I have heard a lot about Hayek and Keynes and how they influence the current financial politics, but not until I read this article in The Nation did I realize how much of a Keynesian I am.
For a long time I have considered myself a social liberal. But I have also seen the consumer economy as a big ponzi scheme, which i guess it is. It is always the people coming in at the end (consumers) that end up paying for all the other people. When the consumers is 99% of the US population, then there isn’t much hope for the country as a whole.
So where did the USA lose its way? I believe it was when they started believing the sirens of Wall Street, who claimed that playing in their casino was actually investing, and that their ideas of what valued a company became the measuring stick. From then on the only measurement that mattered for publicly traded companies was the stock market valuation, and the way of keeping that going up was to very short term inflating the numbers. It ended up being about quarterly results, and companies were rewarded for closing factories and firing staff. This combined with outsourcing based on cheap labor and production has led to a significant trade deficit.
And that is where I learned that I was very much in the school of Keynes. He was very much against big trade deficits, and I guess to some degree to a large trade surplus as well, since somebody else would get a deficit because of that. However, increasing that trade deficit is exactly what all our US corporations have been doing, with moving manufacturing abroad and having the US population buying all the goods. The long term effect is that we have almost no manufacturing base, which means that we are losing research in manufacturing disciplines, since they need factories nearby to test anything new and make improvements.
That is why I’m a Keynesian, and I believe that we need to start making products in the US again, not just services. We don’t want to be like the spaceship that crashed into the second earth in Douglas Adams’ Hitchhikers Guide to the Galaxy series.
