Commanding Heights Essay

†¢ Episode 1: The Battle of Ideas begs a comparison between socialism and capitalism. †¢ It traces the world’s economic history from the early 1900’s to the events following 9/11. †¢ Asks the question which is a better and more foolproof economic system government control or free markets? †¢ It delves into how the First World War impacted two brilliant economists, Keynes and Hayek. And then follows both Keynes and Hayek through their respective career paths (Keynes role as an advisor to the British Government on wartime economy and Hayek as an Austrian soldier). †¢ Keynes predicted that the result of the treaty of Versailles and demanding reparations from an already bankrupt Germany and Austria would cause another war, The Second World War. †¢ Meanwhile Hayek and his disciple Zlabinger fought against hyper inflation and encouraged free markets. †¢ Simultaneously the American Economy was booming, till October 24th, 1930 when the great depression hit and unemployment soared and industry stopped and half of the US banks were closed down. †¢ During this time Keynes’s theory of government intervention helped lead the way out of the problem (Keynes wrote about Macroeconomics). †¢ Meanwhile Lenin had introduced the New Economic Policy which consisted of grass root level capitalism but the commanding heights would still be under the government. The reform was met with scrutiny from the left, soon after Stalin took power and employed centralised planning of every economic aspect. †¢ Owing to the recovery from the Great Depression and Keynes’ key role in the Breton Woods Conference, in America Keynesianism took control and Hayek faded into the background. †¢ In Britain a welfare state and socialism built the country back from the bottom up. †¢ Newly independent countries like India also employed Keynesian methods, allowing for State led industry. †¢ One third of the world followed aspects of socialism until Churchill and Margaret Thatcher and Keith Joseph were influenced by Hayek’s book, ‘Road to Serfdom.’ †¢ In Germany, Ludwig Erhard stopped price control and re-started the free market economy to combat hyperinflation. The success of his risky decision led to the German Economic Miracle. †¢ While Keynes’ still had a strong hold over Washington, a Chicago School of Economics was created and it emphasised Hayek’s theory as a measure to battle stagflation. †¢ Finally Thatcher’s election and confidence in Hayek’s theory allowed for free markets to be established again. Thus, after a period of a century came back to where it was at the beginning of the century, back to free markets.