>But here's the real question: while Keynes's
>recomendations were never adopted wholehaearted, for
>several decades after WWII, the were adopted enough in
>most of the west to allow virtually no unemployment.
>Then, right about the time Nixon claimed that everyone
>was a Keynesian, it seems the ruling class lost it's
>faith in Keynesian solutions, and unemployment started
>to rise.
>
>So what happened? Did the ruling class just decide
>that it could no longer afford full employment, or did
>the experience of the seventies (when the conventional
>wisdom had it that "Keynesian solutions failed") make
>them fall back on neoclassical ideas about "sound
>finance" that they never had real stopped beleiveing
>anyway? Are the ruling classes evil (in knowing how
>to prevent unemployment, while choosing not to in
>order to increase their power) or just stupid?
They're certainly not stupid. Evil is probably closer to it.
Riccardo Bellofiore has an interesting essay, "Lavori in Corso," at <http://www.geocities.com/cordobakaf/bello.html>, which addresses some of these issues. An excerpt:
>When we look at the data and the most convincing interpretations, we
>find that the golden era of capitalism after the Second World War
>was characterised from the early 1960s onwards by the following
>elements: A world economy that had been unified under the leadership
>of the United States because Europe and Japan needed a leader
>country, not merely for economy reasons particularly reconstruction
>- but, also, for political-military reasons. For this reason we also
>had a single currency, the dollar (one should say that if there ever
>was a global capitalism, it was perhaps this). A stable demand for
>private investment was sustained by high profits and, of course, on
>rosy expectations because there were certain convictions associated
>with the proclamation of Keynesian principles, and there were
>central banks who were ready to function as lenders of last resort
>(thus not a model of development based on consumption, as suggested
>by the agreeable conception of Fordism-Keynesianism). Nevertheless,
>state budgets were essentially balanced; the growing percentage of
>expenditure in relation to GNP was compensated by a growth in
>taxation levied principally at the expense of labour. Were one to
>conceive of the Keynesian era as if it had been characterised by the
>pursuance of economic policy within the boundaries of national
>states and by the accumulation of deficits, one would be left with
>no more than a caricature. In particular, growth of capitalist
>income was faster than the growth of real wages, although these
>increased too thanks to the marked expansion of commodity production.
>
>Why did this model go into crisis? Essentially because it was
>unstable: during its development it undermined its own foundations.
>In particularly, its international foundations fragmented: the
>catching-up of Japan and Germany (with Europe coming up behind)
>pushed the USA out of its undisputable central position and led,
>during the 1960s, to a sharpening of inter-imperialist rivalry. Then
>the monetary foundation was undermined: in the same decade, the
>global monetary system that was based not only on the dollar but
>also on the dollar's tie with gold, began to wobble and finally
>collapsed in 1971. Above all, in those same years, industrial
>conflict began to grow to the point where it exploded at the end of
>the decade: after years of 'full employment', why on earth should
>the workers in manufacturing not have done what economic theory
>teaches night and day - in other words, exploit a favourable
>position in the labour market a market that was then favouring the
>seller? More serious than that, as well as asking for higher wages
>and less pressure at work - demands that in abstract terms are not
>incompatible with the capitalist model - at the heart of working
>class antagonism was the rejection of 'factory discipline' itself,
>and capitalist command over production as a whole. Mi this had been
>perfectly foreseeable; in fact, it was foreseen by Kalecki in a
>well-known article dating from 1944. In the 1970s, budget deficits
>increased - not only, and not so much, because of the social
>pressure that was demanding reforms but also because of the attempt
>by the state to continue a Keynesian response to the difficulties,
>and to tame and circumvent the problems posed by social conflict in
>the big factories. In addition to this conflict at the 'heart' of
>the crisis-ridden development, and also intra-capitalist conflict,
>there was, for a time, a conflict with the producers of raw
>materials, of oil in particular. Over a period of a few years,
>profit expectations worsened with the decline in profitability, the
>time-horizon of investments contracted, and investments fell.
>
>Strange as it may seem, it was the return to the fore of monetarist
>economic policy - symbolised in the coming to power of Reagan and
>Thatcher - which led in the United States, but also elsewhere, to an
>explosion of deficits and public debt, precipitating the more or
>less ferocious subsequent attempts at reducing them....