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SELLING KEYNESIANISM

“LET’S BRING OUR EDITORIAL MICROSCOPE into focus on a very significant phenomenon”, the video begins. “The middle-income consumer.”

As a middle-aged white man comes into view, pushing a wheelbarrow full of recent purchases, the voiceover chronicles his recent exploits. “He has fed new demands into the production apparatus of industry, accounting for the housing boom, appliance sales, the rush for prepared foods.” Altogether, we hear, “the zoom in the American market after the war, the unprecedented volume of goods of all kinds, gobbled up by an insatiable tide of buyers, was largely the work of this middle-income man.”

After decades of praise heaped on “job creators”, viewers today may find it disorienting to see the consumer—and a middle-income one at that—cast as the hero of the economy, instead of the investor or the entrepreneur. Yet Fortune, which produced the video in 1956, was hardly an outlier. In the mid-twentieth century, advertising, popular press, and television bombarded Americans with the message thatnational prosperity depended on their personal spending. As LIFE proclaimed in 1947, “Family Status Must Improve: It Should Buy More For Itself to Better the Living of Others.” Bride likewise told its readers that when they bought new appliances, “you are helping to build greater security for the industries of this country.”

This messaging was not simply an invention of clever marketers; it had behind it the full force of the best-regarded economic theory of the time, the one elaborated in John Maynard Keynes’s The General Theory of Employment, Interest and Money (1936). The key to full employment and economic growth, many at the time believed, was high levels of aggregate demand. But high demand required mass consumption, which in turn required an equitable distribution of purchasing power. By ensuring sufficient income for less well-off consumers, the government could continually expand the markets for businesses and boost profits as well as wages. Conversely, Keynes’s theory implied, growing income inequality would lead to lower demand and slower economic growth.

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Find the complete article and many more in this issue of Boston Review - Economics After Neoliberalism (Summer 2019)
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About Boston Review

Economics After Neoliberalism offers a powerful case for a new brand of economics—one focused on power and inequality and aimed at a more inclusive society. Three prominent economists—Suresh Naidu, Dani Rodrik, and Gabriel Zucman—lead off with a vision “for economic policy that stands as a genuine alternative to market fundamentalism.” Expanding on “the state of creative ferment” they describe, Boston Review has commissioned responses to their essay from economists, philosophers, political scientists, and policymakers across the political spectrum as well as new essays that challenge the current shape of markets and suggest more democratic alternatives. Lenore Palladino explores the misguided logic of shareholder primacy and points to more equitable approaches to corporate governance—such as employee ownership funds. Amy Kapczynski examines how the courts have developed a new, anti-democratic First Amendment that protects corporate speech at the expense of regulation designed to protect public health and safety. And Robert Manduca explores the importance of public discussion about economics by revisiting Chester Bowles's remarkable book, Tomorrow Without Fear, which explained Keynesian ideas to the public after World War II.