Keynesian Stimulus In Action Before The Industrial Revolution

[interestrateripoff]

1631 Florence during the depression bought on by the plague.

"The Grand Duke made 18 month interest-free loans for a total amount of 150,000 scudi to the wool and silk workshops, so that they could continue to work and thus support the labor force of these principal crafts in the city. He also ordered the start of construction of the facade of Santa Maria del Fiore and the completion of the Pitti Palace. All this was done to support more craftsmen and labourers. And since the farm labourers are the backbone of the state, he also provided for them by making them dig ditches and canals to draw plenty of water for the use and beautification of the city"

Cipolla, p43 Before the Industrial Revolution.

Was Keynes just re-emphasising what to do, but he make the mistake of putting the govt forward when in fact it should be the wealth hoarders funding it? Although the outcome from this action isn't given in the book.

Edited May 26, 2015 by interestrateripoff

[happyrichie]

i quite like your random posts but this has no real context unless you are saying their is a plague coming or something? now can you find an example on negative interest rates please

[porca misèria]

You can find lots of examples of wealthy benefactors helping society through a rough patch. Of course it only worked because the Duke of Florence was immensely rich, not drowning in debt.

The hard part is saving[1] through the Good Times. The Bible makes a nice little story of Joseph and Pharoah's Dream, describing a wise ruler who didn't run a deficit through the boom, splurging everything and more on Blair Feelgood.

[1] Or in today's terms, investing for the future.

[XswampyX]

You could also say it wasn't the interest free loans, but an effect of the plague that brought everyone out of the depression...?

First you have to realise that making money isn't bad.

Second you have to realise that some businesses will fail.

Third you have to realise that without the second, you can't have the first.

Just to add, you know this already, but I had to point it out.

What's the point/effect of natural selection if nobody ever dies?

What's the point of commerce if nobody goes bust?

Yes half your customers have died, but the ones left are far more secure.

[Uncle_Kenny]

The broken window fallacy was as valid in 1631 Florence as it is in this country today.

[interestrateripoff]

i quite like your random posts but this has no real context unless you are saying their is a plague coming or something? now can you find an example on negative interest rates please

HMO???

Allowed plague to spread quicker. In Milan there were 1563 homes with 8956 rooms with 4066 families living in them.

In 1597 Milanese Public Health officials proclaimed that "no matter how poor and how low their status, people are not allowed to keep more than two beds in one room and no more than two or three people should sleep in one bed". Secondly, if the room was large enough for more beds it needed checking by the health inspector before it was allowed.

[winkie]

Thinking about it so much work is created directly and indirectly from creating problems, creating demand, creating wants and needs.....from bureaucracy and red tape, to health and education etc.....people that share and swap and people that work in the community doing voluntary work like caring for children, cleaning, picking up litter etc are not paid.....question is are they doing others out of paid work?

[davidg]

We could just leave all our babies outside to fend for themselves.

Not straightforward. There are judgements to be made. Unfortunately, Thatcher for instance was a simpleton who knew nothing about economics and like Hitler himself was a strong advocate of Darwinianism. Blamed the weak for failing even as they enacted policies that ensured their certain death. Effectively destroyed our industrial base in a few short years. We haven't really ever recovered from it properly despite occasional pumping of credit to create the illusion of wealth and its concentration in the upper tiers of society.

It's Fatcher innit, haven't heard that for a few days.

[Bloo Loo]

so a rich guy finances some businesses.

What is the issue here?

[billybong]

The broken window fallacy was as valid in 1631 Florence as it is in this country today.

That's why the broken window hooligans are usually glaziers. They aren't suit makers or bakers.

Not meant entirely literally.

World war 2 stimulated the eonomies of the winners (especially the US with no damage on home soil) but the rest saw their countries and their economies destroyed (except for say Germany and Japan who received special help but those that didn't get special help were even worse off). Britain however being so badly run ended up winning and ultimately being worse off than some of the losers (except for the British bankers etc).

Edited May 27, 2015 by billybong

[Bloo Loo]

That's why the broken window hooligans are usually glaziers. They aren't suit makers or bakers.

Not meant entirely literally.

World war 2 stimulated the eonomies of the winners (especially the US with no damage on home soil) but the rest saw their countries and their economies destroyed (except for say Germany and Japan who received special help but those that didn't get special help were even worse off). Britain however being so badly run ended up winning and ultimately being worse off than some of the losers (except for the British bankers etc).

WW2 didnt stimulate the economies...Government spending did....and as soon as the imperitive to win was gone...well, what happened next

[Bland Unsight]

It's Fatcher innit, haven't heard that for a few days.

Reducing hotairmail's argument to "Fatcher innit" is bad darts.

It ought, in principle, to be a rock solid Tory and have misgivings about the concentration of the UK economy on finance and property*, especially as 11 years of New Labour government from 1997 to 2008 followed key elements of these policies in taking us to a point where fully 25% of the Exchequer's tax revenues were from the financial sector and property. Given that much of the financial sector's activity is zero-sum redistribution of existing financial assets and much the rest was just the creation of bonkers debts (and the corresponding 'savings') this ought to give us pause, especially as the burden of those debts is proving so hard to carry. The fact that the tax revenues from SDLT resulted largely from people trading previously existing assets is just the other side of the same coin. Whatever the intent, the ideological commitment to not have an industrial policy, or any form of capital controls, especially in light of the pace of the globalisation of world trade over the decades in question, has turned out to be an informal industrial policy involving turning the UK economy into a hedge fund that's bet everything on property.

A healthy economy must be built like a pyramid. At the peak are the large corporations. At the base is the diversity of small enterprises. An economy founded on a few specialised corporations can produce large profits, but because the purpose of specialisation is to streamline production, it cannot supply the employment which naturally results from a broadly diversified economy. Only a broadly diversified economy is able to supply the jobs which can allow people to participate fully in society.

It is extraordinary to read economists commenting on the state of the nation. They believe that the profits of large corporations and the level of stock markets are a reliable guide to the health of society and the economy. A healthy economy does not exclude from active participation a substantial proportion of its citizens.

Source: The Trap, James Goldsmith, 1993 (emphasis added).

Well, at least we got some kind of pyramid.

*In fact this is exactly the page that Cameron was on from about 2009 till 2013. It is a theme to which I would suspect he remains committed even if the small matter of using a property boom to get past a GE means that it is in danger becoming a commitment less honoured in the observance than in the breach, to coin a phrase.

Edited May 27, 2015 by bland unsight

[Goat]

Thatcher for instance was a simpleton who knew nothing about economics .....Effectively destroyed our industrial base in a few short years. We haven't really ever recovered from it properly.......

Odd that you blame 'Fatcher for this but seem perfectly happy with the performance of Bliar/Brown and for that matter Callaghan.

A couple of charts for you:

First off, the total value added (in 2011 prices):

So 'Fatchers "devastation of the industrial base" resulted in a 16% increase in manufaturing output. Compare and contrast this with Bliar/Brown's 22% real terms fall in output and your comment looks decidedly odd indeed.

Also bear in mind that a lot of the industry that was lost under 'fatcher was basket case heavy industry that was only being kept alive by state subsidy.

Next up, manufacturing output as a %age of gdp:

That's a 21.7% fall under 'fatcher compared to 44.4% under Bliar/Brown (-1.2% p/a under 'fatcher and -3.4% under Bliar/Brown).

So why do you claim that 'fatcher "devastated industry" when it's plainly contradicted by the facts, and why do you ignore the reality of Labour's terrible performance?

Perhaps you should spend less time accusing me of being the conservative party spokesman and more time examining your own beliefs.

[happyrichie]

HMO???

Allowed plague to spread quicker. In Milan there were 1563 homes with 8956 rooms with 4066 families living in them.

In 1597 Milanese Public Health officials proclaimed that "no matter how poor and how low their status, people are not allowed to keep more than two beds in one room and no more than two or three people should sleep in one bed". Secondly, if the room was large enough for more beds it needed checking by the health inspector before it was allowed.

so this is where we are heading then... 2-3 people to a bed, 2 or more beds 2 a room then a plague... you really know how to brighten up my day

[davidg]

Reducing hotairmail's argument to "Fatcher innit" is bad darts.

Well the truth is that UK manufacturing has been in decline since at least WWII and especially in the 1970s under the Wilson and Callaghan governments. Things actually started to recover in the 1990s up to 1997 when manufacturing again went into sharp decline.

[Bland Unsight]

Well the truth is that UK manufacturing has been in decline since at least WWII and especially in the 1970s under the Wilson and Callaghan governments. Things actually started to recover in the 1990s up to 1997 when manufacturing again went into sharp decline.

(Emphasis added)

You mean once Thatcher was replaced with John Major , (or in reality after the forced devaluation on Black Wednesday made our exports more competitive?). Economics not my strong point, but I'm not convinced the evidential redoubt in which you appear to be seeking sanctuary will pass muster should a passing wolf be inclined to demonstrate the destructive capabilities of an entire discharge of their tidal lung volume.

Which damn fool took us into the ERM anyway? (A little googling suggests that the unmentionable lightning rod of political conviction was booted out in November 1990 but we entered the ERM in October - just saying... Though to be fair Major was Thatcher's Chancellor at the time, so maybe there is more to this whole question than the Thatcher's fault/Not Thatcher's fault dichotomy you seem to feel the need to foist onto other posters.)

Your claim that UK manufacturing grew through the nineties appears to be supported by the ONS data, but it wouldn't do to oversell it.

Source: ONS

Edited May 27, 2015 by bland unsight

[Guest UK Debt Slave]

Odd that you blame 'Fatcher for this but seem perfectly happy with the performance of Bliar/Brown and for that matter Callaghan.

A couple of charts for you:

First off, the total value added (in 2011 prices):

So 'Fatchers "devastation of the industrial base" resulted in a 16% increase in manufaturing output. Compare and contrast this with Bliar/Brown's 22% real terms fall in output and your comment looks decidedly odd indeed.

Also bear in mind that a lot of the industry that was lost under 'fatcher was basket case heavy industry that was only being kept alive by state subsidy.

Next up, manufacturing output as a %age of gdp:

That's a 21.7% fall under 'fatcher compared to 44.4% under Bliar/Brown (-1.2% p/a under 'fatcher and -3.4% under Bliar/Brown).

So why do you claim that 'fatcher "devastated industry" when it's plainly contradicted by the facts, and why do you ignore the reality of Labour's terrible performance?

Perhaps you should spend less time accusing me of being the conservative party spokesman and more time examining your own beliefs.

Congrats for putting the record straight.

The grubby little secret of the left is that Labour governments did far more damage to manufacturing in this country than Thatcher ever did.

Most of our heavy industry and manufacturing was already gone by the mid seventies, before "Fatcher" got elected.

Car industry destroyed. What remained was nationalised and supported by the taxpayer. remember British Leyland? $hitty cars that nobody wanted to buy?

Motorcycle industry, DEAD by 1975. Norton, BSA, Vincent, AJS Matcheless, Velocette, Douglas, Excelcior, ALL GONE before "Fatcher" was elected.

Britian had a fantastic car and mororcycle industry in the 1950s and 1960s. It was all ruined by trade union activism and shocking management

(Before Thatcher was ever elected)

Shipping industry - Pretty much gone by mid 1970s, the remainder subsidised by the British taxpayer.

Aircraft industry - Only British Aerospace was left by the mid 1970, a nationalised conglomerate of the some of the older privately run aviation companies. Like the car and motorcycle industry, Britian produced some of the best aircraft in the world and we sold them all around the world too. Supermarine, Gloster, DeHavilland, Short, Vickers, Bristol, Hawker, ALL GONE before "Fatcher" was elected.

Coal - Another Leftie myth. Between them, Tony Benn and Wilson and Callaghan closed more coal pits by far than "Fatcher" but you'll never hear a leftie admit the sordid truth.

You gotta laugh at the lefties' vain attempts to rewrite history and to make "Fatcher" their universal scapgoat for their own destructive management of the British economy.

Edited May 27, 2015 by UK Debt Slave

[Bland Unsight]

Congrats for putting the record straight.

...

You gotta laugh at the lefties' vain attempts to rewrite history and to make "Fatcher" their universal scapgoat for their own destructive management of the British economy.

I think that setting it up as lefties versus non-lefties is problematic. The problem with Thatcher is that she failed. The pre-Thatcher governments of left and right had also failed, though they were sustained by different ideological commitments. And of course, New Labour failed too, (though it largely took Thatcher's diagnosis of the problem as Holy Writ).

All this set the scene for New Labour after 1997. It inherited the historically engrained economic problems that had defeated Thatcherism: a palsied manufacturing sector, a bias towards finance, and a reliance on the state for employment creation.

Source: Ewald Engelen et al., After the Great Complacence, OUP, 2011

Source: Ewald Engelen et al., After the Great Complacence, OUP, 2011

And in due time, Cameron and Osborne came into office in 2010 with a political narrative which would have been recognised by political commentators of the 1970s, running along the lines of a weak and constrained private sector being 'crowded out' by an over large public sector and over-regulated labour markets; and of course, they failed too. Throughout this time, facing failure, governments of right and left have in the end turned to housing bubbles to divert attention from the problem that we appear unable to solve, which is how to sustain the standard of living that we feel we are entitled to when all we appear to be willing to do in order to secure it is lend each other money and bet on house prices. Mark it zero, dude.

[zugzwang]

The Big Money/Easy Credit era began with Thatcher and Reagan, that much is indisputable. By the mid-90s, thanks largely to the efforts of the US govt, the IMF and the World Bank, the ideology of free market capitalism had assumed the status of natural law. Blair and Brown embraced the financialisation of the UK economy with an enthusiasm every bit the equal of their Tory predecessors. Likewise, the subordinate prescriptions of privatisation, deregulation and globalisation. Why would they not? To have done otherwise would have been seemingly to oppose the tide of history and two generations of academic consensus. A mere handful of maverick economists held that the citadel of neoclassical/laissez faire economics was a terrible mirage, and none of them were published in mainstream journals.

[winkie]

The one big change that brought to light the rapid decline in British manufacturing was when M&S always proud to promote that everything sold in their stores was 100% made in the UK....UK had a big rag trade once.....to almost nothing sold made in the UK......nothing else needs to be said.

[interestrateripoff]

http://www.tgarden.demon.co.uk/writings/articles/2001/010129riia.html

A look at UK defence spending in real terms over the past 25 years shows four distinct phases. In the mid 1970’s defence spending was fairly steady around £25.5 bn a year at current prices. It then climbed for the first half of the 1980’s, reflecting a NATO wide commitment to growth, to a plateau of some £33.5bn before going into a decade of decline from 1986 to level out at the current base of around £23.5 bn a year.

Anyone perhaps think Thatchers manufacturing output might have something to do with the defence industry???

[Goat]

Funnily enough I had never been a particular ideological opponent of Thatcher's. It is only with the passage of considerable time and tracing how we got to where we are that I see that many of the missteps were taken on her watch - destroying the last remnants of the industrial base with very high rates of interest as part of a now widely derided means of controlling the economy known as 'monetarism'.......

......Germany did not have north sea oil or the City, they had to pick up East Germany....but look at them!

You do understand that the Bundesbank were the biggest monetarists of all.

[Ah-so]

Funnily enough I had never been a particular ideological opponent of Thatcher's. It is only with the passage of considerable time and tracing how we got to where we are that I see that many of the missteps were taken on her watch - destroying the last remnants of the industrial base with very high rates of interest as part of a now widely derided means of controlling the economy known as 'monetarism'. That and freeing up capital controls, changing the structure of the City and the bank/building society industry in damaging ways that have only become apparent very much later.

I don't know where you have been but I hold Labour and Blair/Brown perhaps in even greater contempt but for different reasons. Economy wise, apart from the regulatory race to the bottom with New York, I don't think they changed the trajectory at all. Major/Clark administration has been the best in my life.

Your charts showing Labour's performance only serve to reinforce my point.

Without separating out the effects of north sea oil and gas, your charts are meaningless. The share of manufacturing is also affected by the massive increase in the credit fuelled nil sum game that is financial services. All I can say is just look at our former manufacturing powerhouses...they don't make very much and it shows.

Germany did not have north sea oil or the City, they had to pick up East Germany....but look at them.

While north Sea oil was obviously a contributor to the figures (although not sure if this a measure of only secondary industries or primary and secondary industries combined), the drop in coal output during this period would have acted to offset the gains from oil.

[billybong]

WW2 didnt stimulate the economies...Government spending did....and as soon as the imperitive to win was gone...well, what happened next

It was the government spending - due to the war both during and after. It's impossible for nations to wage war without it. But it was also the ability of the winners to control things afterwards. None of which would have happened without the war - at least with things as they were then.

The point being that the war only enriched the winners' economies and the losers suffered losses in their economies (generally speaking). If it was possible to do a proper and full calculation/audit of the total wealth of the world's economy before and after the war there would be in total a loss due to all the broken windows (and other damage) despite the government spending.

Of course stuff like inflation (and other dodgy accounting tricks) tends to mask the true outcome of such events which is another reason why the powers that be like inflation so much.

What happened next. Apart from anything else after WW2 there were more wars..

Edited May 27, 2015 by billybong

[Self Employed Youth]

The broken window fallacy was as valid in 1631 Florence as it is in this country today.

TBWF falls down when you smash the window of a rich person or a bank.

Don't smash the windows of the poor, but by all means blow up the right and left wings of the estates of those who hoard money to the detriment of everyone else and you shall create employment and wealth for the poor, paid for with hoarded wealth.