The Commanding Heights

After World War I broke through, people in the world feared globalization. Ignorance was taking over people, fearing of what they didn’t know. They were skeptical, specially when terrorist attacks and depressions begin to happen. What people needed, and some still do, is to understand that globalization doesn’t make is dependent but interdependent.
After War World II, the world economy was down as well as the trust people had in their governments.

Governments and the marketplace both wanted to take over and reinvent the world’s economic order. The main question everyone wanted, and needed to know was “Which one is the best option? Which is the best style of economy for our economy and the rest the world? Which one is the best for every country, understanding that globalization was something that was meant to happen?

John Maynard Kaynes was an educated, unconventional English man.
He thought the government was there to defend people’s freedom. After going to school in Cambridge, he became friends with artists and economists. He made a fortune in the stock market, lost it all but made it all back again. He was a with the business man, people in congress and helping the government out by analyzing and giving solutions on how to organize and manage their economy. Later on in his life, Friedman, who had strong critiques on Keynes’ ideas of the government being a protector of the people and their freedom, made him step back, re-thinking his theories and struggling to come back out with his ideas intended to help the economy.
When Keynes finally published his book on how to fight the depression, he became one of the most influential economists of his age, and he still is today.
In his book, he explains that the government should spin against the wind. In good times they should reduce their spending, and build surpluses, and in the bad times like the great depression, they should step up spending, run deficits and put purchasing power into the hands of the working people.
With his ideas, he brought hope back to people, including governments, which many took his ideas and worked with them in their own economies.

Friedrich Von Hayek, was from Austria. A smart young man that became a soldier for his country, he experienced what it was to be next to dying people, stress and chaos. This influence was decisive in his life, it shaped his personality, leading him to the desire of changing the world into a better place.
Although his ideas weren’t world changing in his early years, they were when he grew older in which his ideas prevailed.

Hayek once said he was a mild socialist. He needed to know people were having opportunities and they were being protected, but at the same time he understood that people needed their freedom, that way there could be a balance between the market (people as consumers) and the government. He enrolled in Vienna University to study economics, his intent was to understand the core issue and fix the problems in the world, his main concerns were the poor, the government policies, fairness and equity, etc.

Keynes and Hayek went through Hitler’s leadership and also Stalin’s Soviet Union. Which created Hayek’s understanding of the issue, and he believed the government was taking freedom away from the people, in both situations.

Keynes and Hayek were friends, but intellectual rivals, both had great ideas and a great understanding of economics, but they were opposite to each other. However, both of their ideas are still shaping our economy today.

In general, governments would take ideas from Kaynes, and sometimes ideas from Hayek, trying to find a balance between them, giving people the freedom, but also having the government behind to protect them.

WWII destroyed the world; there was so much waste after that, especially in Europe. Countries were bankrupt, and people were starving and angry.
People wanted a revolution, they wanted to be free but they were idealistic and anxious to have a socialist system. However, prices were hard to work with in a socialist country, what people really needed was a system that could work and keep things going, while still being able to give them the freedom they have longed for so long.

Every day life was being transformed, technologies, the telegraph and the telephone were a huge change, and distance was changing, disappearing. The progress of man had made chaos. People were now understanding that globalization was happening faster than they thought and they needed to keep up with it if they didn’t want their economies to be left out of this huge, and amazing change.

Von Mises believed markets were like people, they needed to be free, not having the government taking their freedom away. He said that markets work, governments don’t. This accusation was the bottom line of this ideas, he believed that by giving people the necessary freedom they would help the marketplace and with it, the economy. But when the government comes and has some power, it begins taking people’s freedom away telling them what to do, their inflexibility and stress end up controlling everything, only a few minds controlling the world when all the minds in this world should be doing the real work of moving the economy.
At a certain point, Hayek worked for Von Mises, and he helped Hayek on his business cycle theory, for which he later won the Nobel Memorial Prize in Economic Sciences in 1947.

Von Mises predictions became true in Russia, Lenin had brought chaos and a terrible economic disaster. People were dying; they were starving and getting sick. The government, which in reality was the Bolcheviks, was in control of everything in their territory. They had taken away the freedom and the rights of the people. Stalin had introduced central planning, and the communists behind him would manage the rest of the economy. Inspired by the ideas of Marx, Lenin and his people wanted to bring the world together and have an economy that everyone would benefit from. They just didn’t know how to go about it.
Soon enough Lenin passed away, and people thought they were getting their freedom back and that soon their economy would start to heal. Sadly, after 30 years of Lenin’s death, they still had his ideas added in their system.

{ The commanding heights of the economy are the natural resources. What the country owns and has to work with. The resources a territory possesses and the ability it has to make it something memorable.}

In the meantime, Austria and Germany were trying to survive in their broken economy, and after a lack of money trying make war reparations, they made the mistake of just printing more money. This caused a terrible inflation, hyperinflation, leading the country to a whole new level of chaos. It was something no one had ever experienced before, prices were sky high, meaning that for a piece of bread they would pay millions.
Hayek who was then working at a statistical research institute, needed 200 pay raises in eight months. Money didn’t making sense anymore; hyperinflation was wiping out people’s savings, leaving them poor and starving once again. It was a cycle they needed to repair soon rather than later, or else, their economies were going to destroy their countries, and their people.
Hayek always said inflation as an evil thing, that was caused by people and its only purpose was to destroy them.

1920’s Europe was struggling, while on the western side of the world, Americans were spending money, having parties and enjoying their economy. The stock market became a past time, people would make money, lose it but make it back again, shares were growing and money was flowing. They were enjoying the moment and the good economy.
Unfortunately in 1929 the bubble burst. The stock market crashed and closed and the U.S. fell into a huge depression. People were in despair. The disaster had left them with no ability to repay, to spend, to consume or make their money back at all. Everything went down, including industries, stores, and banks, everything had collapsed, and people were out of work.

Once near half of the banks in the U.S closed, people began to panic and trying to get their money out of the banks. Some people could get their money back. Some others could withdraw some, and millions of others lost everything they had. Millions of Americans were starving, unemployed and the numbers were increasing every day.

In Britain, things weren’t different, millions of people marched the length of the country, just asking for the right to work. In this moment, Keynes saw his nightmare coming true. In Cambridge, he wrote a book about the great depression and what to do about it, he wrote the laws, and he also reinvented economy. He wrote about topics people needed to know answers for, he wrote about the problems that were attacking the economy as a whole, not in just one country. He talked about inflation, unemployment, and the general features of economy. He said what to do and what to change to make things better in the world’s economy, how to work with the government and still have democracy. Keynes needed to give an answer about the great depression to all the totalitarian countries.

In the U.S., Roosevelt was the president of the United States. He was encouraging and confident, and brought hope back to the nation. He was at war with the great depression, he came up with programs to bring employment back, how to feed people and educate them. He created ways to bring capitalism up again.
Under the New Deal, industries had new rules and regulations, before it was very competitive and unstable, industries would go bankrupt, then others would come and the cycle would begin again. The New Deal stepped in to stop this issue and to tell the industries what to do and what not to do to stay in business. With this system they stopped that cycle was that destroying them.
In this example, I think president Roosevelt did a great job using Keynes ideas as well as Hayek ideas, by giving people the right and the freedom to choose that to do, but giving them the protection they needed as well as the direction to do things the right way.

I believed this issue didn’t born after the World War I not II. It’s been going on since the beginning of money. But a huge change needed to happen, like the great depression in 1929. People needed to notice that nothing is for free, and the advancements and technology aren’t for free. Everything is paid in this world in one way or another.
I think Keynes ideas as well as Hayek’s are correct, even though they are opposite to each other. But I think the answer is not in just following one idea but understanding the concepts they try to teach, and grab both ideas and make them work together. I believe the freedom of the people is untouchable, I believe it is one of the most important things one can have, but I also think the protection and instruction of the government, or a leader, is absolutely necessary.

This topic is very important in business law, because as someone said in the film, history repeats itself, one time after another. If we know how things were in the past, and learn about it, we will be able face the future, certainly not knowing exactly what will happen, at least we will know what has happened before and the reasons and the solutions. For example, in the film it talked a lot about inflation. Inflation wasn’t something that happened from one day to another. What happened was that people didn’t know exactly how bad it would be to just keep printing money. Now we know what that becomes, therefore, we should be able to detect it on time. Although if it happens again, as well as before, we will know what to do in order to restore the economy.

About the battle of the ideas and the last two minutes of the film, I think that only time will tell. We have all the tools to face the future and come out victorious. But it doesn’t matter which side we take, either Keynes’s ideas or Hayek’s ideas, we need to be smart enough to put them to work for our own benefit. I think if I had to pick one side or the other, I would choose Keynes’ main idea of having the government behind the people, giving them protection and direction, but still giving people the freedom and the power to make their own decisions.