Economic Policy: An economic policy is a belief about the way in which government should interact with, plan or regulate the economy. We will look at three different economic policy ideas; all three of these ideas were part of the debate during the Great Depression of the 1930s and all are still around today. They are:
Laissez faire capitalism
Keynesianism
Socialism
1. Laissez Faire Capitalism
The U.S. economic policy of the 1920s was laissez faire; it was the policy of the RepublicanParty and the policy primarily pursued by PresidentHerbertHoover after the 1929 Stock Market Crash. Laissez faire economics believes that:
Capitalism involves free markets and free enterprise (people able to pursue their own business interests in whatever way they please)
Capitalism is the best and freest of economic systems; people are freest when they are free to pursue their own business interests
Capitalism promotesinitiative, hard-work, innovation, invention, etc., because when one works hard and comes up with new ideas, one can profit financially
Laissez Faire means “to leave alone;” government should remain “hands off” with the economy; government involvement in the economy only hindersinnovation and initiative and creates corruption
Capitalism discourages laziness and lack of initiative because “if you don’t work, you don’t eat”
Capitalism is realistic; people will realistically work best and hardest for their own benefit, so the system rewards self-interest and a drive for self advancement and profit
When left on it’s own, Capitalism will naturally regulate itself and doesn’t need government to regulate it
Government is a necessary, but too much government hinders individual freedoms; government should limit its role to maintaininglaw and order and protecting private property so that businesses can develop in a secure and safe environment
Government always creates “red tape,” which slows things down and creates waste; the free market can always do things better than the government
Capitalist economies will naturally go through Boom and Bust cycles (the economy will go up and down as part of the natural process of market)
Capitalism allows anyone to succeed through their own hard work and abilities; it’s the American Dream: through hard work, you can accomplish anything you put your mind to
Individuals should be responsible for their own selves; they should survive through their own hard work and not rely on government programs; welfare creates laziness and dependency
Government should have a small, balanced budget; government should not use deficit spending
Questions for Debate Preparation (answer in detail on the back)
What would a laissez faire economist say about capitalism? Would he or she support capitalism? Why or why not?
What would a laissez faire economist say about government? How should government be involved in the economy? What is the purpose and role of government?
How would a laissez faire economist explain the Great Depression?
According to a laissez faire economist, what changes would need to be made in the economic and government systems to get out of something like the Great Depression?
What groups or classes of people are most likely to support the idea of laissez faire capitalism?
Economic Policy: An economic policy is a belief about the way in which government should interact with, plan or regulate the economy. We will look at three different economic policy ideas; all three of these ideas were part of the debate during the Great Depression of the 1930s and all are still around today. They are:
Laissez faire capitalism
Keynesianism
Socialism
2. Keynesianism
The U.S. government in the 1930s, under Franklin D. Roosevelt, turned towards Keynesian economic policy. Keynesian economics gets its name from a British economist named John Maynard Keynes. He was an influential economist during the 1930s. Keynesian economics believes that:
Capitalism involves free markets and free enterprise (people able to pursue their own business interests in whatever way they please), but must be limited and regulated by the government to protect people from its instabilities
Capitalism is a good system, but can also be very damaging to people and to a country if “left alone”
Because the system is driven by a sense of self-interest and desire for profit, the government needs to prevent this self-interest from becoming greed and corruption
The Capitalist free market often best represents the interests of the wealthy; government should represents the interests of all the people, paying especial attention to the middle class and regular working people so that they aren’t abused by the Capitalist system
When left on its own, Capitalism create too much turmoil and inconsistency; government needs to regulate the economy to protect people from the ups and downs of Capitalism
With government regulation, the Boom and Bust cycles of capitalism can be reduced so that middle class and working people don’t suffer so much from the down cycles
Capitalism provides opportunities for many to succeed, through hard work and individual abilities, but the government must also provide a safety net for those harmed by Capitalism or those unable to compete and make it on their own
Capitalism will always leave some people out of the prosperity and the government is responsible for protecting those people through programs such as unemployment insurance, medical care, social security, affordable housing, food stamps, etc.
During times of economic trouble, government priority should be to the relief of the people rather than the security of financial and property interests; during these times, the government must spend money to help the people even it means going into debt
By spending into debt, the government can actually stimulate the economy and help it recovery from hard times; during hard times, no one else is spending money, so the government must spend to get the economy going again
Questions for Debate Preparation (answer in detail on the back)
What would a Keynesian economist say about capitalism? Would he or she support capitalism? Why or why not?
What would a Keynesian economist say about government? How should government be involved in the economy? What is the purpose and role of government?
How would a Keynesian economist explain the Great Depression?
According to a Keynesian economist, what changes would need to be made in the economic and government systems to get out of something like the Great Depression?
What groups or classes of people are most likely to support the idea of Keynesianism?
Economic Policy: An economic policy is a belief about the way in which government should interact with, plan or regulate the economy. We will look at three different economic policy ideas; all three of these ideas were part of the debate during the Great Depression of the 1930s and all are still around today. They are:
Laissez faire capitalism
Keynesianism
Socialism
3. Socialism
The U.S. has never pursued a socialist economic policy, though there have been periods of time when socialists in the U.S. were a strong group with many supporters. During the late 1800s and early 1900s, the ideas of socialism were strong and many countries in the world were following socialist ideas. Franklin D. Roosevelt never called himself a socialist, though many laissez faire capitalists accused him of being one. Socialist economics believes that:
Capitalism is a bad system; it oppresses the majority (particularly the working class), while enriching the few (the ruling, wealth-owning class)
Capitalism contradicts democracy; capitalism creates a wealthy oligarchy (group of ruling elite), rather than a government of the people
Political equality requires a level of economic equality; democracy cannot exist as long as there are great gapsbetween rich and poor
Capitalism creates a class society, where the wealth-owning class (upper class) maintains their wealth by exploitingthe working class
For working people to truly be free, they must bring about an end to capitalism, which will only happen if they takepower away from the wealth-owning class and force them to give up capitalism
The capitalist system is driven by greed, oppression and exploitation
Capitalism dehumanizes workers, turning their labor into a commodity (something bought and sold) and their bodies into machines (valuable only for work)
Government should be controlled by the working class for the benefit of the working class
If government was controlled by the worker class, society would be much more equal
The wealth inequalities created by capitalism are unjust, thus capitalism is unjust
Business, agriculture, manufacturing, trade, etc. should be “nationalized,” or controlled by the people (and administered by people’s government)
“Busts” in the economic cycle – like the Great Depression – reveal the natural problems of capitalism and prove that the system doesn’t work and should be eliminated
Questions for Debate Preparation (answer in details on the back)
What would a Socialist say about capitalism? Would he or she support capitalism? Why or why not?
What would a Socialist say about government? How should government be involved in the economy? What is the purpose and role of government?
How would a Socialist explain the Great Depression?
According to a Socialist, what changes would need to be made in the economic and government systems to get out of something like the Great Depression?
What groups or classes of people are most likely to support the idea of Socialism?
