State Intervention Hinders Economic Growth

I. I have some serious doubts as to the free market nature of Rome, and the proto-welfare state there. One could hardly describe Ancient Rome as a free market state, or even pre-capitalist. There was rampant slavery in the form of legal ownership, debt slavery and serfdom; a large and complicated taxation and tariff system, and state ownership of land in the form of the Emperor's personal demesne in Egypt, and a shameful record of state violence. Rome had a welfare state set up by its first Emperor, Augustus, which gave what amounted to a citizen's income to all free citizens, usually in kind. This was called the Congiarium, and this was increased by all of the Julio-Claudian Emperors. The Congiarium was made up of Egyptian grain, as land in Egypt was effectively nationalised under the Emperor's demesne, and many public works schemes were financed by the Emperor personally. (http://penelope.uchicago.edu...*/Congiarium.html) The prescence of major public works programmes are examples of proto-keynesian economics in the Roman Empire, and they illustrate perfectly how the state and the private sector can have a symbiotic relationship with each other. The provincial government would build roads, ports and bridges, which stimulated trade. The projects were too expensive for any individual other than Marcus Licinius Crassus to finance, so the government used slaves to build the infrastructure, and maintained them with labourers and soldiers, which meant that the traders were safe from piracy or banditry, and they stayed in a usable condition. In return, the traders paid a tariff on transporting goods, resulting in a mutually beneficial cooperation between state and government. The same principle also applies to aqueducts, bathhouses and sewers, which improved the quality of life of citizens at the expense of government. (http://history.howstuffworks.com...) I will not argue that the Severan debasement was not responsible for the downfall, but it seems to be in accordance with the dogma of the IMF, who enforce debasement to boost exports in developing countries by devaluing the currency. It is also unfair to say that there were only two main causes of the downfall of the Roman Empire, as they also include a series of famines and plagues, which destroyed the revenues of the government and caused it to rely on primarily Visigothic mercenaries to staff the border forts on the Rhine and Danube. (Edward Gibbon - The History of the Decline and Fall of the Roman Empire) There was also the partition of the empire, which left Rome with the relatively insignificant provinces of Gaul, Africa, Hispania and Britannia, while Byzantium had Greece, Anatolia, Syria, Palestine, Egypt and Cyrenaica, all of which were thriving trading and agricultural centres. This deprived Rome of any real trading partners, since the riches of Persia, Arabia and the Orient were unreachable from the western empire, as well as anything worth trading. This meant that the Byzantine Empire lasted a millenium longer than the Roman Empire. II The hyperinflation was certainly a problem, but it was largely nullified by the fact that very little of the gold and silver actually got to Spain as a result of British, French and Barbary piracy, and the fact that what did arrive was spent on food imports from the Central European Plain, since Spain is a relatively infertile country. (Richard Overy - The Times Atlas of World History) The expulsion of the Jews was not a move to religiously unify Spain, but to annul the debts accrued in the Reconquista. The Jews were often creditors to European monarchies, and there is a correlation of debts owed to Jewish moneylenders and the expusion of the Jews. For example, Edward I expelled the Jews from England when he had built some of the world's largest castles in Wales to pacify the population and left the crown with huge debts, and after having exhausted borowing money from Florentine and Genoese bankers, he borrowed money from the Jews and expelled them in 1290, thus nullifying the debt. There was a trend across Europe of this happening. http://fcit.usf.edu... The downfall of the Spanish Empire was primarily caused by France. The monetary crisis plateaued in late C16/early C17. The absolutist nature of the Spanish state was the architect of its own destruction. Charles II was the result of generations of inbreeding, and consequently was both a poor statesman and infertile, which meant that the closest heir to the throne was also the heir to the throne of France. After the War of Spanish Succession, the heir to the throne of France was forced to renounce his claim on France to become King of Spain, but the influence retained. This was further exacerbated when Napoleon dethroned the King and started a five year Vietnam-style war in Spain that destroyed its economy and killed approximately 100,000 people. This resulted in the colonies gaining independence in the aftermath, and Spain was powerless to intervene. (A.F.W. Edler – The Spanish Succession War) (Christon I. Archer, Editor - The Wars of Independence in Spanish America) III and I I fail to see the relevance of linking the New Deal to Mussolini and Stalin, it seems like you’re attacking strawmen a little here. I don’t have to support every element of the New Deal; I just have to demonstrate that it had an overall positive effect on the US economy. Real GDP growth of the US economy over the course of Roosevelt’s first term averaged at 10.87% PA (1), which cumulatively resulted in a growth of 32.61%. Compare that to the entire ‘Roaring Twenties’ (1920-1929), total real GDP growth was cumulatively 35.82% (2). Therefore, in the first three years of the New Deal, real GDP had grown nearly as much as it had during a so-called boom period. In the period 1933-1941, the economy cumulatively grew by 67.68% (3), a phenomenal figure for such a failed set of policies, I’m sure you would agree. 1. http://www.measuringworth.com... 2. http://www.measuringworth.com... 3. http://www.measuringworth.com... The New Deal also contained several key legislative measures that brought half a century of stability to the US economy and protected America’s middle and working classes. The National Labor Relations Act, or the Wagner Act, guaranteed private sector unions the right to form, collectively bargain and take collective action. Though it has not been repealed, the government has neglected to enforce it since Reagan, resulting in huge amounts of illegal firings and union busting that amounts to nothing more than class war disguised by a veneer of ‘good business’. (Noam Chomsky – How the World Works) The Banking Act, more specifically the Glass-Steagall Act, was another key stabilising measure, as it restricted the affiliation between retail banking and investment banking. This meant that banks could not gamble with peoples’ life savings for the sake of vaporous income made from speculation. This was effectively repealed in the 1980s and since then, the financial sector has been far more prone to crises than the fifty or so years it was operating under the Banking Act. http://harvardmag.com... II and III Reagan and Thatcher did not save the economies of the US and UK; they merely switched their orientation from the middle and working classes to the upper classes through similar means. Reagan cut taxes and social spending, which resulted in a huge growth in the national debt (1) and a phenomenal increase in income inequality (2) and poverty (3). There was also a stagnation of real wage growth among the bottom 80% of the population. The same, however, cannot be said for the top 1% (4) 1. http://www.theatlantic.com... 2. http://www.huffingtonpost.com... 3. http://www.huffingtonpost.com... 4. http://modeledbehavior.com... Thatcher introduced similar measures, which did little to dent the national debt as they caused a recession in the early 1990s due to a stock market collapse. This caused riots in 1991 and 1992 on account of unemployment and poverty, which had sharply increased since 1979 (1)(2). The post-war Keynesian economy that Labour created in the late 1940s gave the UK nearly full employment, an equal society (In 1979, poverty rates were at 10%, and the UK had a GINI coefficient score of .27 (3). Now, its poverty rate is 22% (4) and it has a GINI coefficient score of .41 (5). In 1972, unemployment in the UK reached one million people out of a population of fifty-six million, prompting outrage among both Conservative Prime Minister Edward Heath and the people of the UK, who saw it as scandalous that a government could allow such high unemployment levels (6). In 2011, youth unemployment alone reached one million out of a youth population of 7.4 million (7). 1) http://www.pyrosoft.co.uk... 2) http://www.jrf.org.uk... 3) Owen Jones – Chavs: The Demonization of the Working Class 4) http://www.theguardian.com... 5) http://www.poverty.org.uk... 6) http://news.bbc.co.uk... 7) http://www.theguardian.com... I’ll give some examples in the next round.