2013년 3월 26일 화요일

[The U.S. Weekly Time's] We Are All Keynesians Now (December 31, 1965)

Elsewhere than the official site of the magazine could be found this supposed-to-be cover story: 

출처: Time, Friday, December 31, 1965.
자료: Some Link 

Reading this material found on the Internet, I take some partial excerpts below in trying to understand what had been said on this topic in those days of 1960s : 

* * *

※ 발췌(excerpt):


(... skipping one of the famous passages in the final pages of Keynes's General Theory ...)

Concluding his most important book with those words in 1935, John Maynard Keynes was confident that he had laid down a philosophy that would move and change men's affairs. Today, some 20 years after his death, his theories are a prime influence on the world's free economies, especially on America's, the richest and most expansionist. In Washington the men who formulate the nation's economic policies have used Keynesian principles not only to avoid the violent cycles of prewar days but to produce a phenomenal economic growth and to achieve remarkably stable prices. In 1965 they skillfully applied Keynes's ideas—together with a number of their own invention—to lift the nation through the fifth, and best, consecutive year of the most sizable, prolonged and widely distributed prosperity in history. 

By growing 5% in real terms, the U.S. experienced a sharper expansion than any other major nation. Even the most optimistic forecasts for 1965 turned out to be too low. The gross national product leaped from $628 billion to $672 billion—$14 billion more than the President's economists had expected. Among the other new records: auto production rose 22% , steel production 6% , capital spending 16% , personal income 7% and corporate profits 21%. Figuring that the U.S. had somehow discovered the secret of steady, stable, noninflationary growth, the leaders of many countries on both sides of the Iron Curtain openly tried to emulate its success. 

Basically, Washington's economic managers scaled these heights by their adherence to Keynes's central theme: the modern capitalist economy does not automatically work at top efficiency, but can be raised to that level by the intervention and influence of the government. Keynes was the first to demonstrate convincingly that government has not only the ability but the responsibility to use its powers to increase production, incomes and jobs. Moreover, he argued that government can do this without violating freedom or restraining competition. It can, he said, achieve calculated prosperity by manipulating three main tools: tax policy, credit policy and budget policy. Their use would have the effect of strengthening private spending, investment and production. 

From Mischief to Orthodoxy. When Keynes first propagated his theories, many people considered them to be bizarre or slightly subversive, and Keynes himself to be little but a left-wing mischief maker. Now Keynes and his ideas, though they still make some people nervous, have been so widely accepted that they constitute both the new orthodoxy in the universities and the touchstone of economic management in Washington. They have led to a greater degree of government involvement in the nation's economy than ever before in time of general peace. Says Budget Director Charles L. Schultze: "We can't prevent every little wiggle in the economic cycle, but we now can prevent a major slide." 

(... ...)

Why They Work. By and large, Keynesian public policies are working well because the private sector of the economy is making them work. Government gave business the incentive to expand, but it was private businessmen who made the decisions as to whether, when and where to do it. Washington gave consumers a stimulus to spend, but millions of ordinary Americans made the decisions—so vital to the economy —as to how and how much to spend. For all that it has profited from the ideas of Lord Keynes, the U.S. economy is still the world's most private and most free-enterprising. Were he alive, Keynes would certainly like it to stay that way.

The recent successes of Keynes's theories have given a new stature and luster to the men who practice what Carlyle called '.'the dismal science." Economists have descended in force from their ivory towers and now sit confidently at the elbow of almost every important leader in Government and business, where they are increasingly called upon to forecast, plan and decide. In Washington the ideas of Keynes have been carried into the White House by such activist economists as Gardner Ackley, Arthur Okun, Otto Eckstein (all members of the President's Council of Economic Advisers), Walter Heller (its former chairman), M.I.T.'s Paul Samuelson, Yale's James Tobin and Seymour Harris of the University of California at San Diego.

First the U.S. economists embraced Keynesianism, then the public accepted its tenets. Now even businessmen, traditionally hostile to Government's role in the economy, have been won over—not only because Keynesianism works but because Lyndon Johnson knows how to make it palatable. They have begun to take for granted that the Government will intervene to head off recession or choke off inflation, no longer think that deficit spending is immoral. Nor, in perhaps the greatest change of all, do they believe that Government will ever fully pay off its debt, any more than General Motors or IBM find it advisable to pay off their long-term obligations; instead of demanding payment, creditors would rather continue collecting interest.

To a New Stage. Though Keynes is the figure who looms largest in these recent changes, modern-day economists have naturally expanded and added to his theories, giving birth to a form of neo-Keynesianism. Because he was a creature of his times, Keynes was primarily interested in pulling a Depression-ridden world up to some form of prosperity and stability; today's economists are more concerned about making an already prospering economy grow still further. As Keynes might have put it: Keynesianism + the theory of growth = The New Economics. Says Gardner Ackley, chairman of the Council of Economic Advisers: "The new economics is based on Keynes. The fiscal revolution stems from him." Adds the University of Chicago's Milton Friedman, the nation's leading conservative economist, who was Presidential Candidate Barry Goldwater's adviser on economics: “We are all Keynesians now.”

Within the next two weeks, Ackley and his fellow council members will have to give President Johnson a firm economic forecast for the year ahead and advise him about what policies to follow. Their decisions will be particularly crucial because the U.S. economy is now moving into a new stage. Production is scraping up against the top levels of the nation's capacity, and federal spending and demand are soaring because of the war in Viet Nam. The economists' problem is to draw a fine line between promoting growth and preventing a debilitating inflation. As they search for new ways to accomplish this balance, they will be guided in large part by the Keynes legacy.

That legacy was the product of a man whose personality and ideas still surprise both his critics and his friends. Far from being a socialist left-winger, Keynes (pronounced canes) was a high-caste Establishment leader who disdained what he called "the boorish proletariat" and said: "For better or worse, I am a bourgeois economist." Keynes was suspicious of the power of unions, inveighed against the perils of inflation, praised the virtue of profits. "The engine which drives Enterprise," he wrote, "is not Thrift but Profit." He condemned the Marxists as being "illogical and so dull" and saw himself as a doctor of capitalism, which he was convinced could lead mankind to universal plenty within a century. Communists, Marxists and the British Labor Party's radical fringe damned Keynes because he sought to strengthen a system that they wanted to overthrow.

( ... ... )

The Whole Economy. The thrust of Keynes's personality, however strong, was vastly less important than the force of his ideas. Those ideas were so original and persuasive that Keynes now ranks with Adam Smith and Karl Marx as one of history's most significant economists. Today his theses are the basis of economic policies in Britain, Canada, Australia and part of Continental Europe, as well as in the U.S.

Economics is a young science, a mere 200 years old. Addressing its problems in the second half of its second century, Keynes was more successful than his predecessors in seeing it whole. Great theorists before him had tried to take a wide view of economic forces, but they lacked the 20th century statistical tools to do the job, and they tended to concentrate on certain specialties. Adam Smith focused on the marketplace, Malthus on population, Ricardo on rent and land, Marx on labor and wages. Modern economists call those specializations "microeconomics"; Keynes was the precursor of what is now known as "macroeconomics"—from the Greek makros, for large or extended. He decided that the way to look at the economy was to measure all the myriad forces tugging and pulling at it—production, prices, profits, incomes, interest rates, government policies.

(...) The General Theory, published in 1936. It is an uneven and ill-organized book, as difficult as Deuteronomy and open to almost as many interpretations. Yet for all its faults, it had more influence in a shorter time than any other book ever written on economics, including Smith's The Wealth of Nations and Marx's Das Kapital.

( ... ... )

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