to like. The powerful conservatives don't like it, I would
surmise, because they don't like anything that justifies government
taking an active role in the economy, wielding financial clout that can
direct the use of resources. The followers among conservatives
have been taught to dislike government, to assume that "government is
the problem" and cannot be trusted, and so they lend their support to
what the big-wigs say, and oppose government spending that's justified
by Keynesian analysis.
And right now, with the Tea Partiers and others clamoring about
government spending and the dangerous incurring of public "debt" --in
the face of the worst recession and financial crisis since the Great
Depression-- it also is evident just how little these conservatives
UNDERSTAND the basic idea and insight behind Keynesian fiscal policy.
To address that, and particularly for the benefit of the
religiously-oriented among the anti-Keynesian conservatives, I have
come up with this way of explaining the Keynesian fiscal
policy.</em>
************************
There's a story in the Bible that has the same basic insight that's
underlies Keynsian fiscal policy. It's the story of Joseph's
interpretation of Pharoah's dream-- an interpretation that not only
saves Joseph from prison and makes him Pharoah's right hand man but,
more important for understanding why we should be grateful for the
insight of the British economist, Lord Keynes, an insight that saved
the Kingdom of Egypt from a great calamity.
As you may recall, Pharoah had these dreams:
<blockquote>Pharaoh had a dream: He was standing by the Nile, 2
when out of the river there came up seven cows, sleek and fat, and they
grazed among the reeds. 3 After them, seven other cows, ugly and gaunt,
came up out of the Nile and stood beside those on the riverbank. 4 And
the cows that were ugly and gaunt ate up the seven sleek, fat cows.
Then Pharaoh woke up.
He fell asleep again and had a second dream: Seven heads of grain,
healthy and good, were growing on a single stalk. 6 After them, seven
other heads of grain sprouted--thin and scorched by the east wind. 7 The
thin heads of grain swallowed up the seven healthy, full heads. Then
Pharaoh woke up; it had been a dream.</blockquote>
And when, after Pharoah had failed to get an interpretation of these
dreams from his own wise men, Joseph was summoned before him, this is
the wisdom that Joseph drew from the dreams:
<blockquote>"The dreams of Pharaoh are one and the same. God has
revealed to Pharaoh what he is about to do. 26 The seven good cows are
seven years, and the seven good heads of grain are seven years; it is
one and the same dream. 27 The seven lean, ugly cows that came up
afterward are seven years, and so are the seven worthless heads of
grain scorched by the east wind: They are seven years of famine.
28 "It is just as I said to Pharaoh: God has shown Pharaoh what
he is about to do. 29 Seven years of great abundance are coming
throughout the land of Egypt, 30 but seven years of famine will follow
them. Then all the abundance in Egypt will be forgotten, and the famine
will ravage the land. 31 The abundance in the land will not be
remembered, because the famine that follows it will be so severe. 32
The reason the dream was given to Pharaoh in two forms is that the
matter has been firmly decided by God, and God will do it soon.
33 "And now let Pharaoh look for a discerning and wise man and
put him in charge of the land of Egypt. 34 Let Pharaoh appoint
commissioners over the land to take a fifth of the harvest of Egypt
during the seven years of abundance. 35 They should collect all the
food of these good years that are coming and store up the grain under
the authority of Pharaoh, to be kept in the cities for food. 36 This
food should be held in reserve for the country, to be used during the
seven years of famine that will come upon Egypt, so that the country
may not be ruined by the famine." </blockquote>
That's the essential insight of Keynesian economics: that pattern
of seven fat years followed by seven lean years is just like what the
business cycle constantly produces in a market economy. Before
Keynesian economics, the cycle of boom and bust was devastating during
the bust times because there was such a terrible "famine" of what
"feeds" the economy: namely, demand. With a famine of
spending by businesses and families during lean times, a vicious cycle
of unemployment and business failure would ensue.
So Keynes said: during the fat times, government should take a
portion of the economy's "good harvest" and, with its taxation, fill
the "graneries" of the treasury with the means to "feed" the economy
when the lean times come. Government should take in more than it
spends in fat times, and then spend more than it takes in during the
lean years. That way, it can feed the economy and avoid that
destructive famine that otherwise destroys businesses and families
during the bust part of the business cycle.
We are now in lean times. And just as Pharoah kept Egypt alive by
drawing down his graineries during the lean years, it is entirely
fitting that the government should run a big deficit to protect the
economy from that famine of insufficient demand.
If there is any problem with our national debt --and there IS a
problem-- it is NOT because we are emptying the graineries now, in hard
times. Rather, it is because we did not practice what Joseph told
Pharoah to do during the fat times: we did not fill our
graineries.
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