The announcement has rolled through Wisconsin. $3 billion in aid will land a total of 13,00 jobs somewhere around Kenosha. Or maybe less. Or maybe it won’t happen at all, like past promises. But it’s a great deal, one that will create jobs.
It’s hard to say exactly what the Taiwanese electronics manufacturer is going to do given how quickly the breathless announcement came out. What matters is that it had to be announced because it’s not actually about jobs or anything tangible. All of this is just a very expensive form of political theater, allbeit with stakes lower than last week’s show. Government is here to fix the economy and provide jobs, right? So here ya go.
Like many sequels dished up by Hollywood this is a must-see summer thriller. It’s following a well established formula that everyone loves. And like those movies, it begs the question – where did this come from?
If you love the movies, you may well love the book. It’s called The General Theory, by economic master John Maynard Keynes. The original idea, from 1936, was that classical economics didn’t exactly work. When demand falls and people are laid off from jobs the market may not respond. It’s up to government to put people back to work and “prime the pump” to get things going again.
This theory had the advantage of working extremely well, becoming the foundation for the New Deal and many other efforts around the world. It put a quick end to the Great Depression as people went back to work everywhere. Since it worked so well it became standard practice everywhere. Not enough jobs? It’s up to the government to create them, yes?
Of all the strange aspects of the General Theory, the most important is that no one thinks it’s true.
For something which was shown to work and has been practiced continuously everywhere for about 80 years, not being true should be a hindrance. But this is a show which no one can turn down for a lot of reasons. Like most works of fiction it also does have that basic turn of truth at the core of it.
Given that business cycles are a fact, it stands to reason that economic conditions change constantly. What works one day may not work the next. It stands to reason that Keynes was right in 1936 and he may well have been right again in 2008. It’s also reasonable that Milton Friedman was right in 1980, too.
But this is where the Hollywood magic comes in to create legends. Politicians are judged by the state of the economy whether we like it or not. Election cycles come in a very short term compared with business cycles, two years versus about 17. So every politician has a terrific incentive to do something, really anything, to make it look like they are earning their pay.
They have their own economics, after all.
What we wind up practicing is a series of market interventions which appear to have the approval of the first great market interventionist, Keynes. If government can boost demand for workers in a downturn, why not always? And why not have government boost capital investment while we are at it by lowering tax rates? After all, that’s really just the right-wing counter to the same basic theory that intervention is good.
Keynes didn’t just define left-wing politics after all. He defined the entire spectrum.
Given that all of these methods might well be useful in turns isn’t a very good story. Voters want action, they want an end to their suffering. Nevermind that lower growth is ultimately driven by the demographics of an aging population. Don’t pay any attention to the fact that a worker shortage is probably coming on quickly or that automation means that it takes a ridiculous amount of money to subsidize each of these jobs. Politicians, left and right, have to do something.
That’s the power of Keynes’ work. Everything comes from it, even the stuff that doesn’t make sense.
We can expect more of this kind of reasoning as long as we accept a top-down industrial vision of what this thing we call an “economy” really is. If it’s all about industry, the thinking goes, all we have to do is encourage industry. That will give people jobs and that will keep them fat and happy through the election cycle.
If you don’t buy that, thank you. This is exactly why People’s Economics is essential. The old mythology, which defined far more than we might think, has run its course. It’s time for a new show – one that has the advantage of being true a lot more often than once every 70 years.
Don’t blame Keynes. He did his best. He never wanted to be screenwriter.