Large vs Small Government and Keynesianism

I feel like a clarification regarding my answer on Keynesian economic thought is in order!
Before I delve into the economic part of my argument I think the most interesting question at hand is; Large government versus small government.
I actually like a large government. During the last century Sweden had a large government and no one can say anything other than that Sweden was the very epitome of a civilized and illustrious nation. And for everyone who is not aware of Sweden during the 1900:s, it had none of today’s betaness. A Swedish man back in the day was a MAN. Sure the government did some things that might perhaps has been seen as quite radical by today’s standards. Alas it was a government for the people by the people. What was natural and just was premiΓ¨red (family, strength, industriousness). There was no pussyfooting, undesirable elements were dealt with, unlike today when criminals get a few harsh words and end of story. We had a strong army and a unity within the nation unheard of elsewhere. There was never any sense of the large corrupt government (in contrast to many other nations), because the government was the people and cared for the people. I don’t think there ever was a more equal or civilized society than Sweden during the last century.
Then a sledgehammer hit with full force in the fateful year of 1968 and even though it took quite some time for the sickness to take root the future was forever changed.
Our large government was working very well as long as it worked for the Swedes and before Cultural Marxism smashed the dream to pieces.
My point here is that a large government can be a thing of beauty under the right conditions. This is from a Swedish perspective, I know many Americans will have a hard time relating to this and that is because our nations are so incredibly different, if I was American I would probably be a proponent for as little influence of the state as possible.

Now, over to the economic part. With the above said, it becomes easier to understand why I am a proponent of Keynesian or Stockholm School of economic thought. Based on historical empirical evidence it is clear to see that the state can be a better captain of the economy than the free market. Under the malevolent rule of the free market large corporations will inevitably have great power, and the interests of those corporations does not lie with the people but with themselves.
Let us delve into the history of the last century, first of all we have the relative stability of the Swedish economy (guided by the benevolent hand of the government). And furthermore we have the German economic miracle of 1933 and onwards. The free market would NEVER have solved the mess Germany was in during that time, there was just no possible way for that to have happened. Instead, the government took charge of the situation, created jobs, and with the jobs came more jobs and so forth in an upward positive spiral of economic growth, and that is a good example of the power of state intervention and Keynesianism.
Now I hear voices of dissent saying “What about inflation?”.
Is inflation really a problem? Yes, everything gets more expensive, and your savings will get devalued. However, real wages also increases, and if we want to have a fair assessment on price increases, look at it like this: 8 hours of work today will be able to buy me much more than 8 hours of work would have bought me 50 years ago.
Is inflation without problems all together and a wondrous thing? It is not what I am saying, just that it is not a problem in the grand scheme of things.

And also, speaking of the grand scheme of things. Even though it is fun to debate economic matters and what might be the best way for a nation to deal with its fiscal policies it comes quite far down the list of things that are important to the wealth and well-being of a nation. To take a few other examples, the East Asian tiger economies utilized free trade and a freer market to great success. My point with this is that the wealth of a nation is more dependant on other factors than any political or economic thought. Intelligence and level of education is a good example here. A nation with an intelligent and well educated population will in most cases thrive both under Economic System A as under Economic System B.

So to conclude my thoughts. A large government and state intervention is not necessarily something evil, on the contrary it can be a good thing, especially in smaller nations such as the Nordic ones.
I am a proponent of Keynesianism in some cases, based on historical evidence and the belief that a competent government can do wonders in a time of crisis. Regarding inflation, I don’t see it as anything inherently evil.
And lastly, economic thought are not the end-all be-all of the well-being of a nation but other factors will always determine the end result.

4 Comments on “Large vs Small Government and Keynesianism

  1. Very well explained. Economics has always been something I’ve never understood, but I’ve been developing my knowledge of it recently. Thanks for the article, you glorious son of Svea.

  2. Hi there! Interesting bit about the economic history of the 20th century in Sweden, well put together. Just to clarify though, inflation does not increase real wages. Actually, in the long run it does not relate to real wages at all but to nominal wages (and prices).

    Also, maybe it wasn’t implied in the text but I thought it was, that keynesianism does not mean government intervention in the economy per se, but only to expenditures and tax collection (surplus and deficit). These things could of course be considered as government intervention, but JM Keynes didn’t state that regulations was the foundation of his recommended policies.

  3. Your first mistake is assuming corporations can exist in a free market, a medium without constant interference and especially without government handouts. That argument I’ve heard time and time again from adepts of the failed Occupy movement.

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