Keynesian economics during his era

Keynesian economics during his era

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Nowadays in politics, critics of Keynesian economics say it is unsustainable spending. However, I know that John Maynard Keynes actually said budgets should be balanced in the medium term, just not the short term. Did his theory face this same criticism/misconception during his own time, and how did Keynes respond to them?

Keynes' views were widely mis-represented by his disciples, notably Joan Robinson, who was well to the left of him.

Keynes was actually "orthodox" in many ways. With his emphasis on "money," he was actually closer to Milton Friedman than to the "Keynesian" doctrine he is associated with.

Where he differed from "orthodoxy" was in promoting deficit-financed pump-priming policies "this one time," (the Great Depression). His more liberal disciples, like Robinson, preached that such policies should be followed "all the time" because they believed in government spending. Some of them were actually "Fabian" Socialists.

Keynesian economics during his era - History

Myth: Carter ruined the economy Reagan saved it.

Fact: The Federal Reserve Board was responsible for the events of the late 70s and 80s.

Carter cannot be blamed for the double-digit inflation that peaked on his watch, because inflation started growing in 1965 and snowballed for the next 15 years. To battle inflation, Carter appointed Paul Volcker as Chairman of the Federal Reserve Board, who defeated it by putting the nation through an intentional recession. Once the threat of inflation abated in late 1982, Volcker cut interest rates and flooded the economy with money, fueling an expansion that lasted seven years. Neither Carter nor Reagan had much to do with the economic events that occurred during their terms.

In 1980, the "misery index" -- unemployment plus inflation -- crested 20 percent for the first time since World War II. Ronald Reagan blamed this on Jimmy Carter, and went on to win the White House. Reagan then caught the business cycle on an upswing, for what conservatives call "the Seven Fat Years" or "the longest economic expansion in peacetime history."

Were either of these presidents responsible for their fortune with the economy? No. Carter battled the peak of an inflationary trend that began in 1965. In the following chart, take special notice of the long, slow climb in the inflation column:

In 1965, President Johnson started increasing deficit spending to fund the Vietnam war. This fiscal policy (as predicted by Keynesian theory) increased inflation and reduced unemployment.

Unfortunately, inflation is a self-fulfilling prophecy. If business owners expect it, and raise their prices by the anticipated amount to compensate for it, then they have created the very inflation they fear. This process forms a vicious circle -- inflationary expectations and price increases feed off each other, with the potential of creating hyper-inflation. Unfortunately, economic theory at the time was such that economists didn't know how to stop it, at least safely.

Growing inflation in the 70s received two huge boosts: the first comprised the late-1973 and 1979 oil shocks from OPEC (the Organization of Petroleum Exporting Countries). Soaring oil prices compelled most American businesses to raise their prices as well, with inflationary results. The second boost to inflation came in the form of food harvest failures around the world, which created soaring prices on the world food market. Again, U.S. companies that imported food responded with an inflationary rise in their prices.

All this was accompanied by a growing crisis in monetary policy at the Federal Reserve. Traditionally, the Fed has fought inflation by contracting the money supply, and fought unemployment by expanding it. In the 60s, the Fed conducted an expansionary policy, accepting higher inflation in return for lower unemployment. It soon became clear, however, that this strategy was flawed. Expanding the money supply created jobs because it put more money in the hands of employers and consumers, who spent it. But eventually businesses learned to expect these monetary increases, and they simply raised their prices by the anticipated amount (instead of hiring more workers). The result was that the Fed gradually lost its ability to keep down unemployment the more money it pumped into the economy, the more businesses raised their prices. As a result, both inflation and unemployment started growing together, forming a twin monster that economist Paul Samuelson dubbed "stagflation."

Stagflation happened to reach its peak on Carter's watch, spurred on by the 1979 oil shock. How Carter can be blamed for a trend that began a decade and a half earlier is a mystery -- and a testimony as to how presidential candidates often exploit the public's economic ignorance for their own political gain.

However, Carter did in fact take a tremendously important step in ending stagflation. He nominated Paul Volcker for the Chairman of the Federal Reserve Board. Volcker was committed to eradicating stagflation by giving the nation some bitter medicine: an intentional recession. In 1980, Volcker tightened the money supply, which stopped job growth in the economy. In response to hard times, businesses began cutting their prices, and workers their wage demands, to stay in business. Volcker argued that eventually this would wring inflationary expectations out of the system.

The recovery of 1981 was unintentional, and with inflation still high, Volcker tightened the money supply even more severely in 1982. This resulted in the worst recession since the Great Depression. Unemployment in the final quarter of 1982 soared to over 10 percent, and Volcker was accused of the "cold-blooded murder of millions of jobs." Even high-ranking members of Reagan's staff were vehemently opposed to his actions. Congress actually considered bringing the independent Fed under the government's direct control, to avoid such economic pain in the future. Today, economists calculate that the cost of Volcker's anti-inflation medicine was $1 trillion -- an astounding sum. But Wall Street demanded that Volcker stay the course, and that may have been the only thing that saved him.

In the late summer of 1982, inflation looked defeated, so Volcker sharply expanded the money supply. Once as high as 14 percent in 1981, the Fed's discount rate fell from 11 to 8.5 percent between August and December 1982. Within months, the economy roared to life, and took off on an expansion that would last seven years. Because the recession had been so deep, and the number of available workers so large (with not only laid-off workers waiting to return to work, but also a record number of women seeking to join the workforce), the recovery was guaranteed to be long and healthy.

Interestingly, Volcker was transformed from villain to hero after the victory over inflation. His reputation and integrity were so unquestioned that when his term as Chairman came up for renewal, Reagan renominated him with overwhelming popular approval. Another interesting tidbit is that although Volcker's intentional recession was a classically Keynesian approach to combating inflation, he did so under the name of "monetarism". (The policies recommended by the two theories converged at this point.) Milton Friedman, the creator of monetarist theory, and other conservatives were pleased that the Fed had finally converted to monetarism. However, they were outraged in late 1982 when Volcker threw off the cloak of monetarism and openly returned to Keynesian policies for expanding the economy. Most economists now accept that the Fed was not monetarist at all during this period, and that the label was merely political cover for drastic but necessary action.

Of course, conservatives have a far different interpretation of these events. Let's review their arguments:

According to conservatives, increasing taxation and regulation under Carter stifled the economy. Reagan's 1981 budget (the only one not to be declared "Dead on Arrival" by House Democrats) contained across-the-board, supply-side tax cuts that allowed entrepreneurs to invest and increase productivity. Reagan also slashed regulations, unshackling the entrepreneurial spirit of American business.

There are several problems with this historical spin. First, total federal taxation under Carter rose by an insignificant 1.7 percent of the Gross Domestic Product:

To claim that such a minor increase could produce crippling stagflation is to ascribe to the economy an extraordinary sensitivity to taxation. Although many conservative laymen would gladly accept such a notion, it is not one entertained by serious economists. West Germany in the 1980s, for example, had a total taxation rate of 39 percent of its GDP (compared to 29 percent of combined government taxes for the U.S.), and during that decade Germany was an economic powerhouse. If even a few percentage points are the difference between Carter's stagflation and Reagan's boom years, then by all rights West Germany should have been dead.

But that's only the general level of taxation -- what about the top rate? Although the top rate for income taxes was 70 percent under Carter (where it had always been, since Kennedy), Carter gave the rich the most sacred tax cut they hold dear: a capital gains tax cut in 1978, from 39 to 28 percent. Thus, Carter gave the rich their first tax cut in 15 years. According to conservative theory, this should have nudged the economy in the right direction, not sent it into the worst economic crisis since the Great Depression.

Conservatives also criticize Carter's promotion of expanded government regulations. But Carter actually began deregulating during his term in 1978, he deregulated airlines by 1980, he was deregulating trucking, railroads interest rates and oil. All are fundamental to the economy's operations. Carter also set up the deregulatory machinery that Reagan would later use to slash regulations almost in half by the end of his second term. Again, Carter's actions should have nudged the economy in the right direction, not sent it into the worst economic crisis since the Great Depression.

And yet, there is no evidence that regulation was even the cause of the period's stagflation. The economies of Western Europe are far more regulated than the U.S., and their productivity has been growing faster than ours:

Furthermore, Reagan systematically slashed and burned government regulations, but individual worker productivity grew no faster in the 80s than it had during the late 70s (about 1 percent for both periods).

As for the claim that Reagan's 1981 tax cuts were responsible for "the greatest peacetime expansion in U.S. history," a few grains of salt are in order here. The timeline better fits the liberal explanation than the conservative one. Volcker expanded the money supply in late 1982, and a few months later the economy took off. However, Reagan's tax cuts were passed in 1981, and were already in effect by 1982 -- but, as we have seen, 1982 was the year of the horrific recession.

Tax cuts were supposed to have spurred economic recovery by liberating the tax dollars of entrepreneurs and allowing them to invest them in greater productivity and jobs. However, such greater investment never occurred. It appears that the rich simply pocketed the savings, because investment fell during the 80s:

So there is no evidence that the conservative revisionism is true.

1. Inflation: U.S. Bureau of Labor Statistics, CPI-U (1982-84=100), not seasonally adjusted, table CUUR0000SA0. Unemployment: U.S. Bureau of Labor Statistics, Series ID : lfs21000000.

2. Office of Management and Budget, Budget of the United States Government, Fiscal Year 1997, Historical Table 1.2

3. Where We Stand, by Michael Wolff, Peter Rutten, Albert Bayers III, eds., and the World Rank Research Team (New York: Bantam Books, 1992), p. 143.

Federal Growth from 1776 to 1920

The first major event in the growth of the federal government was the ratification of the Constitution in 1789. Before that, the United States was governed under the Articles of Confederation. The Constitution is frequently praised as a document that protects the rights of individuals and limits the powers of government. But a comparison of the Constitution with the Articles reveals that just the opposite is true. Under the Constitution the federal government gained more power, was less accountable, and had greater latitude to determine its own scope of action. That is what the Constitution was intended to accomplish. 1

The Constitution established the Electoral College for the selection of presidents, but specified no method for choosing electors. Several methods were used, but in most states the legislatures picked them. The framers expected that in most elections no candidate would get a majority of electoral votes. That would permit the House of Representatives to name the president from the five top electoral vote getters. That system never worked as envisioned, and by 1828, with the election of Andrew Jackson, the current system of popular voting for electors had become firmly entrenched, and along with it the party system. 2 From then on, successful candidates owed their success to the support of their parties, and in return used the political system to reward those who helped them get elected.

Undoubtedly the biggest event in the growth of the federal government was the Civil War, which established its supremacy over the states. The Civil War brought much new power to the federal government, and laid the groundwork for the growth of interest groups. 3 The first interest group to systematically raid the Treasury for its own benefit was the war veterans. Originally, Union veterans were entitled to pensions only if they had been injured in battle they had up to five years to claim them. In 1870 veterans pensions totaled $286 million in 1990 dollars and should have then declined. Instead they rose to $1,548 million by 1890, because the Republicans, who dominated the White House and looked to veterans for political support, increasingly liberalized the pension laws until every Union veteran of the Civil War qualified. 4

While veterans were a model for future interest groups, the Treasury at that time had decidedly limited means. At any rate, other groups were more interested in regulatory benefits. The Interstate Commerce Commission was created in 1887, and the Sherman Antitrust Act passed in 1890. 5 The transformation of the U.S. government continued as the turn of the century ushered in the Progressive Era. The Food and Drug Administration was created in 1906, the Federal Reserve in 1913, and the Federal Trade Commission in 1914. A government initially committed to protecting the liberty of its citizens now seemed to be just as firmly committed to looking out for their economic welfare.

The Progressive Era was interrupted by World War I, during which federal power advanced in unprecedented ways. The railroads were nationalized, waterborne shipping was regulated, and the United States Food Administration, created in 1917, controlled all aspects of the food industry, from agriculture to distribution to sales. Similar regulation was applied to fuels, and eventually to the whole economy. 6 When the federal income tax was introduced in 1913, the highest tax bracket was 7 percent for all income above $20,000. Because of the demand for war-related spending, by 1918 the highest rate rose to 77 percent beginning at $4,000. This was the context in which Warren G. Harding was elected to the presidency in 1920 with the theme, a “return to normalcy.”

Addressing the Public

In combination with the bank holiday, Roosevelt called on Congress to come up with new emergency banking legislation to further aid the ailing financial institutions of America. On March 12, 1933, he took one more important step, delivering a relatively informal address on the banking crisis that would be broadcast over the radio. In that first speech, Roosevelt praised the 𠇏ortitude and good temper with which everybody [accepted] the hardships of the banking holiday.” The holiday, as well as the radio address, seemed to have the intended effect: When the banks opened again, the panicked �nk runs” that people had feared did not materialize, showing that public confidence had been restored in some measure for the time being.

During the 1930s, well before the advent of television, some 90 percent of American households owned a radio. Seeing the potential of mass media to communicate directly and intimately with the public, Roosevelt would give around 30 total radio addresses from March 1933 to June 1944. The topics he spoke about ranged from domestic issues such as the economic policies of the New Deal, drought and unemployment, to Europe’s battle with fascism and American military progress in Europe and in the Pacific during World War II.

Keynesian economics during his era - History

The Clinton Presidency: Historic Economic Growth

The Clinton Presidency:
Historic Economic Growth

In 1993, President Clinton and Vice President Gore launched their economic strategy: (1) establishing fiscal discipline, eliminating the budget deficit, keeping interest rates low, and spurring private-sector investment (2) investing in people through education, training, science, and research and (3) opening foreign markets so American workers can compete abroad. After eight years, the results of President Clinton's economic leadership are clear. Record budget deficits have become record surpluses, 22 million new jobs have been created, unemployment and core inflation are at their lowest levels in more than 30 years, and America is in the midst of the longest economic expansion in our history.

  • Strong Economic Growth: Since President Clinton and Vice President Gore took office, economic growth has averaged 4.0 percent per year, compared to average growth of 2.8 percent during the Reagan-Bush years. The economy has grown for 116 consecutive months, the most in history.
  • Most New Jobs Ever Created Under a Single Administration: The economy has created more than 22.5 million jobs in less than eight years—the most jobs ever created under a single administration, and more than were created in the previous 12 years. Of the total new jobs, 20.7 million, or 92 percent, are in the private sector.
  • Median Family Income Up $6,000 since 1993: Economic gains have been made across the spectrum as family incomes increased for all Americans. Since 1993, real median family income has increased by $6,338, from $42,612 in 1993 to $48,950 in 1999 (in 1999 dollars).
  • Unemployment at Its Lowest Level in More than 30 Years: Overall unemployment has dropped to the lowest level in more than 30 years, down from 6.9 percent in 1993 to just 4.0 percent in November 2000. The unemployment rate has been below 5 percent for 40 consecutive months. Unemployment for African Americans has fallen from 14.2 percent in 1992 to 7.3 percent in October 2000, the lowest rate on record. Unemployment for Hispanics has fallen from 11.8 percent in October 1992 to 5.0 percent in October 2000, also the lowest rate on record.
  • Lowest Inflation since the 1960s: Inflation is at the lowest rate since the Kennedy Administration, averaging 2.5 percent, and it is down from 4.7 percent during the previous administration.
  • Highest Homeownership Rate on Record: The homeownership rate reached 67.7 percent for the third quarter of 2000, the highest rate on record. In contrast, the homeownership rate fell from 65.6 percent in the first quarter of 1981 to 63.7 percent in the first quarter of 1993.
  • 7 Million Fewer Americans Living in Poverty: The poverty rate has declined from 15.1 percent in 1993 to 11.8 percent last year, the largest six-year drop in poverty in nearly 30 years. There are now 7 million fewer people in poverty than there were in 1993.

Establishing Fiscal Discipline and Paying off the National Debt

  • Largest Surplus Ever: The surplus in FY 2000 is $237 billion—the third consecutive surplus and the largest surplus ever.
  • Largest Three-Year Debt Pay-Down Ever: Between 1998-2000, the publicly held debt was reduced by $363 billion—the largest three-year pay-down in American history. Under Presidents Reagan and Bush, the debt held by the public quadrupled. Under the Clinton-Gore budget, we are on track to pay off the entire publicly held debt on a net basis by 2009.
  • Lower Federal Government Spending: After increasing under the previous two administrations, federal government spending as a share of the economy has been cut from 22.2 percent in 1992 to 18 percent in 2000—the lowest level since 1966.
  • Reduced Interest Payments on the Debt: In 1993, the net interest payments on the debt held by the public were projected to grow to $348 billion in FY 2000. In 2000, interest payments on the debt were $125 billion lower than projected.
  • Americans Benefit from Reduced Debt: Because of fiscal discipline and deficit and debt reduction, it is estimated that a family with a home mortgage of $100,000 might expect to save roughly $2,000 per year in mortgage payments, like a large tax cut.
  • Double Digit Growth in Private Investment in Equipment and Software: Lower debt will help maintain strong economic growth and fuel private investments. With government no longer draining resources out of capital markets, private investment in equipment and software averaged 13.3 percent annual growth since 1993, compared to 4.7 percent during 1981 to 1992.
  • Enacted the 1993 Deficit Reduction Plan without a Single Republican Vote. Prior to 1993, the debate over fiscal policy often revolved around a false choice between public investment and deficit reduction. The 1993 deficit reduction plan showed that deficit and debt reductions could be accomplished in a progressive way by slashing the deficit in half and making important investments in our future, including education, health care, and science and technology research. The plan included more than $500 billion in deficit reduction. It also cut taxes for 15 million of the hardest-pressed Americans by expanding the Earned Income Tax Credit created the Direct Student Loan Program created the first nine Empowerment Zones and first 95 Enterprise Communities and passed tax cuts for small businesses and research and development.
  • Negotiated the Balanced Budget Agreement of 1997. In his 1997 State of the Union address, President Clinton announced his plan to balance the budget for the first time in 27 years. Later that year, he signed the Balanced Budget Act of 1997, a major bipartisan agreement to eliminate the national budget deficit, create the conditions for economic growth, and invest in the education and health of our people. It provided middle-class tax relief with a $500 per child tax credit and the Hope Scholarship and Lifetime Learning tax credits for college. It also created the Children's Health Insurance Program to serve up to 5 million children and made landmark investments in education initiatives including educational technology, charter schools, Head Start, and Pell Grants. Finally, it added 20 more Empowerment Zones and 20 more rural Enterprise Communities, included the President's plan to revitalize the District of Columbia, and continued welfare reform though $3 billion in new resources to move welfare recipients to private-sector jobs.
  • Dedicated the Surplus to Save Social Security and Reduce the National Debt. In his 1998 and 1999 State of the Union addresses, President Clinton called on the nation to save the surplus until the solvency of Social Security is assured. He also repeatedly vetoed large Republican tax cut bills that would have jeopardized our nation's fiscal discipline. The President's actions led to a bipartisan consensus on saving the surplus and paying down the debt.
  • Extended Medicare Solvency from 1999 to 2025. When President Clinton took office, Medicare was expected to become insolvent in 1999, then only six years away. The 1993 deficit reduction act dedicated some of the taxes paid by Social Security beneficiaries to the Medicare Trust Fund and extended the life of Medicare by three years to 2002. Thanks to additional provisions to combat waste, fraud and abuse and bipartisan cooperation in the 1997 balanced budget agreement, Medicare is now expected to remain solvent until 2025.

Clinton-Gore Economic Policy Has Dramatically Improved the Economy

"My colleagues and I have been very appreciative of your [President Clinton's] support of the Fed over the years, and your commitment to fiscal discipline has been instrumental in achieving what in a few weeks will be the longest economic expansion in the nation's history."
— Alan Greenspan , Federal Reserve Board Chairman, January 4, 2000, with President Clinton at Chairman Greenspan's re-nomination announcement

"The deficit has come down, and I give the Clinton Administration and President Clinton himself a lot of credit for that. [He] did something about it, fast. And I think we are seeing some benefits."
— Paul Volcker , Federal Reserve Board Chairman (1979-1987), in Audacity, Fall 1994

One of the reasons Goldman Sachs cites for the "best economy ever" is that "on the policy side, trade, fiscal, and monetary policies have been excellent, working in ways that have facilitated growth without inflation. The Clinton Administration has worked to liberalize trade and has used any revenue windfalls to reduce the federal budget deficit."
— Goldman Sachs , March 1998

"Clinton's 1993 budget cuts, which reduced projected red ink by more than $400 billion over five years, sparked a major drop in interest rates that helped boost investment in all the equipment and systems that brought forth the New Age economy of technological innovation and rising productivity."
— Business Week , May 19, 1997

Opening World Markets to American Goods and Providing Leadership on Globalization

  • 300 Trade Agreements: President Clinton has opened markets for U.S. exports abroad and created American jobs through nearly 300 free and fair trade agreements.
  • The Most U.S. Exports Ever. Between 1992 and 2000, U.S. exports of goods and services grew by 74 percent, or nearly $500 billion, to top $1 trillion for the first time.
  • 1.4 Million More Jobs due to Exports: Jobs supported by American exports grew by 1.4 million between 1994 and 1998, with jobs supported by exports paying about 13 percent to 16 percent above the U.S. national average. Jobs related to goods exports pay, on average, 13 to 16 percent higher than other jobs.
  • Lowest Inflation since the 1960s: Inflation is at the lowest rate since the Kennedy Administration, in part because global competition has kept prices low. It has averaged 2.5 percent under this Administration, down from 4.6 percent during the previous administration.
  • Won Ratification of the North America Free Trade Agreement (NAFTA) in 1993 , creating the world's largest free trade zone of the U.S., Canada, and Mexico. U.S. exports to Mexico grew 109 percent from 1993 to 1999, while exports to the rest of the world grew by 49 percent.
  • Won Approval of Permanent Normal Trade Relations with China. In 2000, Congress ratified permanent normal trade relations with China. The agreement will integrate China into the world economy through entry into the World Trade Organization (WTO), open Chinese market to U.S. exports, slash Chinese tariffs, and protect American workers and companies against dumping.
  • Successfully Completed the Uruguay Round. The 1994 Uruguay Round transformed the world trading system, opening markets in a wide range of industries, enabling the U.S. to enforce agreements more effectively, and applying the rules for the first time to all WTO members (now 138 in total).
  • Fought for the First-Ever African and the Caribbean Basin Trade Bills. The African Growth and Opportunity Act of 2000 will support increased trade and investment between the United States and Africa, strengthen African economies and democratic governments, and increase partnerships to counter terrorism, crime, environmental degradation and disease. The legislation will also create incentives for the countries of sub-Saharan Africa and the Caribbean Basin to continue reforming their economies.
  • Promoted Trade Opportunities for High Technology. The Clinton Administration completed series of trade agreements on technology, including the WTO's commitment to duty-free cyberspace, keeping the Internet free of trade barriers, in 1998 the global WTO agreements on Financial Services and Basic Telecommunications in 1997 the global WTO agreement on Information Technology in 1996 and a series of bilateral agreements on intellectual property, high-tech products, services and other sectors. These efforts are the building blocks of the New Economy.
  • Secured Historic Debt Relief. In March 1999, President Clinton presented a plan to a U.S.-Africa Summit in Washington that became the basis for the G-7 agreement in Cologne, Germany (known as the Cologne Debt Initiative). The plan would triple the amount of debt relief available for poor countries, reducing their debt by about 70 percent ($90 billion), in return for firm commitments to channel the benefits into improving the lives of all their people. In September 1999, the President announced that the U.S. would unilaterally exceed the terms of the G-7 initiative and entirely cancel the $5.7 billion in U.S. government debt owed by qualifying countries. In November 2000, President Clinton won $435 million from Congress for U.S. participation in the Cologne Initiative.
  • Dramatically Expanded U.S. Efforts to Fight Child Labor and Expand Basic Education. In June 1999, the President traveled to the International Labor Organization (ILO) conference in Geneva, Switzerland, to urge adoption of an historic international convention banning the worst forms of child labor. He won $30 million for ILO enforcement of child labor laws and is fighting for a new initiative to promote basic education in areas of the world where child labor is widespread. In 2000, at U.S. urging, the G-8 countries endorsed the goal of universal basic education. President Clinton brought other issues to the forefront of the international economic agenda, including incorporating labor and environmental considerations in the work of major international economic institutions, increasing U.S. support for global efforts to fight HIV-AIDS and infectious diseases, and closing the digital divide.
  • Defused International Economic Crises. In 1995, after Congress refused to act, President Clinton made $20 billion in emergency loans to Mexico to stabilize the country's financial markets. Mexico repaid the loans in full, with interest, three years ahead of schedule. Following the Asian and Russian financial crises in 1997 and 1998, the Clinton-Gore Administration led a global effort to re-capitalize the International Monetary Fund to allow it to more effectively deal with these problems. President Clinton also insisted that the G-7 develop a set of measures to restore confidence in the world financial system.
  • Promoted U.S. Competitiveness. The Clinton-Gore Administration has made key investments in education and training for American workers and research and development. It has also maintained federal fiscal discipline, helping to reduce interest rates, encourage private-sector investment, and keep productivity high.

Rewarding Work and Empowering Communities

  • Higher Incomes at All Levels: After years of stagnant income growth among average and lower-income families, all income brackets have experienced double-digit income growth since 1993. The bottom 20 percent saw the largest income growth at 16.3 percent.
  • Lowest Poverty Rate in 20 Years: Since Congress passed President Clinton's Economic Plan in 1993, the poverty rate declined from 15.1 percent to 11.8 percent last year, the largest six-year drop in poverty in nearly 30 years. There are now 7 million fewer people in poverty than there were in 1993. The child poverty rate has declined more than 25 percent, the poverty rate for single mothers is the lowest ever, the African American and elderly poverty rates dropped to their lowest level on record, and the Hispanic poverty rate dropped to its lowest level since 1979.
  • Lowest Poverty Rate for Single Mothers on Record: Under President Clinton, the poverty rate for families with single mothers has fallen from 46.1 percent in 1993 to 35.7 percent in 1999, the lowest level on record. Between 1980 and 1992, an additional 2.1 million households headed by single women were pushed into poverty.
  • Smallest Welfare Rolls Since 1969: Under the Clinton-Gore Administration, the welfare rolls have dropped dramatically and are now the lowest since 1969. Between January 1993 and September of 1999, the number of welfare recipients dropped by 7.5 million (a 53 percent decline) to 6.6 million. In comparison, between 1981-1992, the number of welfare recipients increased by 2.5 million (a 22 percent increase) to 13.6 million people.
  • Ended Welfare as We Knew It. In 1996, President Clinton signed legislation requiring welfare recipients to work, limiting the time they can stay on welfare, and providing child care and health care to help them begin work. It also enacted tough new child support enforcement measures proposed by the President. In 1997, President Clinton won the welfare-to-work tax credit to encourage employers to hire long-term welfare recipients and $3 billion in additional resources to help communities move long-term welfare recipients into lasting, unsubsidized jobs.
  • Rewarded Work by Expanding the Earned Income Tax Credit. In 1993, President Clinton succeeded in winning passage of an expansion of the Earned Income Tax Credit, giving a tax cut to 15 million of the hardest-pressed American workers. In 1999, the EITC lifted 4.1 million people out of poverty, nearly double the number lifted out of poverty by the EITC in 1993.
  • Created Empowerment Zones. The 1993 Clinton-Gore economic plan created nine Empowerment Zones and 95 Enterprise Communities to spur local community planning and economic growth in distressed communities through tax incentives and federal investment. The President won expansions of the program in 1994, 1997, and again in 2000. To date, the 31 Empowerment Zones and 95 Enterprise Communities have leveraged over $10 billion in new private sector investment, creating thousands of new jobs for local residents.
  • Created Community Development Financial Institutions. In September 1994, the President signed legislation creating the Community Development Financial Institutions (CDFI) Fund, a Clinton campaign proposal to support specialized financial institutions serving often-overlooked customers and communities. The Fund has certified over 400 CDFIs. It has provided over $427 million to match investments in CDFIs and to encourage traditional financial institutions to increase their lending, investment and services in under-served markets.
  • Strengthened the Community Reinvestment Act. In 1995, the Administration updated the Community Reinvestment Act regulations to focus on banks' actual service delivery, rather than on compliance efforts. From 1993 to 1998, lenders subject to the law increased mortgage lending to low- and moderate-income families by 80 percent—more than twice the rate they increased mortgage lending to other income groups.
  • Encouraged Investment in America's New Markets. In 1999, the President went on two historic "New Markets" trips to highlight the continuing need to bring investment to impoverished inner cities, rural communities and Native American tribal lands. In 2000, the President and Congress worked together to pass this bipartisan initiative to stimulate new private capital investments in economically distressed communities and build network of private investment institutions to funnel credit, equity and technical assistance to businesses in America's new markets.
  • Raised the Minimum Wage. In 1996, President Clinton and Vice President Gore fought for and won a 90-cent per hour increase in the minimum wage, helping 10 million workers.
  • Helped People with Disabilities Work. In 1999, President Clinton insisted that Congress pass the Work Incentives Improvement Act as a condition of the budget agreement. This bipartisan law allows people with disabilities to maintain their Medicare or Medicaid coverage when they work.

Modernizing for the New Economy through Technology and Consensus Deregulation

  • Modernized Financial Services Laws. In 1993, the laws that governed America's financial service sector were antiquated and anti-competitive. The Clinton-Gore Administration fought to modernize those laws to increase competition in traditional banking, insurance, and securities industries to give consumers and small businesses more choices and lower costs. In 1994, the Clinton-Gore Administration broke another decades-old logjam by allowing banks to branch across state lines in the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. President Clinton fought for and won financial modernization legislation, signing the Gramm-Leach-Bliley Act in November 1999.
  • Reformed Telecommunications. In 1996, President Clinton signed legislation to open up competition between local telephone companies, long distance providers and cable companies. The law also requires the use of new V-chip technology to give families greater control over which television programming comes into their homes.
  • Created the E-Rate. With the leadership of Vice President Gore, the Telecommunications Act contained the E-Rate initiative, which provides low-cost Internet connections for schools, libraries, rural health clinics and hospitals. More than 80 percent of America's public schools have benefited from the E-rate, which has helped connect 30 million children and up to 47,000 schools and libraries to the Internet. The percentage of public schools connected to the Internet has increased from 35 percent in 1994 to 95 percent in 1999. The percentage of classrooms connected to the Internet has increased from 3 percent in 1994 to 63 percent in 1999.
  • Increased Resources for Educational Technology by Over 3,000 Percent. President Clinton and Vice President Gore increased our investment in educational technology by over 3,000 percent, from $23 million in FY 1994 to $769 million in FY 2000, including training over 600,000 new teachers to use technology effectively in the classroom.
  • Paved the Way for Electronic Commerce. President Clinton fought to eliminate legal barriers to using electronic technology to form and sign contracts, collect and store documents, and send and receive notices and disclosures, while ensuring that consumers on-line have the same protections that they have in the paper world. He signed the Electronic Signatures in Global and National Commerce Act on June 30, 2000.
  • Creating Market Opportunities for Technology Firms. The Clinton-Gore Administration adopted a market-led approach on e-commerce, making spectrum available for digital wireless, and reforming Cold War export controls.
  • Worked to Close the Digital Divide. Since 1992, the President and Vice President have tripled funding for Community Technology Centers, which provide access to computers and the Internet to low-income urban and rural neighborhoods. President Clinton also challenged the private sector to develop new business models for low-cost computers and Internet access to make universal access at home affordable for all Americans. The Technology Literacy Challenge Fund has provided $1 billion in federal resources to help schools work with businesses and community organizations to put modern computers, high-quality educational software, and affordable connections to the Internet in every classroom. The Taxpayer Relief Act of 1997 created a temporary tax deduction for donations of computers to elementary and secondary schools.
  • Forged Trade Agreements on High Technology. The Clinton Administration completed series of trade agreements on technology, including the WTO's commitment to duty-free cyberspace, keeping the Internet free of trade barriers, in 1998 the global WTO agreements on Financial Services and Basic Telecommunications in 1997 the global WTO agreement on Information Technology in 1996 and a series of bilateral agreements on intellectual property, high-tech products, services and other sectors all soon to be capped by the opening of a major networked economy initiative.

Investing in Educating and Training the American People

  • More Americans Are Enrolling in College: 66 percent of 1998 high school graduates enrolled in college or trade school the next fall, compared to 60 percent in 1990.
  • More High School Students Are Preparing for College: The percentage of high school graduates who have taken four years of English and three years each of math, science, and social studies increased from 38 percent to 55 percent between 1990 and 1998. Research shows that high-quality academics in high school is key to college success.
  • More Americans Are Earning College Degrees: Over 32 percent of 25- to 29-year-old high school graduates had earned at least a bachelor's degree in 1999, up from 27 percent in 1990. In particular, white and African American women have seen their college opportunities grow.
  • Americans Are Becoming Lifelong Learners: 50 percent of adults participated in formal learning in the year prior to a 1999 survey, up from 38 percent in 1991.
  • Created the College Tax Credits, the Largest Single Investment in Higher Education since the G.I. Bill. A $1,500 tax credit for the first two years of college, the Hope Scholarship will pay for nearly all of a typical community college's tuition and fees. The $1,000 Lifetime Learning Tax Credit reimburses families for 20 percent of their tuition and fees (up to $5,000 per family) for college, graduate study, or job training. Starting in 2003, the credit will reimburse families for 20 percent of their costs up to $10,000, for a maximum value of $2,000. This year, 10 million American families will save over $7 billion through the college tax credits.
  • Doubled Student Financial Aid. Students will receive over $50 billion in federal grants, loans, and work-study aid this year, up from $25 billion in 1993. President Clinton has consistently supported budget increases for Pell Grants this year, over 3.8 million needy students receive a Pell Grant scholarship of up to $3,300, a $1,000 larger maximum grant than in 1993. The President won another increase for Pell Grants in the FY 2001 budget, bringing the maximum grant to $3,750. The President also won increases in work-study funding to help one million students pay for college.
  • Created Direct Student Loans and Reduced Interest Rates. In the Student Loan Reform Act of 1993, President Clinton won the Direct Student Loan program to improve customer service and compete with guaranteed lenders. It has saved taxpayers over $4 billion so far by eliminating lender subsidies. President Clinton also fought to reduce interest rates and fees in the Student Loan Reform Act of 1993 and the Higher Education Amendments of 1998. As a result, students can expect to pay $1,300 less in interest and fees for the average $10,000 loan than they would have in 1992. The student loan default rate is now 6.9 percent, down from 22.4 percent eight years ago.
  • Created New Paths to College through GEAR UP, AmeriCorps, and TRIO. President Clinton won the new GEAR UP initiative in the Higher Education Amendments of 1998 which is already helping 700,000 low-income middle school students prepare for college. Over 150,000 Americans have earned money for college while serving their communities through President Clinton's AmeriCorps program, a campaign promise enacted in 1993. To help disadvantaged youth prepare for and succeed in college, the TRIO programs have grown by $342 million over the past eight years.
  • Strengthened Elementary and Secondary Education. In 1994, President Clinton reformed federal education initiatives in the Improving America's Schools Act and the Goals 2000 Act. The President's new approach was grounded in the principles that all of America's students should meet high academic standards and the federal government should make new investments to help them meet those standards. The President has also fought to hire 100,000 teachers, promote educational technology, support charter schools, build K-16 partnerships, and focus on early reading through America Reads.
  • Passed the Workforce Investment Act of 1998. In 1992, President Clinton and Vice President Gore proposed to streamline and bring greater accountability to our nation's job training system. In 1998, they won legislation to meet the needs of both America's workers and businesses by encouraging local control of training and employment programs helping customers locate assistance through one-stop centers and empower adults to receive the training they need.

Reducing Tax Burdens for Average and Hard-Pressed Working Families.

  • Lowest Federal Income Tax Burden in 35 Years: Federal income taxes as a percentage of income for the typical American family have dropped to their lowest level in 35 years.
  • Higher Incomes even after Taxes and Inflation: Real after-tax incomes have grown for Americans at all income levels, much faster than they did prior to the Clinton-Gore Administration. Real after-tax incomes grew by an average of 2.6 percent per year for the lower-income half of taxpayers between 1993 and 1997, while growing by an average of 1.0 percent between 1981 and 1993.
  • Expanded the Earned Income Tax Credit. In 1993, President Clinton succeeded in expanding the Earned Income Tax Credit, giving a tax cut to 15 million of the hardest-pressed American workers. In 1999, the EITC lifted 4.1 million people out of poverty, nearly double the number lifted out of poverty by the EITC in 1993.
  • Created the $500 per Child Tax Credit. In 1997, President Clinton secured a $500 per child tax credit for 27 million families with children under 17, including 13 million children from families with incomes below $30,000.
  • Won the Hope Scholarship Tax Credit. President Clinton proposed tax credits for college tuition in 1996 and signed them into law in 1997 as part of the balanced budget agreement. The Hope Scholarship provides a tax credit of up to $1,500 for tuition and fees for the first two years of college, roughly equal to the cost of the average community college. It will save American families $4.9 billion this year.
  • Won the Lifetime Learning Tax Credit. Also enacted in 1997, the Lifetime Learning tax credit provides a 20 percent tax credit on $5,000 of tuition and fees (to be raised to $10,000 in 2003) for college and graduate students and adults taking job training. It will reduce the cost of college and job training for American families by $2.4 billion this year.
  • Established Education IRAs. The 1997 balanced budget agreement also created Education IRAs. For each child under age 18, families may now deposit $500 per year into an Education IRA in the child's name. Earnings in the Education IRA accumulate tax-free and no taxes will be due upon withdrawal if the money is used to pay for college. The law also allowed taxpayers to withdraw funds from a traditional IRA without penalty to pay for higher education for themselves or their spouse, child, or even grandchild.
  • Created Empowerment Zones. President Clinton created Empowerment Zones and Enterprise Communities in 1993 and expanded them in 1994, 1997 and again in 2000 to spur economic growth in distressed communities through tax incentives and federal investment. To date, the 31 Empowerment Zones and 95 Enterprise Communities have leveraged over $10 billion in new private sector investment, creating thousands of new jobs for local residents.
  • Simplified Pension Rules. In 1996, President Clinton signed the SIMPLE (Savings Incentive Match Plan for Employees) plan into law, simplifying and expanding retirement plan coverage for small businesses.
  • Simplified Tax Laws and Protected Taxpayer Rights. President Clinton signed the Taxpayer Relief Act of 1997 to simplify the tax laws and enhance taxpayers' rights. The law has saved families and businesses millions of hours be simplifying and reducing paperwork, such as allowing a tax exclusion for income from the sale of a home.
  • Closed Tax Loopholes. To ensure that all taxpayers pay their fair share, the Clinton Administration addressed the use and proliferation of corporate tax shelters by proposing several remedies to curb the growth of such shelters by increasing disclosure of sheltering activities, increasing and strengthening the substantial understatement penalty, codifying the judicially-created economic substance doctrine, and providing consequences to all parties involved in an abusive sheltering transaction.


Trade Expands Opportunity for American Workers

"Harley-Davidson is growing rapidly, and sales to other countries is one reason why. President Clinton's efforts to open foreign markets have made a difference and helped create jobs at Harley-Davidson."
— Bobby Ramsey began working at the Harley-Davidson York plant in 1972 and is now responsible for inspecting all incoming motorcycle parts prior to the assembly process. Since 1995, Mr. Ramsey has also been his union's Chief Shop Steward, which entails handling all second step grievances of workers and helping represent his co-workers to management. U.S. exports of motorcycles and parts have grown by 15 percent a year from 1987 to 1998, reaching one-third of industry sales. Harley-Davidson will export 22 percent of the motorcycles produced in Mr. Ramsey's plant. By 2003, Harley-Davidson expects to double production from 1996 levels largely because of exports, creating new jobs for American workers.

"Kodak and its employees have experienced significant gains because of NAFTA. The NAFTA has enabled Kodak to realize considerable tariff savings and to make production decisions based on rational economic grounds rather than on tariff considerations. For example, the agreement has enabled Kodak to transfer a high-cost sensitizing operation for color negative film from Mexico to Rochester, New York. In all, NAFTA has been a win-win-win for Kodak's operations in Canada, Mexico and the United States."
— Dan Carp, President and CEO of the Eastman Kodak company , credits NAFTA with Kodak's rapid growth in export sales. Eastman Kodak manufactures high technology imaging products for sale in 160 countries. Under NAFTA, Mexican duties on film and photo paper have been reduced from 15 to 30 percent to 6 to 9 percent, and they will be eliminated by 2004. Kodak's exports to Mexico have more than doubled since 1993, creating greater stability and more job opportunities for Kodak's 54,000 employees.

Making the Dream of Homeownership a Reality

"I feel true independence in owning my own home. To those who think it's impossible: It is possible. Don't let anyone talk you out of it."
— Lucy Vocu, a teacher and single mother . Lucy Vocu has lived on the Pine Ridge reservation all her life. In 1985, Lucy got her GED, and in 1994, she graduated from Oglala Lakota College with a Bachelor of Science in Elementary Education. She currently works for the Shannon County school system at Wolf Creek School. Her children, Grace, 15, and Jacob, 7, spend a lot of time using their computer. Jacob recently tracked tornadoes on the Internet. Lucy is a first-time homeowner. She moved from a two-bedroom rental house into this new three-bedroom home, which offers more privacy. Lucy is excited about being a new homeowner and, if her budget allows, she hopes to add to her new home a swing set for Jacob and a basketball net for Grace.

"The social workers at Marion House, which has received funding from HUD's homeless grants, helped me get back on my feet. They counseled me on how to find a job and helped me learn the skills I would need to stay employed. Today I am newly married, and I have been working the last four years as a secretary for a social service agency. And I am delighted to say . . . I am a homeowner. Because of your leadership President Clinton, and because of your commitment to providing funding for homeless programs across the country, there will be hope and optimism in place of despair."
— Christa Spangler, of Baltimore, MD, December 23, 1998 . Christa Spangler was a formerly homeless woman who hit rock bottom in 1994 when she was forced to live in her car. Previously, she had lost custody of her children, and spent eleven years in and out of halfway houses, rehab clinics, and hospitals. She found her way to Marion House, a Catholic transitional housing program for homeless women and children. Christa is now married, working as a receptionist and living in her own home. Federal resources pay 25 percent of the Marion House budget.

Empowerment Zones Are a Potent Weapon Against Poverty

"I am living proof that the Empowerment Zone works! If it wasn't for the Empowerment Zone, I would have never have had the chance to buy this building or to expand my business. We are fighting the war against poverty throughout our neighborhoods and cities, but we have a very potent weapon — the Empowerment Zones. And we will use that weapon to win this war because, after all, our future and our children's future depends on it. We must never give up hope."
— Nancy Santana , 37, is a single mother of three who lives in North Philadelphia, Pennsylvania. She used resources and a loan she obtained through her local Empowerment Zone to move from welfare to start her own business, Nancy Santana's Cleaning and Maintenance Services. Four years later, her business employs over 25 people, many of whom she recruited off of welfare.

Community Development Financial Institutions Expand Economic Opportunity

"President Clinton's efforts have been very helpful to me. I had trouble getting funding from other sources. The Enterprise Corporation of the Delta has worked with me and people in my community, helping us improve our position in life. Now, I can get into this business, where otherwise I could not have."
— Ephron Lewis co-founded Lewis & Sons Rice Processing — the only African-American-owned rice processing company in the country — with his father. The construction of his plant was made possible by a loan and technical assistance from the Enterprise Corporation of the Delta, a community development financial institution supported by the Department of Housing and Urban Development. He now farms roughly 3,000 acres, producing rice, wheat and soybeans.

Encouraging the Growth of Small Businesses

"I started my small consulting and legal firm with the principle that everyone should have a shot at the twin American dreams of owning your own business and owning your own home. I look for the dreamers, the ones who want to be a part of this country in the best way, but who don't have the tools and information they need. I hope to be an instrument of growth and change in Brooklyn's Latino community through increased business opportunities. This SBA loan will allow me to set up an office outside my home, close to where I can make the most of the services I have to offer."
— Enealia Nau, Small Business Owner from Brooklyn, NY . Enealia Nau is a first-generation American who operates a small business consulting firm from her home in Brooklyn. After putting herself through college and law school, Ms. Nau started her consulting firm that focuses on the legal and financial needs of the minority communities from which she draws her clients. Ms. Nau helps families from minority communities realize the American dream through starting their own businesses — from beauty shops to corner stores — and buying their first homes. She has seen many clients start from nothing and build prosperous lives for their families through small businesses, including one client who started with a small "bodega" and now owns one of the largest grocery stores in Brooklyn.

Expanding Economic Opportunity by Closing the Digital Divide

"Bridging the technology gap in Indian Country is a major challenge, and I am grateful for the attention that the Clinton Administration has given to this critical issue. The National Congress of American Indians is building on the initiatives announced during the President's Digital Divide tour stop at the Navajo Nation in April 2000 through its Tribal Leaders Digital Divide Task Force, funded through the AOL Foundation. Through the Task Force, we are actively working with industry, federal officials, and others to forge a new tribal-based partnerships and policy recommendations to close the technology gap."
— Susan Masten, President, National Congress of American Indians, and Chairwoman, Yurok Tribe . Susan Masten has served as a strong advocate for the betterment of Native communities on a local, state and national level for 22 years.

"Community technology centers provide low-income individuals with skills training and the ability to produce their dreams. They are also an important entryway to the technology industry. We think of President Clinton as our first angel investor his Administration's work has been fundamental to Plugged In and to the community technology center movement."
— Magda Escobar, Executive Director, Plugged In, East Palo Alto, California . East Palo Alto, a low-income community, is located in Silicon Valley, the epicenter of the technological revolution. Plugged In trains teenagers and employs them in a web design business provides a creative arts and technology studio and after-school program and provides community members with access to computers and telecommunications equipment to increase their employment opportunities

Treatise on Money and the General Theory of Employment, Interest and Money – 1927 to 1939

1927 Keynes continues working in his academic and bursarial duties at King’s College, a variety of business roles and his editorial and journalistic activities. He takes a less prominent role in public life as he develops ideas and drafts his next major work – A Treatise on Money.
Summer 1929 Keynes is made Fellow of the British Academy.
October 1929 Led by Wall Street, the world’s stock markets crash, heralding an economic depression.
4 November 1929Keynes joins the government’s Macmillan Committee of Enquiry into Finance and Industry.
30 January 1930Keynes joins the Economic Advisory Council, set up to report to the government on economic policy.
10 May 1930Keynes writes in the Nation:

He meets President Roosevelt who writes to Felix Frankfurter, “I had a grand talk with K and liked him immensely…”

Keynes, the economist, is best known for his proposal that when national economies suffer a downturn, governments should borrow and spend money to boost economic activity. Part of the proceeds of the resulting economic growth should then be used to repay the debt. One of Keynes’s major contributions to investment methodology was his championing of concentrated investment portfolios. These, he proposed, should consist exclusively of investments about which the investor had become highly knowledgeable.

Hoover’s early career

Hoover, a very successful mining engineer, thought that the engineer’s focus on efficiency could enable government to play a larger and more constructive role in the economy. In 1917, he became head of the wartime Food Administration, working to reduce American food consumption. Many Democrats, including FDR, saw him as a potential presidential candidate for their party in the 1920s. For most of the 1920s, Hoover was Secretary of Commerce under Republican Presidents Harding and Coolidge. As Commerce Secretary during the 1920-21 recession, Hoover convened conferences between government officials and business leaders as a way to use government to generate “cooperation” rather than individualistic competition. He particularly liked using the “cooperation” that was seen during wartime as an example to follow during economic crises. In contrast to Harding’s more genuine commitment to laissez-faire, Hoover began one 1921 conference with a call to “do something” rather than nothing. That conference ended with a call for more government planning to avoid future depressions, as well as using public works as a solution once they started. 2 Pulitzer-Prize winning historian David Kennedy summarized Hoover’s work in the 1920-21 recession this way: “No previous administration had moved so purposefully and so creatively in the face of an economic downturn. Hoover had definitively made the point that government should not stand by idly when confronted with economic difficulty.” 3 Harding, and later Coolidge, rejected most of Hoover’s ideas. This may well explain why the 1920-21 recession, as steep as it was, was fairly short, lasting 18 months.

Interestingly, though, in his role as Commerce Secretary, Hoover created a new government program called “Own Your Own Home,” which was designed to increase the level of homeownership. Hoover jawboned lenders and the construction industry to devote more resources to homeownership, and he argued for new rules that would allow federally chartered banks to do more residential lending. In 1927, Congress complied, and with this government stamp of approval and the resources made available by Federal Reserve expansionary policies through the decade, mortgage lending boomed. Not surprisingly, this program became part of the disaster of the depression, as bank failures dried up sources of funds, preventing the frequent refinancing that was common at the time, and high unemployment rates made the government-encouraged mortgages unaffordable. The result was a large increase in foreclosures. 4

Keynesian economics during his era - History

People create the society in which they live, and society has a powerful influence on history. As Europe moved into the 18 th century, it discarded years of beliefs and embraced the adage, "knowledge is power." This enlightenment movement went beyond personal intelligence, bringing about a different sense of expression in everything from architecture to music. Ludwig van Beethoven is considered one of the greatest composers of all time. His compositions broke barriers, brought about the romantic era in classical music, and were influenced by what was going on around him.

The 18 th century was called the Baroque period, and Vienna was a Baroque city. In one sense of the word, baroque refers to the type of dramatic architecture that began to spring up throughout the Austro-Hungarian capital. Baroque architecture was opulent and had movement, something never seen prior to this time. All forms of decor, including the design of buildings, painting, sculpture, and the decorative arts inside and out, worked together to create a breathtaking and fluid theme that demanded awe from the people who viewed its magnificence.

Vienna's Baroque architecture reflected where the city was, socially and economically. Baroque architecture followed the medieval period from the 5 th to the 15 th century, and the somewhat overlapping renaissance period from the 14 th to the 17 th century. Each of these periods had distinctive architectural style, as well. Vienna architecture did not come into its own, however, until the baroque period, because the Turks regularly infiltrated Vienna and dictated it build up the city's foundations rather than design and build magnificent architectural structures. When Vienna came unto its own in the 18 th century, it built some of the world's most famous baroque period structures, including St. Peter's Church, the Belvedere Palace, Schonbrunn Palace, and the Karlskirche. Vienna was in the midst of a grandiose rule, and the 18 th century architecture reflected that.

Knowledge is perhaps the most significant event that morphed Europe, including Vienna, from the Renaissance period into the Baroque time. This time period is also known as the Age of Enlightenment, and was called so because it was a time when people let go of superstitious beliefs and embraced scientific and intellectual theories. People began to understand that their actions and reactions placed a direct impact on the society they lived in, and it is a person's choice to make the society he lives in a better or worse place. This, naturally, led to man revolting against ruling governments that were impeding the quality of life, and demanding a more equal division between the socio-economic classes.

People not only demanded newer forms of leadership, but also newer forms of art, music, literature, architecture, and theater to reflect the social changes. Long-gone were the days of art for amusement, for example. Rather, art, including music, took on a new form of expression that was a visceral attack on the senses and direct reflection of the happenings in society at that time. People wanted intellectual entertainment.

The musical transition during this time period was also considered baroque in the beginning. Music morphed into ornate, boisterous compositions written by some of history's finest composers and played by huge orchestras. It was too much, too soon, however, and the melodies became lost in multiple musical instruments playing independently -- a technique called polyphony. This oftentimes sounded cluttered, and the Baroque period of classical music ended in 1750.

The Classical period of the classical music era began in the mid-18 th century. The music was cleaner, with clearer and more distinct parts. This moved away from the muddled baroque sound and into fresher more melodic symphony. The transition from baroque to classical occurred from 1750 and lasted until 1830.

The turn of the century brought about the Romantic era in music. The music was dubbed Romantic because the music was more passionate and expressive. The music remained classical and an expression of the society in which it was written and played, but the individual pieces, instruments, and the people who played them did so with an idiosyncratic flair. The Romantic Classical music period ran from 1810 to 1900, and Ludwig van Beethoven is regarded as the first Romantic composer, no doubt due to the passion and detail that fueled his works. Beethoven's music was a direct reflection of the point in time in which he lived.

While the music was playing, Vienna saw a great plague throughout the 18 th century. The plague claimed nearly one-third of Vienna's population before it was brought under control. By 1790, however, Vienna had grown to 200,000 citizens, and the city enjoyed prosperity in more than just being known as the greatest musical city in the world. Medical doctors and scientists were breaking ground in the fields of medicine and pharmaceuticals. Many medical breakthroughs during this time period included an understanding of blood circulation discovery of red blood cells, protozoa, and bacteria classification of disease, and how it is broken down into different categories based upon the impact it has on the body the impact that environmental conditions have on health, including contagious diseases, such as the plague.

Doctors began to diagnose illnesses and attempt to treat them in a different manner than their previous counterparts. Certain pharmaceuticals were discovered and enlisted to combat illness instead of the older and more dangerous methods. Some of these methods were controversial, however, and undoubtedly led to further illness or even death. Regardless, medical science made huge strides during the 18 th and 19 th centuries in Vienna.

Beethoven was born in Bonn, Germany in 1770 and moved to Vienna in 1792 to study music under Joseph Haydn. This move not only placed Beethoven in the city believed to the musical center of the world at the time, but also under the wing of one of the most prolific composers of classical music. Haydn is referred to as the "Father of the Symphony," or the "Father of the String Quartet," because of his influence in this form of classical instrumentation. Studying under Haydn gave Beethoven a reason to move to Vienna during this unique period in the city's history.

Despite the medical advancements of the time, Beethoven began to lose his hearing in 1796 due to Tinnitus. The constant ringing in his ears made it nearly impossible for him to work, much less socialize. Many theories revolve around the cause of Beethoven's deafness, including an autoimmune disorder and his practice of perpetually placing his head in cold water to stay awake. Doctors at that time could not properly diagnose or treat the condition and suggested Beethoven move to a small suburb to give his ears a rest. This did not work, and, consequently, by 1811 Beethoven stopped performing in public because he could not hear his own music.

Hearing loss was not Beethoven's only ailment. The composer also suffered from a number of illnesses throughout his life, including headaches, abdominal issues, depression, fevers, abscesses, respiratory infections, and nose bleeds. In fact, Beethoven referred to his illness as "inflammatory fever," because he suffered from high fevers for more than a year. Despite the scientific and medical advances of the era in which Beethoven lived, medicine could not save Beethoven, or his brother Carl, who died of tuberculosis in 1815. Beethoven had spent a tremendous amount of money for Carl's medical care, and scholars believe this, additional problems in his personal life, and harsh changes in Austria's censorship policies caused Beethoven's demise.

Beethoven died on March 26, 1827 he was only 56-years-old. An autopsy revealed a distended inner ear, which helped explain his hearing loss. The autopsy also showed Beethoven suffered from kidney and liver failure. Some circles believe Beethoven's organ failure was due to alcoholism, others indicate he was the victim of a dangerous lead-based medical treatments being used at that time which resulted in lead poisoning.

No matter what the cause of death, Ludwig van Beethoven is undoubtedly one of the most influential composers in classical music. In part, because he was influenced by the marked social, economic, medical, and hierarchical changes during the era in which he lived. His life work reflects a time in history when people understood the importance of change and embraced it, with all the expression and flamboyance they could muster. Regardless of his inability to hear, and medical science's inability to help him hear, Beethoven ushered in the Romantic Classical phase of music with the time's inherent baroque energy.

For more information on the influential periods surrounding Beethoven's life, please click on the links below.

With such levels of deficit spending, the Federal Reserve remained vigilant about controlling price increases and raising interest rates any time they seemed a threat. Under the leadership of Paul Volcker and his successor Alan Greenspan, the Federal Reserve effectively guided America’s economy and eclipsed Congress and the president.

Although some economists were nervous that heavy government spending and borrowing would lead to steep inflation, the Federal Reserve succeeded in its role as an economic traffic cop during the 1980s.

Watch the video: My Friend Irma: Memoirs. Cub Scout Speech. The Burglar


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