Keynesian Economics

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Submitted By openmic
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John Maynard Keynes’ influence and ideology
Even today John M. Keynes’ ideas remain crucial to the most important debate of our time: how can we escape from the economic crisis? Should governments borrow and spend their way out of trouble or slash spending and reduce the national debt?
Despite Keynes’ avid support for the free market, his theory is one strongly based on the mixed-market economy. “Keynes said it was possible for governments to come in and make markets work better... Keynes saved capitalism from the capitalists.” - Prof. Joseph Stiglitz Keynes’ theory opposed Adam Smith’s metaphor of “the invisible hand” – which envisages a self-correcting economy, in the form of the self-regulating behaviour of the market - due to individuals' efforts to maximize their own gains in a free market which benefits society, even if original ambitions include no benevolent intentions. Instead Keynes said that capitalism doesn’t always work on its own accord, but that government intervention is sometimes necessary (especially during periods of recession – which Keynesians see as an “economic malady” rather than a normal part of the business/trade cycle.
Keynesian theory in modern macro-economics
Alistair Darling MP, Chancellor of the Exchequer, 2007-2010 – “The dominant thinking in Europe at the moment is exactly repeating the mistakes (I believe) that were made at the end of the First World War”. This statement was made in reference to the fact that Germany is now imposing the idea of tough budget cuts in Greece in exchange for emergency loans. Darling compares this action to the forced pay of reparations by Germany, imposed by the Allies after WWI in the Treaty of Versailles. The fact that the debtor country has such a weak economy defies the possibility of making such large repayments. In order to repay…...

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