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The Case for a Bold Economics

18 39 56
11.03.2019

CAMBRIDGE – At the end of 1933, John Maynard Keynes sent a remarkable public letter to US President Franklin Delano Roosevelt. FDR had taken office earlier that year, in the midst of an economic slump that had pushed a quarter of the labor force into unemployment. He had launched his ambitious New Deal policies, including public works programs, farm subsidies, financial regulation, and labor reforms. He had also taken the US off the gold standard to give domestic monetary policy freer rein.

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Keynes approved of the general direction of these policies, but also had some sharp criticism. He worried that FDR complicated the economic recovery effort by broadening his policy agenda unnecessarily. FDR was doing too little to increase aggregate demand and too much to change the rules of the economy. Keynes took particular aim at the National Industrial Recovery Act, which, among other things, greatly expanded labor rights and fostered independent unions. He fretted that the NIRA would sap business confidence and weigh on the federal bureaucracy, without making a direct contribution to recovery. He wondered whether some of the advice FDR was getting “is not crack-brained and queer.”

Keynes did not think much of FDR’s economics, but at least he was a........

© Project Syndicate