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Thursday, May 21, 2015

'1776: The Revolt Against Austerity'

Steve Pincus at the New York Review of Books:

1776: The Revolt Against Austerity: Was the Declaration of Independence a powerful indictment of British austerity policies? Does America’s founding document need to be seen as part of an economic debate about the British Empire? ... Just as political debates in Britain and the United States today turn in large part on the response to the great recession of 2008, so the events that made the United States were shaped by the British imperial government’s reaction to the debt crisis of the 1760s. What made the Declaration so offensive to British politicians then ... is that America’s founders offered a blueprint for a different kind of state response to fiscal crisis. ... [explains how debt crisis led to austerity policies for the colonies] ...
What alternative strategy did the authors of the Declaration propose? Today, we tend to regard the practice of using government spending to stimulate economic growth as an invention of John Maynard Keynes in the 1930s. But already in the eighteenth century, self-styled Patriots, followers of Pitt on both sides of the Atlantic, argued that what the British Empire needed if it was to recover from the fiscal crisis was not austerity but an economic stimulus. ...
Twenty-first century American politicians routinely draw our attention to our founding moment and founding document... But they fail to understand the economic arguments that in large measure shaped what Thomas Jefferson and his colleagues wrote. When Governor Scott Walker of Wisconsin proudly proclaims that “we celebrate the fourth of July and not April 15, because in America we celebrate our independence from the government, not our dependence on them [sic],” he fails to see that our founders blamed George III and his government not for taxing too much but for doing too little to stimulate consumer demand. ...
America’s founding document called for an American state that would promote economic growth just as the British state had done before the shift toward balancing the books. ... Had George III and his ministers not adopted austerity measures in the 1760s and 1770s, had they chosen to follow Pitt’s policies of economic stimulus, America’s founders might not have needed to declare their independence at all.

[That's only a small part of the essay -- there's a lot more in the full post, e.g. an argument the Adam Smith supported expansionary policy for the colonies.]

    Posted by on Thursday, May 21, 2015 at 12:15 AM in Economics, Fiscal Policy | Permalink  Comments (20)


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