To revive an economy during a downturn, Keynesian economics dictates that govt must spend when consumers will not. John Maynard Keynes would be dismayed at the present govt of his native country as Britain joins Europe with draconian government spending cuts. American conservatives are using the example of Britain and the struggling United States of America economy to declare Keynesian economics dead.
The fundamentals of Keynesian economics
Keynesian economics is depending on the cycle of money. An economy gets healthier as people spend. The economy got really bad while the cycle of money essentially stopped during the Great Depression. Making the cycle of money work again was what Keynes told the government to do. The laissez-faire capitalism theory won out at that time which made everyone ridicule him for his ideas. Keynes’ ideas were taken to heart by the Roosevelt administration, which spent to build roads, dams and other public works projects. The United States of America economy did really well for about 50 years after World War II came along requiring a ton of government spending.
Working with Keynesian economics isn't a thing Europe will do
Europe was hurt badly by the global financial crisis. The economy crashed. Keynesian economics was the idea given to European governments by U.S. Treasury Secretary Timothy Geithner. Instead, Europe is heading the other way with austerity measures. A $130 billion spending cut is being done in Britain. This is hurting the military, pensioners, the middle class and poor because of the 500,000 jobs lost. A higher national debt along with less growth and less tax revenue could be what the British governments ends up with, the Guardian accounts Nobel Prize winner Joseph E. Stigliz saying.
What Keynesian economics and the midterm elections have to do with each other
A United States of America economy that remains sluggish despite billions in government stimulus has conservatives arguing that the Obama administration should follow Britain’s example. Right wing pundits eagerly anticipating Republican gains in Congress are trumpeting the 2010 midterm election as the official declaration that Keynesian economics have failed. The White House cautions that an abrupt end to government economic stimulus will extend the downturn. Conservatives argue the economy has stabilized, and it is time to wean the country from deficit spending.
Articles cited
Wisegeek.com
wisegeek.com/what-is-keynesian-economics.htm
New York Times
nytimes.com/2010/10/21/world/europe/21austerity.html?hp
National Review
nationalreview.com/corner/251088/obamas-economics-are-loaded-bear-j-d-foster
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