Supply-side, Keynesian economics and the Kondratieff
Wave
By Mark L. Smith
Secretary, Texas Private Security Board
Supply-side economics argues that economic growth is best created by reducing barriers for people producing goods and services by lowering taxes and reducing regulations. The origin can be traced back to people like Adam Smith., Alexander Hamilton, and most recently Arthur Laffer, an economic adviser to Ronald Reagan. In short, �the more you tax and regulate something the less of it you get.� The more you tax cigarettes, the less you have � the same with productivity. The more you tax it, the less you get. (The Laffer Curve 1978) This is the capitalists-preferred system.
Keynesian economics is based on the ideas of 20th century British economist John Maynard Keynes. He believed private sector decisions led to inefficient outcomes and advocated active involvement by the public sector or more regulations. He also believed in redistribution of wealth; government taking from one person and giving it to another to whom it does not belong�in other words, legal theft. Keynes argued that rich people wouldn�t spend enough money � so take it away from them and give it to poor people who would � thus creating economic activity. (Good Intentions 1985) This is the socialists-preferred system.
Joseph Stalin wanted to know what system was right, so he commissioned the brightest economist he could find to study it and give him a report. The economist was Nikolai Kondratiev. After years of study and research, he concluded the free market capitalist system had a cycle of changes. He compared it to our annual seasons � spring, summer, fall, and winter. The spring was the beginning of economic growth with investment, speculation and hard work. Then there would be a summer where everyone was doing well and prospering. Then a fall would occur, signaling the end of the peak of economic growth. Finally winter would come, which resembles a recession. But if left alone, the cycle would start all over and spring would begin again.
Conversely, a socialist-controlled system was a constant interference of government trying to prop up the economy, injecting money into it, resulting in high taxes and endless regulation, which never allowed the system to reset and perpetuating a constant winter.
This study was later peer-reviewed by a team of economists led by R. N. Elliott Kondratieff and the cycle was named the Kondratieff Wave. Unfortunately, and characteristically, Stalin took it as a criticism of his policies and executed Kondratiev in 1938. (The Kondratieff Wave 1972)
What this demonstrated is that there is no perfect system� but an occasional downturn in the economy is better than a constant downturn. William F. Buckley, Jr. once said, �The problem with capitalism are capitalists. The problem with socialism is socialism.� In capitalism, there are capitalists who will game the system, but the problem with socialism is the system itself. I challenge anyone to show me a society where since the beginning of time chose socialism as the form of government and it didn�t fail.
We have been trending away from supply-side economics for the past 20 years until 2009, when we went pedal to the metal to Keynesian economics. Now here we are in a prolonged winter. If the USA were an oligarchy, we would have to tolerate becoming a third-world socialist country... but that is not who we are. Thank God for our constitution limiting the time we have to pay for our mistakes.
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