Giving Politicians An Excuse To Spend More Money
Milton Friedman explains Keynesian economics and its influence on politicians and deficit spending. Theories made popular by John Maynard Keynes advocate for increased government spending during recessions and suggest that government should make up the difference if private spending isn’t high enough to boost the economy. Unfortunately, politicians have embraced Keynes’s ideas as a reason to spend, regardless of the state of the economy.
A new orthodoxy emerged in the 30’s, one that has remained powerful to this day.
It owes its influence to the brilliance of one man.
John Maynard Keynes was unquestionably, one of the greatest economists of all time.
The core of his theory was that what happened to the quantity of money didn’t matter.
What really mattered was a particular category of spending; in economists’ jargon, autonomous spending.
It might be investment by business enterprises in building factories and adding to the number of machines and adding to inventories. It might be spending by individuals to build houses.
Or, most important of all, it might be deficit spending by government.
If private spending on investment, on house building, was not enough to maintain full employment, then government could always step in and spend enough to make up the difference.
The theory of pump priming was born.
The theory was a godsend to politicians who had been grasping at any expedient.
And here along came a scientific theory, offered under the most responsible of auspices, that justified what they had been wanting to do all along.
Is it any wonder that government spending has exploded ever since, or that deficit spending or that deficit spending has become the order of the day