The Commanding Heights
The Commanding Heights: The Battle of Ideas explains how the structure of the economy had changed during the 1914 and 1970. It also had talked about how the government and the markets functioned during those hard times. In the 20th century Friedrich Von Hayek and John Maynard Keynes were very significant to the economy because of their conflicting arguments about the classical liberalism and aggregate demand. The movie showed how Hayek believed in the “market” economy idea where the government had less power over the economy rather than Keynes “planned” economy idea where the government had more power over the economy. Keynes and Hayek had fought for their own ideas on what they believed would shape modern day society for the ideal person. Keynes argument on the other hand had been the most influential out of the two.
When the first world war ended, Austria and Germany had been forced to pay for the costs of the war. They decided that they had no choice but to begin to print a lot more money in the order to reimburse for the funds that they do not have. When Germany and Austria begun to print more money, it had caused hyperinflation in their countries. By 1929, the markets then began to slowly crash, the banks had to closed and over millions of people lost the only money they had. Once the government took wind of this, they decided it was time for them to figure out a plan for their economy to bounce back and thrive from this dreadful crash.
When the government finally decided that they needed to figure out a plan, John Keynes had stepped up and told his theory to save the economy from this Great Depression. He decided he had to write a book that would explain why and how this Great Depression had came about and what he believed the government should do to prevent such an economic collapse from happening once again. Keynes ideas were that he believed the government should spend the money to make sure there was enough jobs for the people even if it meant bringing shortfall. He believed that with the increase in the government spending it would begin to benefit the economy. After Keynes theory had been proposed, the president Roosevelt, used Keynes idea and decided to create government agencies to allow for more jobs for his citizens.
An American author, Daniel Yergin, talked about the New Deal and that Roosevelt had made a program for regulating capitalism. They did it in a way that they would have never even thought about doing in order to protect their people from the unfitted market systems. Hayek on the other hand believed that the government should not have more control over the economy, yet no one really cared about Hayek’s point of view, they all decided to follow Keynes ideas instead. When World War II happened, job opportunities started to pop up considering they had to start preparing for war. With more jobs available, the great depression dispersed. After World War II, successful economies and even socialism began to pop up in more countries because they had decided to follow Keynes idea as well.
A book disclaiming and going against Keynes ways and ideas had been written by Hayek because he still was in disbelief of Keynes plans and ideas to actually work. Hayek tried to get the message across that “with too much of government planning, it turns into too much power for the government which in turn abolishes the economic freedom and turns man and women into slaves”. It had shown that in Germany and Austria, hyperinflation caused their money to be worth nothing which required the economy and the government to find a new leader in order for their circumstances to get better. They then quickly found a new leader, Ludwig Erhard, who had similar views to Hayeks. They both believed that price controls hadn’t been stopping the inflation and therefore were not helping the economy.
Considering the fact that the price controls were not helping the economy, Erhard decided to get abolish of them. This then left the citizens with no desire to trade in the black market and left them to endure more freedom of their own. Erhard showed the country exactly how Hayek’s believed that the economy should have been run. Hayek believed that the idea that Keynes had was giving the government way too much power to run the economy. Hayeks believed that Keynes theory did not influence the citizens at all, that they had no control in the matters that affected them. He believed to want to follow in the foot steps of the libertarian, Ludwig von Mises who also believed that the markets and people should be free from any government control and should therefore be free on their own with less government control than Keynes believed they should have. Hayek believed that the government and the economy would plummet because of the control over the prices and over the wages.
In turn, the theory that Keynes brought about had become one that many countries started to use. Since the beginning Keynes had the right ideas about how to correctly lead the government into economic success. The citizens of their countries had begun to flourish from his beliefs and from his ideas. Keynes had in fact made the society fall into place and allowed the people to become more protected of their living styles and in terms of their economic welfare.