Lessons were learned from the 1930s. Governments committed themselves to maintaining demand at a high enough level to secure full employment. They recycled the tax revenues that accrued from robust growth into higher spending on public infrastructure. They took steps to ensure that there was a narrowing of the gap between rich and poor.
The period between FDR’s second win and Donald Trump’s arrival in the White House can be divided into two halves: the 40 years up until 1976 and the 40 years since.
Keyne’s lessons were forgotten. (Hans: after the assault on western economies by the offspring of Saudi Arabia’s oil embargo of 1973: Hyper Inflation and the mistaken conviction that Keynesian economics was to blame.) Instead of running budget surpluses in the good times and deficits in the bad times, UK governments ran deficits all the time. They failed to draw the proper distinction between day-to-day spending and investment. In Britain, December 1976 was the pivotal moment. Matters came to a head in early December when a divided and fractious cabinet agreed that austerity was a price that had to be paid for a loan from the International Monetary Fund, which was needed to prop up the crashing pound.
Subsequently there was a paradigm shift. Labour had been reluctant converts to monetarism; the Thatcherites who followed were true believers. Controls on capital were lifted, full employment was abandoned as the prime policy goal, trade union power was curbed, taxes for the better off were cut, inequality was allowed to widen, finance waxed as manufacturing waned.