Globalization is an ongoing process; every day brings us closer to an interconnected and interdependent economic footing. As we continue to lean on each other more and more for economic and financial security, questions are raised as to whether or not this is a good idea. This also extends to the idea of the government’s role in the world economy – whether or not a private business should adhere to governmental regulations and oversight in order to be allowed to operate. In the first episode of Commanding Heights: Battle for the World Economy, many different leaders and politicians vie for either furthering globalization or stopping it. Their varying positions and arguments help to cement the varying pros and cons of this ongoing phenomenon of the government’s role in the world economy. In this paper, we will identify the leaders behind each position and detail their arguments and justifications.
John Maynard Keynes was a theorist who imagined that the economy would not survive unless the government stepped in and helped to regulate it. He imagined a world in which goods and services could be transferred freely among countries. He helped the British government manage the wartime economy during World War I, and denounced the reparations asked of Germany by France as being far too much for a struggling, defeated country to reasonably handle. He successfully predicted Germany attempting to seek revenge via a second world war.
He and others like him believed that, without the government to control wages and prices, there is no barometer for what to pay people equitably, and therefore there were no signals to prevent a chaotic management of the economy. Therefore, the government needed to have some sort of control over the government in order to set precedent.
In the wake of the Great Depression, he wanted to find a way to manage the economy through the government, in order to ensure that it would not happen again, becoming the master and creator of what we know as macroeconomics. In the face of World War II and totalitarianism, Keynes felt it necessary to come up with a new way of thinking. As a result, his new system involved the government creating jobs for people – building parks, digging trenches, putting people to work however they could. This let the people continue to work, and also helped perform vital government duties.
Friedrich von Hayek was a theorist who felt “the market would eventually take care of itself.” After the First World War, he began to advocate socialism, as he was concerned with the poor and wanted to make the division of goods more equitable. Ludwig von Mises also believed that the economy should be free from governmental oversight – markets, in his opinion, were far more reliable than governments. The state controlled economy of Russia was soon met with disaster, as there were not enough resources and profit to go around, due to the government-fixed prices.
Vladimir Lenin, leader of Russia managed to eschew the normal virtues of socialism to provide marginal returns on the Russian economic front; he allowed people to run small businesses and the like. When responding to detractors, he said that the heavy industries would still be run by the Bolsheviks. However, he died soon afterward, and the economy returned to Bolshevik Russia thanks to Stalin, who introduced central planning of the economy.
The essence of Keynes’ position was that the government played a vital part in the continuation of the economy, as it required that money in order to function as well. The government should set supply and demand, and be allowed to take steps to balance out inequalities in employment. The essence of Hayek’s position was that the free market would solve its problems on its own – the customer would decide what companies and products deserved to survive, and that the government should not interfere in that unnecessarily.
In the early part of the 20th century, there were two major opposing forces to the concept of government control in the economy. Keynes believed that the government had a responsibility to oversee all aspects of the economy in every industry, as precedents needed to be set for prices and wages, and a central overseeing body had to exist, or else there would be events such as the Great Depression, where mismanagement and inflation would lead to economic despair. Hayek felt the need for government to be socialized – that central oversight of businesses was wrong. Resources needed to be shared, and no one was to be favored. There are both advantages and disadvantages to this ideal, but this also resulted in many people being destitute due to no requirements to hire people, and nowhere for people to be employed.
Works Cited
Commanding Heights: The Battle for the World Economy. Dir. William Cran. Perf. David Ogden Stiers, Tony Benn, Stephen G. Breyer. PBS, 2002. DVD.
