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BOATS, BOOTS AND KEYNESIANISM IN INDIANA AND ELSEWHERE

January 2, 2016

BOATS, BOOTS AND KEYNESIANISM IN INDIANA AND ELSEWHERE

An internet professor posed the question of why the State of Indiana’s economy is performing so poorly when other states’ performances in the region, while not great, are by GDP and other indices doing so much better nowadays. I expanded on the issue with the following response and decided to publish it as a lightly edited blog of my own.

A rising tide, contrary to President Kennedy’s observation, does not lift all boats because the poor and working classes have no boats to lift. Likewise, you cannot pull yourself up by your bootstraps if you have no boots. I do not agree that we must all sit and wait for business cycles to turn this way or that in some inexorable form of invisible hand happenstance, especially when Keynesianism (as adopted by government) is a proven set of policy choices that has historically and demonstrably shown us how to end or ameliorate the horrors of the Great Depression and other downturns in the economy. The old “business cycle” theory of ups and downs has been proven to be very sensitive to government intervention via policy. There is little to show that “laissez faire” treatment of doing nothing and waiting for “the market” to turn solves or softens downturns in the economy – quite the opposite (See Coolidge, Hoover, the Great Depression etc.)

Government intervention via Keynesian policies of carrots and sticks works to solve market problems via increases in employment and wages and (thus) demand, which in turn reinvigorates and stimulates “the market” to resume growth. Government should not be a mere bystander in the Hoosier or any other economy but should rather adopt policies and engage in strategies that stimulate aggregate demand, the final arbiter of economic activity. Far from being a mere bystander, government should rather be a major participant in the maintenance of market equilibrium and serve as crucial component in early recognition and regulation of the now outmoded concepts of “business cycles.”

Contrary to the assertions of Wall Street and other status quo exponents who have a vested interest in failed market solutions, it is time to tell them that this economy is ours and not theirs to manipulate for their own ends and that our elected representatives will set the rules and regulations for their participation in our economy that look first to the peoples’ interests and not Wall Street’s bottom lines (even though their bottom lines will greatly improve with Keynesian-fed increases in demand).

Finally, we live in a world these days of international demand with globalized markets, and government rather than private enterprise is the only entity empowered to enter into agreements with such other entities (trade, tax, labor standards, capital movement, etc.), even though as a practical matter Wall Street lobbyists currently write our trade and tax treaties. It is time for the peoples’ representatives to negotiate such international understandings on behalf of the people who elected them and their interests (labor, environment, etc.) rather than the bottom line interests of big banks and multinational corporations.

Perhaps unfortunately, the solution for correcting these wrongs and adopting what works for the people involves a political process that has been blurred by incessant propaganda of Fox News and others intent on profit-making irrespective of how their greedy myopia adversely affects America and its people which, simply stated, means that we have to elect politicians who look out for the interests of our country and our people as their first priority, so let’s get on with that process in the fall of this new year.   GERALD   E

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