Tsunamis as “stimulus”? Larry Summers thinks so. Here’s Larry, the former director of the White House National Economic Council for President Obama and a strong believer in Keynesian so-called “stimulus”, commenting on the economic impact of the tragic tsunami which has struck Japan… ”…It may lead to some temporary increments, ironically, to GDP, as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake, Japan actually gained some economic strength…” This is a shocking statement, or at least it should be. Though he takes pains to wrap this preposterous claim with concern about the loss of life, there is simply no getting around the fact that Mr. Summers is equating destruction with “economic strength”. He is, however, simply following directly in the footsteps of John Maynard Keynes himself who, in his 1936 treatise The General Theory, wrote: “Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical economics stands in the way of anything better.” Keynes repeated the “destruction as stimulus” fallacy often. In a 1940 issue of The New Republic, he wrote: “It is, it seems, politically impossible for a capitalistic democracy to organize expenditure on the scale necessary to make the grand experiments which would prove my case — except in war conditions.”
Keynes was renowned for his sharp tongue and quick wit to be sure. But destruction-as-stimulus is not a mere shock-value rhetorical device for expounding the Keynesian doctrine of aggregate spending. No, it is at the absolute CENTER of the ideology. Full comment here