Government

Kendra Horvath Government Stimulation, Economic Growth Humanities 30

Government Stimulation, Economic Growth

Kendra Horvath

May 28, 2010

Humanities 30

Mr. Kabachia

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Throughout the world’s history, there have been many types of ideologies, but liberalism has

seemed to be the favored one in today’s western culture. Liberalism includes many principals

that involve the freedom of an individual’s choice to make their own decisions in their life,

rather than a higher power such as a monarchy or a dictatorship. Classical liberalism is

expressed through six main principals; individual rights and freedoms, self-interest,

competition, economic freedom, and private property, but in a modern liberal society, the

principals are not always followed exactly as they are written. One example of this is when

Franklin Roosevelt gave his inaugural address in 1933. He stated, “I shall ask the Congress for

the one remaining instrument to meet the crisis- broad Executive power to wage a war against

the emergency, as great as the power that would be given to me if we were in fact invaded by a

foreign foe,” which means that he wanted to make executive decisions about the crisis that the

United States was facing in the thirties, known as the Great Depression. Roosevelt felt that

government intervention in the economy was necessary for the nation to pull out of the

recession, so he introduced The New Deal which had principals of what we consider modern

liberalism (welfare state, welfare capitalism, human rights). This was a new concept in the

United States because before the recession in the 1930’s, there was little or no government

involvement in the economy. Revolutionary thinkers like Adam Smith, John Locke, and David

Ricardo believed strongly in little or no government control in the economy, and that if

individuals were free to make their own decisions with their wealth, that it would eventually

work it’s self out. They would criticize the idea of government intervention strongly because

government is seen as a higher power and their interference would just bring the economy

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down. The Revolutionists idea’s may be true for some of the world’s economies, but we should

embrace Roosevelt’s perspective to the extent that when a country or nation’s economy is in

such terrible shape, that the government’s meddling in the economy would help when they are

trying to pull a nation out of a recession. This should happen by the government stimulating the

economy in recession times, have a deficit in boom times (and spend it in depression times),

and redistributing power among everyone, not to just the people that “mattered”.

When a nation is in a recession, there is very little economic movement. People are out

of jobs, businesses barely get by or shut down, and the economic principals of classical

liberalism start to look like a bad choice. To stop this slow movement and job loss in the

economy, the government should stimulate the economy by starting social programs, such as

road construction, building bridges, and other projects that would help workers get their jobs

back. This is essentially what President Roosevelt did in the 1930’s, with the help of Keynesian

economics, to make the New Deal. This involved reform and recovery, and specifically, relief to

the unemployed. This idea stimulates the economy because when workers start to make

money, they start to spend money, so it just begins to go in a circle, getting the currency to flow

throughout the nation again.

Although starting social programs is a good way for the government to get the economy

going again, these programs need money to take off. To solve this problem, the government

needs to save the money n a deficit. John Maynard Keynes was an economist who introduced

this idea while studying the Depression and developed this new economic theory. He believed

that in times of boom, the government should be spending less money and increase taxes. This

would leave less money in people’s pockets, softening the boom. He also believed for the bust

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times that governments should spend more money and reduce taxes, which would leave more

money in people’s pockets so they could spend the money or invest in the economy. Having

this kind of government intervention would start to balance out the economy, resulting in less

job loss and more economic growth.

The most important thing when an economy is in a bust time is workers to stimulate it.

A nation could spend all of the money it wanted on social programs, but in order to start those

social programs they need strong, happy and healthy workers. To ensure that all of the workers

needs are met, the government needs to distribute power among every person in the economy,

not just big companies or corporations. John Maynard Keynes talked about redistributing

power and resources to everyone and to make work programs that would help workers if they

were ever in an economic crisis. By using these ideas in The New Deal, Franklin Roosevelt

created labor standards and unions, which provided a safety net for workers and had set rules

and regulations for workplaces so the workers wouldn’t be unhappy or unhealthy. These ideas

would result in happy workers who would be involved in the social programs, thus stimulating

the economy.

In the case of recession times, it is good to embrace the principals of modern liberalism.

This ideology does not completely cut out the principals of classical liberalism, but simply

modifies the principals to help balance out the economic roller coaster of boom and bust times.

Giving the government power is a good thing while a nation is in a recession because our

leaders whom we elected would know what is best for our economy, which in turn is the best

for our well-being.

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