Sorry this is not Keynesian policy. Keynesian policy needed prices to
rise while wages stayed constant. Increasing Wages offset any increase
in output. This shifted Aggregate Supply to the Left while shifting
Aggregate Demand to the right. The result most likely no change in
output and heavy inflation. Under Keynesian policy you need real wages,
that is wages divided by prices, to fall in order increase output. This
does not happen if wages are rising as prices are rising.
This is just another sad statement about the lack of education in
economics in most countries. Most people have no clue as to what they
are talking about. This is the example of what Roosevelt did in the
1930's to kill the economic recoveries of 1933 and 1936 and therefore
made the great depression what it was. Governments with no education in
economics need to not fool with the economy. In fact Governments who
have education in economics would know it is still best not to mess with
the economy.
"Anti-Multiculty" Antimulticult
...@hotmaiil.com wrote:
> [Ed. Let's face it, left-wing societies don't work...]
> Keynes fails North Korea and Kim Jong-il
> http://www.brookesnews.com/032901nk.html
> Peter Zhang
> Monday 9 August 2004
> Last year Kim Jong-il decided to take his cue from Maynard Keynes and
> attempted to inject some life into what is jokingly called the North Korean
> economy by ordering that money wages be increased significantly and funded
> through deficit spending.
> The result was roaring inflation with reports that black market prices for
> rice jumped by 300 per cent. However, this really does not matter for most
> North Koreans because they could not even afford rice at the old black
> market prices, thanks to Kim Jong-il's crazy socialist policies
> Although Kim Jong-il is not the brightest of men he cannot be entirely
> blamed for this economic fiasco. After all, he was doing no more than the
> majority of Western economists prescribe, in varying degrees, for their own
> governments.
Again a total lack of knowledge of policy. No western government since
FDR has tried to boost wages to get out of a recession. Defecit spending
yes but this does not come by raising wages.
> It is still unclear from whom Kim Jong-il received his economic advice. (If
> it was a North Korean source, it is highly unlikely he will be able to give
> any further advice — ever).
> What struck observers in particular was the speed at which bottlenecks
> appeared and extensive shortages emerged — not that shortages are new to
> Kim's socialist paradise.
Gee really maybe it was because the increase in wages shifted AS to the
left. Perhaps even a wilder thought N. Korea is operating at the natural
rate of unemployment. The government has kept the levels of capital so
low worker productivity sucks and therefore they are poor. What a concept.
> Considering that the ramshackle state of North Korea's industrial base is so
> well known no one should have been surprised at the rate at which
> bottlenecks and shortages spread throughout the economy.
> The Kim Jong-il Stalinist planning approach has so disjointed what there is
> of the country's capital structure that its stages of production are
> completely incapable of coordinating their output. This was the real source
> of the shortages and bottlenecks.
> If his monetary policy had been left unchecked the result would have been
> hyperinflation. (A pretty meaningless concept in a country with such an
> abysmal standard of living). But why should Kim Jong-il have suddenly
> decided on a desperate "dash-for-growth" policy?
Complete studpidity. Monetary Policy? Since when was deficit spending
Monetary Policy? Did they print money to pay the deficit?
> Reports clearly show that North Korea's economy is in ruins and the only
> thing preventing a complete social and political collapse is the army, which
> in turn is mainly maintained through foreign subsidies, most of which are
> intended for the civilian population.
> That these subsidies had been significantly reduced must have had a bearing
> on his decision to try and inflate his way out of his economic dilemma.
> The failure of Kim's economic policy could be portentous. With the
> population starving, industrial production virtually at a halt and supplies
> to the armed forces being cut back his position is becoming increasingly
> precarious. What is a Cognac-loving dictator to do in these circumstances?
> One thing we do know, Kim Jong-il is not suicidal. Even if he wanted to
> launch an attack on the South Beijing would not let him. This is not June
> 1950 and both Stalin and Mao are long dead He can continue with his attempts
> at nuclear blackmail.
> The problem for him is that he will never be able to extort enough money to
> keep North Korea afloat. The economy is dead and that is that. Furthermore,
> the state of economy will eventually undermine his weapons program and
> weaken his military machine.
> The only kind of economic reform program that would help his hapless
> subjects is the one that would destroy his regime. Of course Kim Jong-il
> could always retire to a Beijing suburb and while away the time with yellow
> movies, Cognac and Russian women. The world would certainly be a safer place
> if he did.
This is not true either. Gorbechev instituted many market reforms and it
did not destroy the Soviet Regime. The breakup of the Soviet union came
from many political reforms not going to a market based economy. Keynes
has a lot of problems and there are a lot of arguments why fiscal policy
should not be used but uneducated articles like this do nothing to point
out the real issues or even give people a clue to what proper economic
policy is or should be.
