With the recent recession John Maynard Keynes and his theories are being debated by millions of Americans, though likely without their knowledge, as his theories have become integral to America’s economic policy. A search of “John Maynard Keynes” on Google news, limited to just the past week, yields more than 200 results, illustrating the scope of Keynes’ continued influence. Fueled by concerns over unemployment and inflation the debate rages over government’s role in the economy, including regulation of industry, tax rates, and government spending to stimulate the economy. What people are really arguing over are the merits of supply-side economic versus demand-side. Keynes or “Keynesian economics is based on the notion that government can boost employment or cut inflation by manipulating the demand side of the economy—increasing government spending and expanding the money supply to boost employment and doing just the opposite to hold down inflation.”
“The two decades between 1919 and 1939 had seen great economic instability.” The economic troubles were being experienced both at home and abroad. In addition to the unemployment plaguing America and other “major capitalist industrial nations--…Britain, France, [and] Germany” —there was also “nightmare inflation, collapsing banks, [and] agrarian and industrial devastation.” The start of this economic collapse coincided with the end of World War I and the accompanying peace treaty.
Keynes, a British economist had been advising his government throughout World War I, including The Paris Peace Conference. He entered the international scene of economics with his 1919 book titled, The Economic Consequences of the Peace. The book captured his views following the Treaty of Versailles at the close of World War I. Keynes argued that the immense reparations imposed on a fractured Germany would brew animosity within the nation as well as prevent them from rebuilding a healthy economy.
Amidst the global recession, including America, which was experiencing “The Great Depression”, Keynes continued to offer his advice to Great Britain and the United States. At the time economists largely “favored balanced budgets.” This was certainly true in America where “in the 1932 presidential election, Franklin D. Roosevelt had blasted Herbert Hoover for running a deficit, and dutifully promised he would balance the budget if elected.” FDR’s eventual persuasion to follow Lord Keynes ideas came several years after their first meeting in 1934. This delay was perhaps due in part to each man’s peculiar impression of the other: FDR perplexed by Keynes, explained to his Secretary of Labor that because of his “rigamarole (sic) of figures…He must be a mathematician rather than a political economist.” ; Keynes returning the sentiment remarked he had "supposed the President was more literate, economically speaking."
In 1938 Roosevelt fortified the New Deal, a comprehensive series of social and economic...