Lord John Maynard Keynes was a brilliant thinker, economist and trader whose ideas caught the global trade winds in the early 20th Century. He died in 1946. But his theories still hold sway.
Born to the British Empire in 1883, he was a product of Cambridge. Born, raised and educated.
Keynes' ideas flourished in the Depression-era 1930s. He believed that a lack of consumer demand was the culprit behind all economic problems. Low growth. High unemployment. Accordingly, governments should spend mightily to boost jobs and economic activity.
Keynes challenged neoclassical economics. Ideas holding that free markets would, in the short-to-medium term, provide full employment as long as workers were flexible with wage demands. Contrarily, Keynes held that a free-market economy needed to be managed. Believing that the business cycle could be enhanced. Eradicating economic booms and busts.
His theories fundamentally changed macroeconomic theory and practice. And were adopted by governments worldwide.
Even today, in the name of Lord Keynes, economists and politicians support stimulus spending, minimum wages, unemployment benefits and income redistribution.
Of course, politicians love it. As they're able to increase the size of their budgets. To lavish money on constituents. All under the guise of helping the economy. While ensuring good will and votes. That's Keynesian economics.
Of course, there has been no evidence that it works. Economically, that is. Politically, it does plenty to keep elected officials in office. For 80 years, nations the world over have tried Keynesian economics. Sending government budgets dramatically higher.
The economy has been littered with Keynes's fingerprints these last eight years. With little to show for it.
Remember the $825 billion stimulus package in 2009? Enacted to stimulate jobs and inject capital into the economy. Of course, unemployment worsened. Nor can anyone recall a bridge, highway, building or worthwhile project to come from that expenditure.
State and local governments raised the minimum wage. Created special subsidies for certain constituents. Even took over the healthcare system and moved towards a single-payer healthcare system. The kind that has already proven less than effective in Western Europe and Canada. That is, if you dislike waiting thirteen months for a knee replacement. Or having inadequate access to highly rated medical professionals.
Then we lowered interest rates to historical lows. For six years. Seniors and retirees on fixed incomes be damned. Ushered in the federally managed healthcare system. Provided food stamps and welfare payments to record numbers of Americans. Saw record numbers of young American adults living with their parents. And nearly 38 percent of the mentally and physically competent adults of working age are out of the work force. Nor seeking employment.
Add to that the huge increases in unemployment benefits, Medicare, Medicaid and Social Security. Not to mention ethanol, wind, solar and electric vehicle subsidies.
Of course, Keynesianism has been a demonstrable failure in other economic environments. Like Cuba. Venezuela. The Soviet Union. All taking Keynes idea of state-controlled economics to the illogical next step. Till they went broke.
For the last decade, the United States has headed down that same path. Spending ever more taxpayer dollars. Borrowing ever more capital from foreign creditors. Since 2009, the national debt rocketed from $9 trillion to $20 trillion.
$9 trillion to $20 trillion? And what quantum leap do we have to show for it?
For all of his polymathic brilliance, Keynes was wrong. But, offering politicians and administrators access to an endless pool of taxpayer capital was like leading pigs to slop.
After 80 years of government growth, and scant evidence of return on capital, should we stop and question our underlying assumptions? The ones that support such policies?
Since the current expansion began, U.S. real GDP has expanded at just a two percent annualized rate. Last year, eight years into an economic recovery, the U.S. economy grew by 1.9 percent. While government spending, tax rates and regulations increased. Reducing entrepreneurial activity, jobs and income growth. And pushing more companies out of the U.S.
Still, many choose to ignore the correlation between bigger government and slower growth. Making excuses for slower growth, rather than blaming the root cause.
It's the new normal, we're told. Demographics. Weak corporate investment. Income inequality. Foreign trade. The lasting impact from the financial crisis. Or less-than-adequate tax receipts.
Such explanations attempt to place blame on the private sector. And still supporting Keynesian, big-government policies. Which any college freshmen with a microeconomics course and a sense of objectivity recognize as self-serving hogwash.
As P.J. O'Rourke said, "Giving money and power to government is like giving whiskey and car keys to teenage boys."
Governments produce nothing. They manufacture nothing. They create nothing. They are financed by taxation on personal incomes and business profits. Yes, government can help create a level playing field. A pro-business environment. One that enforces the rule of law and contracts. But after that? It must get out of the way.
The private sector creates, produces, manufactures, imports, exports and trades. Politicians, bureaucrats and Keynesians don't care to admit it. But those working in the real know it.
In November, the electorate -- like Caesar in 49 B.C. -- crossed the Rubicon and declared civil war on Big Government. Bureaucrats and politicians will fight fiercely for taxpayer funding and the power it brings. But one can hope that, finally and at long last, Keynesianism becomes a casualty of war.
