Do you agree that the rich are rich because they don't spend money?
If there are more people employed, why would markets be stagnant or shrinking?
Your question is flawed, employment is a consequence of the liquidity of the market not the other way around. If the market is stagnant or shrinking unemployment in manufacturing and service industries will rise.
If that were the case, how could there ever be an upturn?
An upturn can be stimulated in several ways, one way would be a re-distribution of wealth via tax changes to increase consumer demand by giving the money to people who’ll spend it. Another would be for the government to manipulate the market by increasing public funded works, building bridges, repairing roads, constructing dams etc. Because the work is passed to private contractors this has the benefit of stimulating the construction sector and at the same time promotes employment and increases consumer spending - more people earning money means more people spending money. If you study FDR’s new deal you’ll see this plays a large part.
Why do so many economists criticize Keynesianism?
Because some of his theories are just plain stupid.
Economics is an art not a science, people’s views change and new ideas replace old ideas, in economics as in poetry peoples view of the ideal changes over time, free verse is promoted over traditional verse among the “poetry experts”. In poetry however that doesn’t really matter, the poetry reader can ignore the experts and read whatever they like. When it comes to economics listening to the experts is a tad more dangerous.
You can however apply the pudding test to judge economic theory. Keynes economic theories have been successfully applied and have proved themselves by steering many economies out of recession. So far the alternatives which replaced them haven’t faired so well. That’s not to say Keynesian theory is somehow superior, as I said some of his ideas are downright stupid but others seem to continue to work.
I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.
It’s a great quote Mike.
It‘s a bad argument against raising income tax though, that’s not really your fault, the argument is so prevalent on the internet as a counter to increasing taxes it’s easy to take it at face value.
It’s a bad argument for three reasons, the first is it’s an argument from authority, the presumption being that Churchill being a great Prime minister was also a great economist. That’s not really a problem though because Churchill had a good understanding of economics, thanks largely to Keynes.
The second reason it’s a bad argument is that I live about 30 miles from where he made the speech that quote comes from and I happen to know what he was actually talking about. That leads nicely into the third reason.
Churchill made that quote in a speech in Manchester at the Free Trade Hall in 1904. The speech was an argument about the stupidity of protectionist policies with regard to cotton, specifically American cotton. An issue very close to the hearts of people in Lancashire at the time where the major industry relied on imported cotton. The tax he was arguing against was an import tax, not an income tax. His argument was fairly simple - if you can formulate a reasonably argument for implementing import taxes those arguments are just as reasonably to the countries you are exporting to.
It’s a sound argument against import tax and protectionism and in favour of free trade but unfortunately has nothing to do with income tax.
You can validate that here if you have time.