Then he makes this fantastic ploy to prove the "logical fallacy" Keynesianism: "The government can't put money into the economy without taking money out of it." The money, as in Keynes' time is first of all raise through the same sorts of loans we've already been taking out--mostly from abroad. I'm always puzzled by how reactionary these tracts can get when they want to: it's a global economy when we're shipping jobs overseas but the inflow of capital from abroad is completely impossible when it's funding government spending.
Then he acts as if "slicing the pie differently" would be, in itself, a bad idea--as if having no pie at all would be a better alternative.
In addressing Keynes argument about the division between savings and investment, he basically denies facts on the ground: money *does* sit idle. What this basically advocates is letting rich people keep their earnings sheltered during a time of crisis--where they neither have an inclination to expose it to the "gales" of creative destruction through investment or are asked to pitch in to help at least keep the rest of the country alive during the crisis. This is where Keynes' chapter on "long run prospects" seems most pertinent: the "animal spirits" of investors are dulled and, if we are to be dependent on them for all forms of social production, these spirits must be lifted. How is this supposed to happen? Consumers have no money to spend and potential business customers (the "dept II" he conveniently leaves out of his equation) see the lack of confidence and spending. He gets uppity because Keynesian wants to get money out of banks and into the economy--but, he says, if you give it to consumers they will probably just save it anyway--as if people would, in large numbers, rather sock away their income than pay for food and--especially today--shelter.
The whole point of making the economy a national issue is getting money into the hands of the average person so that they can meet their basic needs through cash-based commodity consumption. "The Economy" is not separate from that (as his nifty graphic shows). This is essential to the economy: you can't have businesses produce things without workers or consumers, however much these titans would wish they could (or try to get around it by outsourcing.)
Throughout the video this is the real anxiety. We may ask, "Why are we supposed to give all our money to the capitalists instead of the government?" Our good CATO interlocutor promises, "Because they will rationally invest it--not like those irrational investors who, anyway, were only led astray by tiny government programs." And if they don't? If none of these magical small businesses that are supposed to replace the industrial economy of yore crop up? If all of them that do are ridiculous dot.com pyramid schemes that workers invest time and energy only to have their future employment and pensions evaporate with the shell companies that were set up? Well just sit and wait: the capitalists will eventually get around to it: they're busy helping build up the Chinese economy. When the US population has been properly disciplined (to accept third world wages, benefits, and labor rights) they'll be back to exploit the people who haven't died off. Hold your horses...geez.
His final argument about why Keynesianism is so popular is classic: he says it is used only because politicians like to spend other people's money. Is this guy trying to parody himself? Obviously there are actual academics who believe in this policy: they have data too. More than that, there is this pretention that all these decisions are being taken by elite members of society rather than resulting from popular pressures. It is a strange kind of populism that acts as popular pressure doesn't exist. I'll agree that it is being decided by elite members of society--but so is neo-liberalism.
And, far from it being something Marxists or even radical leftists would see as a step forward, those who are paying attention know exactly who this will benefit in the long run. Capitalism is prone to terrible crises. It is an inherently unstable system--a quality that people on this site seem to see as generally laudable. If only it wasn't so often paired with the pesky pressure of democracy--of all the rabble wanting to "eat" and "live" while obviously serving no purpose in society since they aren't being paid (enough) by capitalists--well then it would likely work out fine. The little nugget this video fails to mention were the forces pushing for outright fascism (then seen in very different light) or full communism. Roosevelt was not just working with fancy abstractions that tailored, tenured CATO baffoons can scrape out of the (Keynesian inspired) data: he was trying to stave off a popular revolt to right totalitarianism or left wing radicalism. Businesses and the US government realized this as well hence, as Staughton Lynd chronciles, legislation was sponsored to recognize unions and collective bargaining:
It was the hope of those sponsoring this legislation that strikes would decrease. In the short run, strikes increased and took the more militant form of sit-downs. But the national government stuck to its strategy of benevolent neutrality. It is as if the government consciously took its chances on militancy in order to be sure of forestalling radicalism. At some point (whether before or after the governmental initiative seems still unclear), a part of the American business community endorsed this cooptive strategy and independently implemented it. (37)He gives the example of United States Steel, which recognized their unions even before the US government mandated it as they realized this was the best way to stifle the revolt. For Lynd, this is exactly what it did, mostly killing off the radicalism that threatened American business.
If we were to look at Keynesianism in truth, it would be in the post-war economy, which, even then was largely based on an impressive set of new, imperial strategies. Still, it is a more reasonable place to look for when Keynesianism was succeeding--and when workers wages were far better than they are today in real terms. For many radicals--such as the economist and former editor of the Monthly Review, Harry Magdoff--this represented not a challenge to capitalism, but it's saving grace. On the whole, nothing was changed in terms of the class structure of production, just its distribution. And even that only looks desireable in retrospect. It certainly isn't the best we can do. More importantly, for the entire post war period--and more so today--the bulk of government spending (aside from payments on the debt itself and social security obligations) goes towards military spending.
As John Stewart wondered last week, why do libertarian minded folks “trust government with tanks and nuclear weapons, but not to pass out cheese to poor people." It doesn't seem to make sense but judging from the frenzy of activity on the topic of the great depression (as opposed to the hangover we still have from much larger build up of the "military industrial complex" there is little principle involved other than making sure people who have the bulk of the money today come out on the other side of this crisis with their wealth intact. How that happens is a mystery, but they seem to be banking on bailouts with no takebacks--once again confirming the permanent adolescence of the capitalist consciousness.