2013 FIFTH PLACE ESSAY

by Darren Eng, Age 18
Submitting Teacher: Jibin Park


"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who consider themselves quite exempt from any intellectual influence, are usually the slaves of some defunct economist."

So John Maynard Keynes states in his famous book, The General Theory of Employment, Interest, and Money. And indeed, the many modern Keynesian followers of this era have launched numerous tirades on conservative economists, accusing them of "selfishness," "greedy wall street bias," and of attempting to destroy the lives of common folk. Yet little do they know that the defunct economist they have fallen victim to is John Maynard Keynes himself.

In the 1940s, the market seemed to respond to Keynes' beliefs, as many believed World War II effectively marked the end of The Great Depression. Keynesian supporters pointed to massive government spending and increased aggregate demand as the reason for the recovery, but what they did not take into account was the deprivation that prevailed during World War II. While GDP increased by 84 percent between 1940 and 1944, the less remembered component of that, real private GDP, actually fell 14 percent during that period. Severe rationing and a lack of basic consumer goods were preeminent during that period and served as a constant reminder of the difficult lives citizens lead. Although the country was not in a recession, the US was certainly not enjoying prosperity. It was massive frugality, not massive spending, that eventually brought the US to prosperity.

While government seems to be the perfect solution to our problems, in reality, government does not solve problems, it adds to them. In the 1930s, Franklin Delano Roosevelt diverged from the beliefs of his predecessors and promised government spending as the solution to the nation's economic woes. His radical New Deal has been triumphed by modern economists as the "savior" of capitalism. President Obama even tried to mimic the New Deal with his stimulus package and "fair competition" policies. But what did the New Deal really give us? In 1930-1932, Americans were on average working 18% less hours than during 1929, yet during the New Deal era of 1933-1939, adults worked on average 23% less hours than the 1929 level. Private hours worked were even lower at 27% lower than the 1929 level. Damaging policies in the name of "fairness" such as the NIRA artificially raised wages and prices and restricted output, thereby reducing growth overall. Even after the NIRA was declared unconstitutional in 1935, similar policies that continued during the Great Depression slowed production. FDR's "alphabet soup" of agencies created the illusion that a recovery was occurring, yet in reality the recovery was being slowed by his policies. And what have President Obama's New Deal-esque done so far? The United States unemployment rate is currently 8 %.

Government continues to attempt to solve our problems, yet the evidence overwhelmingly seems to reveal that it has contributed to them. In John Stossel's TV special, "No They Can't," Stossel examines the role of government in rising college tuition costs. With empty promises of lower costs and government subsidized education, politicians are able to eagerly collect the votes of desperate students. Yet even with rising government spending on tuition per student over the last decade, tuition costs have skyrocketed over the last decade even when adjusted for inflation. The top ten schools in the US News and World Report'suniversity rankings have tuition prices that all hover around 40 thousand dollars a year. The enigma, however, is quite easily revealed when one examines how many trivial expenditures are accumulated by these colleges. For example, Stossel examined the University of Missouri, which has lavish recreational facilities, including an artificial waterfall, a gym outfitted with state-of-the-art equipment and professional murals, and even a rock wall, fit for a vacation resort. Government spending has only enabled further spending on unnecessary expenditures. Instead of helping students afford college, government has only made it more difficult.

And indeed, this has become a recurring theme throughout the last several decades of history. As Ronald Reagan's famous quote becomes more evident, it is hard to deny that government cannot solve our problems, as it increasingly has become the problem.