Both today’s letter to the editor and the longer expanded version hint strongly at Keynesian economics. Unfortunately, “Keynesian economics” is as broad a term as “liberal” or “conservative”, and covers a *lot* of ground. So, what exactly do *I* mean by it? Let me begin by talking about some common threads or themes that fall under this umbrella.
One common thread in all Keynesian thought is that deliberate action can influence the business cycle – and can do so with a positive result. This isn’t as self-evident as it might sound; real world problems such as time and information lag play heavily into the ability of anyone (but usually, Keynesians mean government) to influence the economy. Remember the stimulus checks – debated in early 2008, but not arriving until months later? That’s *fast* for government. Then there’s the lag in getting the information – even “early” economic data is usually months out of date, and frequently gets significantly changed with revisions afterward. All these things make government (or any) deliberate attempt to alter the business cycle problematic at best.
A second common thread is that the “positive result” these actions should take is a leveling one, not a maximizing one. For example, a government might spend a lot during a depression to reverse it, and then tax a lot during a boom to pay it back. Theoretically, you should end up with a generally increasing growth rate, with the “valleys” filled and the “peaks” leveled. No booms – but no busts, either. The failing here is human, not logistical. We are perfectly capable of following this prescription, but simply fail to do so.
These two threads mean that Keynesians tend to be both sustainable (especially when compared to the slash-and-burn of free market capitalists) and concerned about something other than the bottom line. Which accurately reflects something about the great economist himself; he viewed capitalism as a means to an end, not an end in itself. Or to put it in slightly more modern (and accepted) terms: He believed in working to live, not living to work.
This leads us back to today’s letter. How the hell could an area already hit by economic problems further invest money in its population? Keynesian principles show a way. Our current situation and expectations (do not ever forget expectations in economics!) are that this area will do poorly. By borrowing money to invest in people who live here, it is investing in ourselves, making our likelihood of profitability much higher in the future.
If you are like me (or most people) you either blew your stimulus check on bills or basic items. At that point (unless you were paying off a loan), that stimulus check became a handout from your point of view. It didn’t do a single thing to help you in the long run; you were simply handed a fish. Much like the justification for capitalism, this sort of thing only makes sense if it increases your abilities permanently. That is, if it teaches you to fish.
Investing in our population’s education is a sound bet, historically. It worked for Germany in the 19th century, the US in the early 20th, India in the late 20th, and China now. It is time for our regional leaders to realize that nobody’s going to do it for us – that we must do it for ourselves. Whether through Open University styled initiatives, or simply funding their way through school, we must take care of our own – because it’s obvious the free market will not.
Once these benefits bear fruit, we must repay ourselves. Whether through tax incremental financing or other automatic mechanisms, we can then have a balanced budget in the long run, along with a much smoother business cycle.
Ultimately, this kind of economics is the economics of hope. Not the false hope that “the market will fix everything”. Instead, this is a hope grounded in the muscles, minds, and will of the people we live and work with.