Alan Nasser — Why FDR Did Not End the Great Depression – and Why Obama Won’t End This One

The crisis was not merely economic. Keynes had witnessed the rise of revolutionary movements in response to the protracted inability of capitalism to meet the needs of working people. He had written about both the Bolshevik revolution and the tendency of austerity to spawn revolt from the Right. Keynes was antipathetic to both fascist and worker rule, and feared revolutionary consequences should the New Deal fail. “If you fail,” he wrote Roosevelt, “rational change will be gravely prejudiced throughout the world, leaving orthodoxy and revolution to fight it out.” The political stakes were high, as they must be under conditions of protracted capitalist austerity.

The stakes are no less high now. The current contraction emerged from a political-economic settlement, the post-Golden-Age period from 1974 to the present, resembling in relevant respects the Depression-prone economy of the 1920s.

I want to review both those features of the 1920s which generated the economic debacle Keynes addressed, and the corresponding precipitating causes of today’s crisis. The similarity of the origins of both contractions is striking. If Keynes was right to argue -and we shall see that he was- that large-scale public employment is the only remedy for a severe and extended economic contraction, it will be clear that the same prescription applies to the present depression. We will then be in a position better to grasp the urgency of public employment as a policy without which the United States faces a future of long-term stagnation and intolerable unemployment….

The Summers-Krugman point confirms Keynes’s central claim that, contrary to the neoclassical theory that the free economy naturally tends toward full-employment equilibrium, the economy can reach equilibrium (the quantity of goods supplied is equal to the quantity of goods demanded) at any level of employment. Let there be 30 percent unemployment. Firms will then produce no more and no less than the lucky 70 percent are willing to pay for. Excess capacity will be wrung out of the system by the liquidation or destruction of redundant plant and equipment. But what about excess labor capacity?

Secular stagnation leaves the nation with a large number of permanently un- and unemployed persons devoid of hope for themselves or their children. But it is just this hope that constitutes the “American dream.” With the dream become a nightmare, we are on the path to social dislocation on a potentially terrifying scale: higher rates of crime, suicide, domestic violence, psychological depression and other forms of social disorder characteristic of periods of intense material insecurity. These are forms of unorganized resistance, and cannot be “wrung out” of the system like idle plants. They will be repressed. The powers that be have been putting in place for some years now, surely in anticipation of widespread social turbulence, the infrastructure of a police state. This comes as no surprise. Historically, capitalism in deep and protracted crisis and without an organized and active Left generates the makings of fascism. If the Left remains dormant, we are in for big trouble.

Counterpunch
Why FDR Did Not End the Great Depression – and Why Obama Won’t End This One
Alan Nasser | Professor emeritus of Political Economy and Philosophy at The Evergreen State College
(h/t Clonal in the comments)

Nasser explains why Keynes held that a permeant job guarantee program and public investment are essential for the continuance of modern capitalism in a democratic state.