Empirical Evidence for Keynesian Model

In the United States of America (U.S.A.), if I ask you, is the military a part of the Federal Government, would you answer yes or no

In the U.S.A., if you are a large manufacturer of widgets, do you hire people to help you make the widgets?

If the U.S. military buys widgets from you, is that government spending?

Does this spending create jobs for widget makers?

It is obvious that the answer, to all of the above, is yes.

World War Two forced the government spending that ended The Great Depression. To me, this is empirical evidence that proves, the Keynesian Idea, that aggregate demand determines economic activity. And, because just before the spending on WWII, The Great Depression was still ongoing, disproves the neoclassical idea that free markets will automatically provide full employment, if wage demands are flexible—meaning a cut in money wages.

It is more than just unfortunate that the government spending on WWII was used to buy things that kill people. It doesn’t have to be you know, it could be used to buy and make things that improve people’s lives: new railroads, highways, bridges, clean water utilities, and a very long list of other useful things.

Just as the Roosevelt Administration couldn’t get congress to allow enough spending without the external forcing provided by WWII; so is President Obama hindered from getting enough spending to stimulate our economy out of the 2007 great recession.

Given all the benefits that would arrive with an end to the current recession, why is the large stimulus spending that would end it so adamantly opposed by many of our representatives (those elected in my state and district, however, don’t represent my views) in congress?

My thoughts and answers to the inquiry in the above paragraph are many and varied—some based on plain ignorance of the concepts and history of the subject, some based on dogged adherence to certain ideals, some based on racism, some based on misplaced loyalties, but most based on pure greed.

I’ll put my thoughts and answers in another E-pamphlet (blog); right now I want to finish my ideas on government stimulus spending.

The fact that free market neoclassical ideas were in place leading to The Great Depression and, conversely, that near unlimited government stimulus spending (called for by Keynesian economic theory) was forced by WWII events, shows, overtly, that stimulus spending, if large enough, will bring near full employment.

I have a caveat in all this: I say the above will happen in a capitalistic system if there is room for expansion—there was after WWII, at least as the distribution of things was at that time until now.

But now (2010), I think the limit for expansion has already been exceeded. And if the excess’s of the rich are taken back by the “have not’s” forced by unameliorated global warming consequences, chaos will be the order of the day and the whole system will collapse.

The laws of physics will bring this about if changes are not immediately made in our unlimited use of fossil fuels. Government regulations, very stringent ones (the bête noire of conservatives), are the only things that can force the needed changes.

This will, of course, kill the kind of capitalistic system we have always had (one ruled by the rich and powerful) and in its place, a more progressive, egalitarian one will have to arise—one with enough regulation to permit a very large middle class, one with a very small, if any, upper class, and no poor class.

Think it will happen? Personally, I have always been an optimist but my seventy three year walk down the hallways of life “bumping into the walls on both sides”, as Barbara Kingsolver has written, says no.

Oh! And as an aside, if the above changes to the use of fossil fuels are not made, my thoughts on why the congress is so adamantly opposed to stimulus spending that would end the current great recession are irrelevant. If we insist on using up all the fossil fuels in the ground, we will render our planet unlivable and cease to exist.