Bidenomics And Luxonomics

Tuesday, 3 December 2024, 10:37 am
Opinion: Keith Rankin

Joe Biden struggled to understand why his presidency was unpopular; especially why so many regarded his economic legacy as weak when he thought it was strong. Indeed, by many of the conventional macroeconomic indicators Joe Biden's economic policies were a success. Part of the problem is that much of that seeming success did not 'trickle-down' to where it was most needed, to the American working-class, now the precariat.

The bigger problem is that Bidenomics was functionally the same as 'hitlernomics'.

Much of Adolf Hitler's popularity among the Volk in the 1930s was due to his 'getting Deutschland moving again'. The 'three arrows' (to borrow a concept from Abenomics) of hitlernomics were: rearmament (in practice, massive government support for the 'big-gun' industry); infrastructure (with the autobahn construction being the best known component of this), and family subsidies to get Deutschland breeding again.

Bidenomics faithfully reproduced the first two of these. Not only did Biden use Keynesian fiscal policy to boost the big-gun industry, the number of deaths attributed to the use of American big-guns in 1921 to 1924 far exceeded the deaths dues to German big guns in 1934 to 1938. (We might note, however, one particular German big-gun atrocity; the bombing in 1937 of the Spanish Basque town of Guernica in 1937; memorialised in the eponymous painting by Pablo Picasso.)

Joe Biden acclaims as his biggest domestic policy success the $1.2 trillion November 2021 'Infrastructure Investment and Jobs Act'. How much this boosted the United States economy remains moot, because much of this kind of money takes a long time to be actually spent. Almost certainly the main fiscal boost, by far, in 2021 to 2024, was his administration's spending on big guns; the federal government support for the 'military-industrial complex' in these present highly insecure global times. In addition to the two combustible wars in what used to be called the 'Near East', there was a substantial ramping up of a new Cold War with China. Remember how, in 2021, the buzz phrase in American-led geopolitics became 'Indo-Pacific'.

Bidenomics doesn't have an explicit a third-arrow, such as Hitler's demographic policy. Yet there will be many in the United States who will say, whether by commission or omission, that the United States' huge recent influx of documented and undocumented immigrants was a tacit admission of an emerging labour supply problem that's affecting the whole of the developed world.

In the meantime, Luxonomics is paralysing Aotearoa New Zealand. Prime Minister Christopher Luxon claims to be focussed on "economic growth" while presiding over a national economy that's tanking. In a recent New Zealand Listener article, George Forbes – Prime Minister 1930 to 1935 and Finance Minister 1930 to 1931 – was rated by a panel of experts to be New Zealand's worst prime minister, ever. (See New Zealand's prime ministers, ranked, RNZ, 29 November 2024; and The real power list: NZ’s Prime Ministers rated, NZ Listener 8 November 2024.)

Forbes was known best for his policies of government 'retrenchment' which deepened and extended the economic crisis in New Zealand; the crisis known globally as the 'Great Depression'. When studying economic history, my professor excused George Forbes on the grounds that John Maynard Keynes' 'General Theory' had not yet been published. (It was published in 1936.) On that basis, it was argued, Forbes' advisers were not in a position to give him the advice that might have led to a much better outcome.

Christopher Luxon today has no such excuse for accepting lamentable macroeconomic advice. To be somewhat hyperbolic, Luxon is doing his best to make Forbes look like an economic genius.

Going back to the context of hitlernomics, the principal reason for the rise of Adolf Hitler's National Socialist (Nazi) Party was the program of fiscal austerity in Germany from 1929 to 1932; a policy driven by the centrist administrations of those years. In the 1928 election in Germany, the Nazi share of the vote was not only miniscule, it was diminishing. The rise of Nazism in the 1930s was not so much due to post-WW1 reparations nor the 1923 hyperinflation. It was due to government retrenchment during circumstances for which Keynesian economics shows such policies were completely inappropriate. There were also prevailing international factors, of course, including the one often emphasised by American economic historians (and conservative economist Milton Friedman); the role of central banks (especially the US Fed) in 1929 in pushing up interest rates in the wake of the 1928 stockmarket boom and taking too long to bring them down again.

In 2023 to 2024, after covid, Bidenomics 'conveniently' offset what might otherwise have been a global application of Luxonomics. But at what cost? Ultimately the application of hitlernomics in the 1930s did even more harm to the world than the Great Depression; the big-gun policies of Adolf Hitler gave us World War Two. But the societal distress that made Hitler more than a political joke was due to the widespread prior application of macroeconomic policies of austerity barely distinguishable from those of New Zealand's government today.

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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.

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Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

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