Popular Economics Weekly
The Brits in particular must be wondering what happened to Robin Hood, the legendary champion of the poor, who robbed the rich to give to the poor during medieval times when nobles ruled their world (at least until the Magna Carta). Taking from the poor to enrich the richest has been British economic policy since at least 2010, just after the onset of the Great Recession for most of the western world.
The New York Times has recently reported that one-fourth of Liverpool’s residents—the bastion of the North Britain’s Brexit movement—are officially poor. Funny thing, that is also true of 25 percent of working Americans that also live below the poverty line of $24,000/year for a family of four.
Is that a coincidence, when Britain’s Conservative Party has ruled since 2010, and America’s Republican Party has succeeded in cutting government budgets with similar austerity measures since 2010, when Republicans again took over the US House of Representatives?
The real question is why there is still a debate over austerity policies that impoverish the lower income brackets, when Lord John Maynard Keynes won the economic argument whether budget cutting austerity measures, or greater government support, was the best solution during trying times in the 1930s.
Lord Keynes debated Austrian economist Frederick Hayek over what fueled economic growth and general prosperity—lower taxes and less government interference in business, or Keynesian economic theories that became the basis of America’s New Deal, which put millions of Americans back to work and enabled us to finance and win WWII?
The obvious answer since at least World War II is that boosting what economists call the aggregate demand of the economy is the ticket to prosperity. This is a little-understood concept outside of economic circles. It means finding ways to boost the finances of the 80 percent of working adults that do most of the spending—whether by boosting their incomes or benefits (such as health care), since consumer spending fuels two-thirds of economic activity in developed countries.
Whereas conservatives in both the US and UK have focused on taking income and benefits away from the working class, in order to finance Wall Street and the growing globalization of multi-national corporations.
Even the supposedly progressive Obama administration gave just one boost to Americans with its 2009 American Recovery and Reinvestment Act. But it wasn’t enough to grow more than 18 months’ of recovery from the worst recession since the Great Depression. More than 8 million jobs and some $6 trillion in asset wealth were lost due to the Great Recession—a magnitude of loss not seemingly imagined by most professional economists.
This was not comparable to the Marshall Plan that rebuilt Europe after WWII, in other words. So the western world seems to understand that it takes a worldwide war before policy makers will think in terms of a sufficient aggregate demand to invest in future growth. But what about during peacetime?
Otherwise, the conservative forces seem to always return, as they did in 1937 when after several years of 3 percent plus GDP growth, Republicans became the majority party again, and President Roosevelt became convinced it was time to pay down the government debt that had financed the New Deal.
But the result was a second depression in 1938 that gave it the name of the Great Depression, and which wasn’t cured until World War II put everyone to work. There hadn’t yet been enough growth in demand to eliminate the record income inequality in 1928 that had resulted in the Great Depression.
We knew then what we seem to forget so easily, and which causes such history to repeat itself. Enriching just the few impoverishes the many, as well as future generations.
So Brits must be wondering, what happened to their Robin Hood? Is he gone forever, or will a modern Robin Hood and his band appear that can once again find ingenious ways to take from the rich and inspire the poor?
Harlan Green © 2018
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