We’ve seen how Hansen gradually wove a web between Harvard and Washington which led him in a favorable position, both politically and academically. But the “American Keynes” did not stop there. As the US went to war in December 1941, he managed to weigh in on economic policy.
Making new connections with Washington in the context of World War II
While campaigning for presidential re-election on a pledge to keep the United States out of the war (Vedrine, 2021: 355), Franklin D. Roosevelt nonetheless reinstated in May 1940 the National Defense Research Committee and established the National Defense Advisory Commission with a view to prepare for war. This required economic expertise (Cayla 2022: 96) and soon Hansen entered the scene.
From 1940, the fiscal seminar started to include participants from Harvard’s Graduate School of Public Administration – often referred to as the Littauer School – as more lectures were specifically geared towards US economic policies (Salant, 1976: 18). From then on, new recruits from Hansen’s seminar (Tobin, 1976: 34) joined the the ranks of economists in Washington.
At the same time, Hansen’s activity in Washington intensified as he participated in the National Resources Planning Board (NRPB) and became chairman of the Federal Reserve Board (Musgrave, 1975: 59). Among the students he took with him to his new positions were Paul Samuelson, who joined the NRPB (Tobin, 1976: 34), and Evsey Domar, who joined the Federal Reserve Board (FED) in 1943. Domar, who was still working on his Ph.D under Hansen’s supervision, suggested organizing a “little” fiscal seminar in Washington where he could inter alia share his reflections on debt sustainability and growth. This new seminar was a great success. Even John Maynard Keynes attended it. (Boianovsky, 2020: 3).
Hansen also testified to congressional committees like the Temporary National Economic Committee (TNEC). Herbert Stein (who will later become president of the Council of Economic Advisers from 1974 to 1984) remembered that he was extremely impressed by the “showcase for Keynesianism” (Herbert Stein, quoted by Miller 2002: 614) delivered by Hansen and Lauchlin Currie – a former student of Hansen who was from then on White House assistant and organizer of these hearings. What was really unique about Hansen was his ability to keep a foot in politics and the other in academia.
These years of political commitment also tell us something about Hansen’s way to address economic issues. John Kenneth Galbraith (who was also known for his ability to address various audiences) described him as “a man for whom economic ideas had no standing apart from their use” (Galbraith, quoted in Miller, 2002: 613). For two decades, Hansen consistently slogged in the trenches as he was still acting on several fronts : influence on political institutions, scientific books and publications to convince the academic community of the relevance of Keynesian solutions, and popular books and conferences throughout the country to advocate to citizens. He was therefore still influential when Keynesians like Tobin, Robert Solow and others designed the economic policies of John Kennedy’s and Lyndon Johnson’s administrations (Miller, 2002: 614).
Hansen’s footprint in Washington D.C.
Hansen’s most direct political sway was however not to last long. By 1943, opponents of Keynesian policies managed to sink the NRPB after it presented a postwar goals report to which Hansen’s contributed with a paper entitled “After the War—Full Employment.” In it, he advocated for bold economic expansion and increased federal spending to ensure sustained demand through stronger business-administration collaboration. Two years later, he also lost his position at the FED (Miller, 2002: 616). Though Hansen was already far away from Washington in 1946, his ideas soon found their way in the Employment Act (Tobin, 1976: 34).
With constant pugnacity, Hansen later kept defending his ideas. As we said, his major impact went through those he had trained and who shared his view. Some go as far as saying that the Kennedy-Johnson tax cut of 1964 owes as much to Hansen as to those who designed it (Mozumi, 2018: 40). As the former president of Kennedy’s Council of Economic Advisors himself acknowledged: “Alvin Hansen was never close to Presidents or politicians, and he never held a major government office. Yet no American economist was more important for the historic redirection of United States macroeconomic policy from 1935 to 1965″ (Tobin, 1976: 32).
It is thus not by chance that Walter Salant, a graduate of Hansen’s seminar, could count among Hansen’s alumni: a president and three members of the President’s Council of Economic Advisers, four economists on the board of governors of the US central bank, two undersecretaries of the Treasury, two assistant secretaries of state for economic affairs, a secretary of defense and an undersecretary for health, education and welfare (Salant, Walter S, 1976: 22). No doubt, Hansen was the center of gravity of a huge network, the common denominator of decisive actors in academia and the US administration, the spider at the heart of its own web.
References :
Boianovsky, M., 2020. Domar, expectations, and growth stabilization 42.
Cayla, D., 2022. Déclin et chute du néolibéralisme. De Boeck Supérieur.
Miller, J.E., 2002. From South Dakota Farm to Harvard Seminar: Alvin H. Hansen, America’s Prophet of Keynesianism. The Historian 64, 603–622.
Mozumi, S., 2018. The Kennedy–Johnson Tax Cut of 1964, the Defeat of Keynes, and Comprehensive Tax Reform in the United States. J. Policy Hist. 30, 25–61.
Musgrave, R.A., 1975. PORTRAIT: Alvin Hansen. Challenge 18, 59–60.
Salant, W.S., 1976. Alvin Hansen and the Fiscal Policy Seminar. Q. J. Econ. 90, 14–23.
Tobin, J., 1976. Hansen and Public Policy. Q. J. Econ. 90, 32–37.
Védrine, H., 2021. Dictionnaire amoureux de la géopolitique. Plon.