activity & prices fell, stayed down Unemployment rose dramatically, stayed high Wages fell, but increased profits din’t raise I Investment fells, stayed down
Behind Persistence of Depression
Depth of unemployment despair Generated a collective refusal of suffering due to impersonal forces Rise of new form of labor organization
waged labor forms industrial unions, CIO
unwaged, unemployed demand support
unemployment compensation to finance adjustment
social security in face of financial collapse New demands for full employment, rising wages
Capitalist Adaptation - I
At the level of theory: Keynes
From classical view of wages as cost
To understanding that both wages & profits can
wages =
costs but also
demand
pressure for I to raise productivity and reduce costs Economic theory extended to social sphere
e.g., human capital theory, growth theory
provided logic for investment in education, R&D, welfare, etc.
Capitalist Adaptation - II
At the level of policy: New Social Compact
Progressive response (unlike Nazis, Stalinists) Accepted unions, imposed bargaining,
wages Subsidized I to
productivity (WWII+) Strict financial regulation (to avoid crises) Socialization of adjustment costs in UI & Social Security
Capitalist Adaptation - III
Post-war gifts of productive assets to private industry Full Employment Act of 1946 Fordist production, fordist education Restoration of patriarchal nuclear family Racial hierarchy on job and off (ghetoization) Cold War, Point IV
Capitalist Adaptation - IV
Post-1950s investment in education & central cities Post Sputnik Space Race Civil Rights Act Peace Corps & Vista Green Berets Cuban Missle Crisis Bay of Pigs
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The Rise of the Keynesian State II
Internationally
Preoccupations of US Policy Makers, During & After WWII
Planning for reconstruction of world order began during WWII,
Before
resolution of war was clear Basis was Keynesianism rather than Nazism or Stalinism (assuming the Allies won) Primary Aim: Stability for trade & investment
Stability
Stability desired vis à vis instability of Great Depression
Depression, int’l circulation of depression breakdown in gold standard & int’l trade Controls on capital flows
Defaults on int’l debts Stability desired vis à vis WWII
Disruption of int’l trade Disruption of int’l investment
No Going Back
Refusal to return to Gold Standard Refusal of Free Markets in Currencies Refusal of Keyne’s proposal for int’l currency to be regulated by independent global central bank
Solutions: Economic & Political
Bretton Woods Agreements: fixed exchange rates
national foreign exchange reserves
International Monetary Fund (pool of reserves)
Keynesian Nation state handles adjustment GATT toward free trade Free mobility of capital (for investment) United Nations (to avoid war & foster int’l cooperation)
Implementation
US occupation and re-engineering of management of Germany & Japan, e.g., land reform & union busting Marshall Plan in Europe as a whole Emergence of multinational corporation as major vehicle of int’l investment Replacement of colonial empires being torn by independence movements Pax Americana & nation/elite building