Pharos-Tribune

Columns

June 5, 2012

Economy calls for raising Keynes

If the financial collapse of 2008 served any purpose other than to depress the value of our retirement funds, it made people like me read those overly optimistic reports on mutual funds more closely than before.

These glossy reports investment companies are required to publish for our consumption is not exactly like reading your favorite book or magazine.

One monolithic report I read last week did offer something different: A quote from famous English economist John Maynard Keynes. The man known most for supply side economics was once quoted about an economic period that was less than robust, but nearing the tipping point for strong recovery and growth. Of course, one of my mutual fund managers used that quote to draw a comparison to the current economy. Point made.

Keynes, who died in 1946, was popularized in the 1960s. Keynes believed that too much personal saving could stifle economic growth because it would tie up capital. He believed that government couldn’t be entirely laissez-faire and let economic growth take care of itself without intervention. He believed that from time to time, wealth had to be redistributed and that giving capital to the poor would stimulate the economy because the poor are more likely to spend money than save it.

I’m not an economic scholar, but I would say if Keynes were alive today, he’d be saying the times have changed, but the reasons for his economic theories haven’t. We may not be saving as much personally as we did in the 1960s, but companies are actually saving more, and the balance sheets show it. The time for wealth redistribution may be at hand because the gap between the rich and poor has grown, and the 99 percent movement is what that theory is all about. As for government intervention, that’s already happened.

GM and Chrysler have been bailed out, and dozens of banks have either been shut down or recapitalized by the federal government.

Perhaps the thing Keynes believed in more than anything is that consumption, not savings, causes growth. There are many ways to promote consumption. Expanding the population by letting more people into the country is one way. Giving tax cuts to put more money in the economy is another. Holding down inflation and importing cheap goods from other countries is another. We’ve been there and done that.

What we haven’t been able to do is raise incomes across the board so that more people can retire early and spend their golden years spending money. We haven’t been able to pay women the same salaries their male counterparts are making, and so they have to work longer to earn their keep. By being cheaper alternatives to men, pay inequality indirectly becomes an issue for men as well. We haven’t been able to save enough money to put our children through college because student loans in this country now outpace credit card debt for the first time.

These are interesting times when it comes to pay. CEOs are making obscene millions because they can produce, but some of the best employees that have ever been on assembly lines are laid off or let go because they are simply too expensive for companies to keep.

On the surface, it’s about competition between businesses domestically or internationally. But under the surface, it’s really a competition between the workers of the 1960s when Keynes’ philosophy was embraced and the 21st century when it’s virtually been forgotten.

Consumption? Consumer confidence is down again, and employers only created 69,000 jobs last month while the country geared up for the summer months when employers are traditionally eager to higher cheap, seasonal labor to help out those struggling high school and college students.

In 1996, former Federal Reserve Board Chair Alan Greenspan spoke of something called “irrational exuberance” several pages into a speech he gave at a black-tie dinner. Within hours, markets all over the world dropped and the words were forever associated with him.

Today, the real irrational exuberance we have is political, not economic. We just don’t have the will or popular support to do what we have to do to drive the consumption Keynes described as the salvo for growth.

Instead, we’re sitting back and being patient. We’re happy to have “rational exuberance,” which is to say that over time, unemployment is gradually dropping, the economy is growing, factory orders are up and so are profits.

And as the Europe Keynes once knew before there was a Euro or even Great Britain in the Common Market teeters on the brink of economic default, it may be time to raise Keynes on both sides of the Atlantic and think about the possibility that we’re too consumed with the wrong things that aren’t serving to grow any country’s economy much at all.

• Dave Kitchell is a columnist for the Pharos-Tribune. He can be reached through the newspaper at ptnews@pharostribune.com.

 

1
Text Only | Photo Reprints
Columns
  • WOLFSIE: High-tech got you down? I love where I bank. It's a branch inside of a big supermarket. I can make a modest withdrawal and then go and blow every last penny in the cookie aisle. The tellers at the window appreciate me. They know about my obsession with round numbers and und

    April 18, 2014

  • PETERS: Grizzly bear may help human medicine I've gained 5 pounds since last summer. My body mass index (BMI) is still fine, but I need to stop gaining to keep it that way. Grizzly bears put my weight gain to shame. In the late summer, they eat some 50,000 calories per day and gain more than 1

    April 18, 2014

  • WILLIAMS: Feelings of the flowers I took one of those fun tests on Facebook to see what kind of flower I am and lo and behold, it said I was an orchid! That is so wrong because I have always thought I was the exact opposite of an orchid. I'd characterize myself as a daisy. You know,

    April 17, 2014

  • HAMILTON: Government as innovator? You bet! Five years ago, the federal government spent $169 billion to fund basic research and development. This fiscal year, it's down to $134 billion. People who believe in public belt-tightening applaud drops like that. I understand why: there are many reas

    April 17, 2014

  • PARKER: It's time to take a joke, America In selecting Stephen Colbert to replace David Letterman as host of the "Late Show," CBS has waged war on America's Heartland -- or so proclaims that Palm Beach font of heartland mirth, Rush Limbaugh. Don't you believe it, Heartlanders. But wait, ther

    April 16, 2014

  • KITCHELL: Forum about adding answers, subtracting questions A week from tonight, Logansport residents and those outside Logansport who purchase electricity from the Logansport Municipal Utilities will have a chance to find out some things for themselves. A free forum at McHale Performing Arts Center will feat

    April 16, 2014

  • MARCUS: Truth is often unwelcome Jim Feelwright greeted me warmly as I entered the room: “Well, here he is, Mr. Negative.” Since it was a friendly meeting, I borrowed a famous line from the movies: “You can’t handle the truth.” “You,” he said, “just don’t want to see what’s really h

    April 15, 2014

  • VILLAGE IDIOT: Signs of spring finally upon us Today I saw my first crocus popping up after the long winter. It was in a picture a friend posted on Facebook. Suddenly, it seemed everyone was posting pictures of buds on trees, robins on the lawn, green shoots coming up in the garden. It was almost

    April 15, 2014

  • Brian Bosma BOSMA: House Republicans achieve legislative priorities When the General Assembly began its work last November, as Speaker I pledged a session driven by five main issues: increased road funding, enhanced job training, early childhood education, fair business taxation and cutting government red tape. With

    April 14, 2014 1 Photo

  • LYONS: Taking pity on the Plutocrats "Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that belie

    April 14, 2014

Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Poll

Should e-cigarette marketing be regulated like tobacco?

Yes
No
Unsure
     View Results
Featured Ads
AP Video
Obama Hopeful on Ukraine, Will Watch Russians Flamingo Frenzy Ahead of Zoo Construction Crew Criticized Over Handling of Ferry Disaster Agreement Reached to Calm Ukraine Tensions Raw: Pope Francis Performs Pre-easter Ritual Raw: Bulgarian Monastery Dyes 5000 Easter Eggs Diplomats Reach Deal to Ease Tensions in Ukraine U.S. Sending Nonlethal Aid to Ukraine Military Holder: Americans Stand With KC Mourners Obama Greets Wounded Warriors Malaysia Plane: Ocean Floor Images 'Very Clear' Sparks Fly With Derulo and Jordin on New Album Franco Leads Star-studded Broadway Cast Raw: Two Lucky Kids Get Ride in Popemobile Boston Bombing Survivors One Year Later Sister of Slain MIT Officer Reflects on Bombing
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.