Commanding Heights Episode 1- Battle of Ideas
The Commanding Heights: The Battle of Ideas explains how the structure of the economy changed during the 1914 and 1970 and how the government and the markets functioned during those times. In the 20th century Friedrich Von Hayek and John Maynard Keynes were very influential to the economy because of their opposing arguments regarding classical liberalism and aggregate demand. Hayek believed in the “market” economy idea rather than Keynes “planned” economy idea. Both these people had fought for their own ideas on what would shape modern day society for the ideal person. Keynes argument had been the most successful between the two.
When the first world war ended, Austria and Germany had been forced to pay for the costs of the war. This being nearly impossible for them, they began to print much more money in the order to reimburse for the funds they do not have. when they begun to print more and more money, it had caused hyperinflation. By 1929, the markets began to crash, banks closed and over millions of people lost their money. This is where the government decided for their economy that they are indeed in need of a plan to bounce back from this crash.
When the government decided 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 to write a book that explained why and how this Great Depression had came about and what the government should do the prevent such an economic downfall from happening again. Keynes ideas were for the government to spend money to keep full employment even if it meant bringing shortfall. He believed that the increase in spending would happen to benefit the economy. After this theory was proposed, the president Roosevelt, used Keynes idea and created government agencies to allow for citizens to have more jobs.
An American author, Daniel Yergin, talked about the New Deal and Roosevelt had made a program of regulating capitalism. They did it in a way that had never been done before to protect their people from unfitted market systems. Hayek on the other hand believed that the government should not have more control over the economy, yet no one cared about his point of view, they all followed Keynes idea 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 novel disclaiming and going against Keynes ways had been written by Hayek because he still was in disbelief of Keynes plan working. He tried to get the message across that too much of government planning means too much power for the government which in turn destroys the economic freedom and turns man into a slave. It had shown that in Germany, hyperinflation caused their currency to be worth nothing which lead them to needing a new leader in order for their situation to get better. They 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 were not helping the economy.
Considering the fact that the price controls were not helping the economy, Erhard decided to get rid of them. This left the citizens with no desire to trade in the black market and left them with more freedom of their own. This is an exact example of 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 and was not giving that influence the citizens. He wanted to follow in the foot steps of the libertarian, Ludwig von Mises who believed that the markets and people should be free from any government control. He believed in turn that the government and the economy would fail because of the control over the prices and over the wages.
In turn, the theory of Keynes thrived. He had been on the right track to set the government up for success since the beginning. The citizens of their countries had flourished from his beliefs and from his ideas. He had in fact made the society become more secure of their living styles and in terms of their economic welfare.


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