Economics, Bureaucracy, and Race: How Keynesians Misguided the War on Poverty.

Author:Wray, L. Randall
Position:Book Review

Economics, Bureaucracy, and Race: How Keynesians Misguided the War on Poverty, by Judith Russell. New York: Columbia University Press. 2004. Paper, ISBN 023111253X, $24.50; cloth, ISBN 0231112521, $62.50. 304 pages.

This year marks the fortieth anniversary of the birth of the War on Poverty (WOP), announced by Lyndon Baines Johnson on January 8, 1964, with the promise to eliminate poverty-making the United States the first nation in history to accomplish this feat. While a few battles may have been won, there can be little doubt that this war was lost as decisively as any fought in our nation's history. This timely, well-argued, and always interesting analysis makes it clear that defeat was fore-ordained given three initial conditions that constrained implementation of the WOP: the dominant role played by John F. Kennedy's Council of Economic Advisors (CEA), the prevalence of institutional racism, and the perceived inability of the Labor Department (DOL) to run the program. The key omission from the WOP was a job guarantee. This, in turn, resulted from the CEA's belief that (a) poverty is not inextricably linked to unemployment, (b) unemployment can be reduced adequately through aggregate fiscal policies (such as Kennedy's tax cut of 1963), and (c) millions of Americans would have to be maintained as an unemployed buffer stock to keep inflation in check. Readers will not be surprised, as these views still hold sway among economists-even among heterodox economists (see Sawyer 2003).

Judith Russell documents through careful archival research that the WOP was developed in the Kennedy administration as a "showy" proposal to be used in his second campaign. His first campaign had been based on "sacrifice" and "fiscal responsibility"--but he had barely defeated Richard Nixon and needed a decisive win along with a Democratic sweep of Congress to gain a mandate for his second term. Russell argues that Kennedy had little concern with poverty or unemployment, nor, in particular, with disadvantages faced by black Americans. Nor did he have much understanding or interest in economics. The CEA, led by W. Heller, with important input by J. Tobin, set out to "educate" Kennedy in "Keynesian" economics (which Russell correctly realizes was a highly bastardized version of John Maynard Keynes' own theory). As Russell argues, this "education" was mostly disastrous, with the CEA able to turn the president and policy against the dominant "structuralist" views of...

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