Definitely Not a Keynesian Suggestion

Michael Stephens | February 16, 2012

The people at Bloomberg appear to have made a curious error on their website yesterday.  They have attributed an op-ed to Amity Shlaes that was almost certainly not written by her.  You see, Amity Shlaes is a well-known skeptic of Keynes and all things Keynesian, having written the bible for those who like to claim that the New Deal made the Great Depression worse.  (For a nice takedown of such claims, as well as Shlaes’ contributions in particular, see this Levy Institute policy brief.)

The Bloomberg op-ed in question contends that the Obama administration’s intention to withdraw militarily from Afghanistan and other places will devastate those countries’ economies.  This is because, according to the op-ed, establishing US military bases in foreign countries boosts economic growth there.

The real Amity Shlaes would have carefully instructed us that such public interventions not only cannot increase economic growth (even in the context of a downturn) but will actually decrease it (the New Deal, you see, is what made the regular ol’ Depression “Great”).

Now if this was written by Amity Shlaes, it is a peculiar way of announcing her conversion.  But let’s not quibble over ceremony.  If it is indeed Shlaes, let’s follow her lead.  In order to boost the growth rate in a time of economic malaise here at home, we should invite the US military to occupy the United States; we could even pay them a bonus to do it (Shlaes’ calculations suggest this might still be worth our while).

But if the military is too busy increasing other countries’ growth rates, I have another idea.  We could initiate an emergency recruitment drive for the US Army and station the new troops here in the United States, carrying out nation building in particularly distressed economic regions (there are, I believe, a few million people without jobs who would welcome the opportunity).  Of course we might need to build some new infrastructure bases to facilitate these operations here in the US, and may have to hire some additional support staff.

And if the threat of being shipped overseas and put in harm’s way is a barrier to recruitment, we could always create a new, strictly domestic branch of the military that recruits civilians to engage in nation building through repairing schools and providing social services.  We could call it, I don’t know, the Civilian Conservation Nation Building Corps, or something like that.  But none of that Keynesian nonsense please.

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2 Responses to “Definitely Not a Keynesian Suggestion”

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  1. Comment by Max — February 17, 2012 at 9:46 am   Reply

    I got a chuckle out of this line:

    “Conversely, the absence of soldiers seemed to hurt. Nations that asked the U.S. to withdraw, like France in the 1960s and Thailand in the 1970s, afterward paid a growth penalty.”

    Poor France, without any U.S. soldiers to show them how civilized people do things, how will they ever learn?

  2. Comment by forecaster — February 18, 2012 at 1:44 pm   Reply

    You failed to mention the businesses that are created near military bases that boost the economy in the area. The military and civilian personnel spend their earned money on local goods and services. This increases the economic growth. Removing those people from spending money decreases the growth. This is why BRAC is such a big deal with local communities, especially those that were built because of the bases. I think Shlaes article is spot on.

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