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01 rise of keynesianism - The Rise of the Keynesian State I...

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Unformatted text preview: The Rise of the Keynesian State - I Nationally “Keynesian” State s s s s The term “Keynesian” The derives from the name of the economist John Maynard Keynes Keynes Keynes developed an Keynes economic theory of the planning state for active government intervention government Even when policy makers Even were not consciously Keynesian, his theory dominated policy for 30 years dominated As Keynesian policies failed As in the late 1960s both the Keynesian state & his theories entered crisis entered Keynesian “State” s “State” usually understood as “nation” state x i.e., national government governments, plus set of all institutions organizing a particular social set order order sub-national (regional, muncipal) national supra-national s But “state” can be understood more broadly x x s Keynesian “state” exists at several levels: x x x Elements of Analysis in this Section s s s s Historical Sketch of Emergence & Development Social & political character of Rise Social See how “economic” is rooted in social & See rooted political political See how “economic” is social & political social Prelude & Source: Great Depression s s Great Depression = crisis of earlier order Earlier order involved: x x x x x x 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 s s s s s s when wage ↑ exceeded ↑ of productivity, when profits dropped (often generated financial profits crisis) crisis) business cut back on I ⇒ ↓ total output business downturn ⇒ increased unemployment downturn ⇒ downward pressure on wages downward ⇒ restoration of profits, investment & growth Crisis of Business Cycle s s s s s s In Great Depression downturn didn’t produce In an upturn an 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 s s s Depth of unemployment despair Generated a collective refusal of suffering due Generated to impersonal forces to Rise of new form of labor organization x x waged labor forms industrial unions, CIO unwaged, unemployed demand support 3 3 unemployment compensation to finance adjustment social security in face of financial collapse s New demands for full employment, rising New wages wages Capitalist Adaptation - I s At the level of theory: Keynes x x x x From classical view of wages as cost To understanding that both wages & profits can ↑ To ↑ wages = ↑ costs but also ↑ demand wages ↑ pressure for I to raise productivity and reduce costs costs e.g., human capital theory, growth theory provided logic for investment in education, R&D, provided welfare, etc. welfare, s Economic theory extended to social sphere x x Capitalist Adaptation - II s At the level of policy: At New Social Compact New x x x x x Progressive response (unlike Progressive Nazis, Stalinists) Nazis, Accepted unions, imposed Accepted bargaining, ↑ wages Subsidized I to Subsidized ↑ productivity (WWII+) productivity Strict financial regulation (to Strict avoid crises) Socialization of adjustment Socialization costs in UI & Social Security costs Capitalist Adaptation - III s s s s s s Post-war gifts of productive Post-war assets to private industry assets Full Employment Act of 1946 Fordist production, fordist Fordist education education Restoration of patriarchal Restoration nuclear family nuclear Racial hierarchy on job and Racial off (ghetoization) off Cold War, Point IV Capitalist Adaptation - IV s s s s s s s Post-1950s investment in Post-1950s education & central cities cities Post Sputnik Space Race Civil Rights Act Peace Corps & Vista Green Berets Cuban Missle Crisis Bay of Pigs The Rise of the Keynesian State II Internationally Preoccupations of US Policy Makers, During & After WWII s s s s Planning for reconstruction of world order Planning began during WWII, began Before resolution of war was clear Basis was Keynesianism rather than Nazism or Basis Stalinism (assuming the Allies won) Stalinism Primary Aim: Stability for trade & investment Stability s Stability desired vis à vis instability of Great Stability Depression Depression x x x x Depression, int’l circulation of depression breakdown in gold standard & int’l trade Controls on capital flows Defaults on int’l debts Disruption of int’l trade Disruption of int’l investment s Stability desired vis à vis WWII x x No Going Back s s s Refusal to return to Gold Standard Refusal of Free Markets in Currencies Refusal of Keyne’s proposal for int’l currency Refusal to be regulated by independent global central bank bank Solutions: Economic & Political s Bretton Woods Agreements: fixed exchange rates Bretton ⇒ national foreign exchange reserves ⇒ International Monetary Fund (pool of reserves) International ⇒ Keynesian Nation state handles adjustment Keynesian s s s GATT toward free trade Free mobility of capital (for investment) United Nations (to avoid war & foster int’l cooperation) Implementation s s s s s US occupation and re-engineering of management of US Germany & Japan, e.g., land reform & union busting Germany Marshall Plan in Europe as a whole Emergence of multinational corporation as major Emergence vehicle of int’l investment vehicle Replacement of colonial empires being torn by Replacement independence movements independence Pax Americana & nation/elite building ...
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