How much control does the government have over the economy?

[btpound]

My dad is a republican. We got into a debate about Reagan. Usually by the end of these types of discussions we have knives at each others throats (not literally). We are both very passionate and knowledgeable about our respective views. But when we get on economics he always gets on how Reagan lowered taxes and how the economy boomed as a result. He even made a graph and wrote a paper "proving" Reaganomics. So since his lynch pin is usually "the democrats did this and it fucked everything up" or "Republicans did this and it made this happen", and it begged a question in my mind. If capitalism is chaotic, and the bulk of it's inner workings are are left to factors that only the free market can determine, how much control does government really have over it? I have heard different view from fellow comrades. I have heard some say it is total chaos, and some say it is manipulated like puppet. Does the government really issue policies that effect the economy in a profound way? Or can they only react?

[RadioRaheem84]

The government has been in control of the economy since the days of FDR. No one since then has really "cut" government, even Reagan. All he did was shift spending from social programs to corporate subsidies. He also gave tax breaks to big business and shifted the tax burden from the upper class to the middle and lower class. Government is still big, it's just in favor of major corporations. Whenever government is for us the little people, then it's "big government".

[Buffalo Souljah]

Since the introduction of the floating currency and the liberalizing Bretton Woods system of monetary policiy, the role of the Fed, especially in international monetary policy has been reduced and the general tendency in production is anarchy. There is a good quote from Georg Lukacs' History and Class Consciousness (from the essay "Class Consciousness") that describes this circumstance with reference to the world economies during the first World War:


...With the crises of the War and the post-war period this tendency has advanced still further: the idea of a ‘planned’ economy has gained ground at least among the more progressive elements of the bourgeoisie. Admittedly this applies only within quite harrow strata of the bourgeoisie and even there it is thought of more as a theoretical experiment than as a practical way out of the impasse brought about by the crises...It's really taken for granted that the Fed has alot of influence (at least terrestrially) in the creation of money and regulating interest rates, and it is not the case that the system of production (at least in the United States) is anarchistic in nature. There are some excellent tomes on the history of the Federal Reserve system which I would recommend you read if you are interested in how money works in the United States.

[Sleeper]

BTPound,

In addition to what has already been said, you might point out that the laissez-faire aspect of Reagan's Economics which also supposedly leads to the trickle-down effect is the exact same economic structure by which the country was put into the Great Depression with Hoover as the President. Furthermore, the country only ever recovered from the Great Depression by way of the, "Big Government," as structured by FDR which your Dad (no doubt) vehemently opposes.

When it comes to Governmental control of the economy, at least in the States, the Government exists primarily to ensure that the status quo is not threatened and that society (from the top down, socio-economically speaking) continues to replicate itself. This is so mostly because of bribery and a fun little thing called, "Campaign Financing," which is also pretty much bribery. Any Legislation that this Government makes that would otherwise appear to threaten the status quo and actually enact some sort of benefit for the greater good of all is simply that, an appearance.

For example, look at the way that the Health Reform Bill has been completely bastardized. The original idea was to enact some sort of fully social, or at least socially controlled health care system, but then the insurance companies put some nice pies out there and the Congresspeople and Senators decided to dip some fingers in. What you finally end up with is something that will more or less lock in high prices for everyone while simultaneously assuring big health insurance companies customers because it is either purchase health insurance or be fined.

In addition to that, one of the only seemingly positive aspects of this bill is that the insurers will have no alternative but to accept patients with pre-existing conditions. I'm glad that people with pre-existing conditions will be accepted, but (and this is a big but) this fact will force all of the small players out of the market who basically survived by offering low-moderate rates to seemingly low risk patients. Again, it is definitely a positive that people with pre-existing conditions will be accepted onto insurance plans, but this would be better done with a Government plan that automatically takes such patients as part of the Government option. I mean, the whole thing should be taken care of by the Government, of course, but if they absolutely insist on maintaining public insurance, then what they have to do is ensure the lowest possible rates for those who are insured privately and this can be done by way of the Government assuming the high-risk patients.

So, essentially, every single aspect of this bill benefits big-time insurance in one way or another. That's why their stock values have been shooting up as the passage of this bill looks more and more inevitable.

[ZeroNowhere]

This (http://libcom.org/forums/theory/state-intervention-financial-system-30012009) is worth reading as regards government intervention during crises.

[Bitter Ashes]

Central banks control intrest rates, which is one of the bigger powers over the economy available in free market economics. The goverment can disort the market if they think they need to with tax cuts, incentives, subsides, nationalisation and bailouts. Even legislation can have an effect on the economy. For example, the minimum wage meant that although many workers benefitted, the bourgeois just upped sticks and moved thier buisness to more expoitative parts of the world. Same sort of thing with regulations. If the banking regulators cracked down on the banks too much, then the banks would just move thier operations abroad where they can fuck with people's lives from there.

It's all pointless though because the whole system of capitalism is broken and cannot be rescued.

[ZeroNowhere]

To add to that, the economy is quite a bit less 'closed' than it used to be in, say, the 1930s, so increasing government intervention in the economy following the crisis (which, I would say, wouldn't accomplish much, but neo-liberalism seems to be suffering the same fate as Keynesianism in the '70s) would give no reason to expect an increased welfare state and so on. Though, of course, one can't expect leftists to stop clamouring for those, given the general association of regulated capitalism with the New Deal and accompanying social reforms.