• John Maynard Keynes was afamous early 20th centuryEconomist• During the infamous American“Great Depression” Keynes arguedthat to combat the widespreadeconomic hardship, instead ofrelying on the free market, thegovernment should take an activerole in spending money to getpeople back to work andencourage them to resumespending themselvesFamousdepression erapicture byDorothea Lange
The President’s response• Initially the AmericanPresident, Franklin DelanoRoosevelt, did notacknowledge Keynes’theories as they weresomewhat revolutionary forthe time, but after the twobegan exchanging letters andfinally meeting in 1934, hisEconomic ideas began totake hold
Outcome• Many central ideas ofFDR’s “New Deal”, whichis often heavily attributedto the end of thedepression, tie directlyback Keynesian Ideals• The Government beganto increase spending onpublic works projectssuch as the TennesseeValley Authority (TVA)• These efforts, coupledwith the American Warproduction boom of the1940’s, seemed to solvemany of the time’sEconomic Woes
Flaws• One important factor toconsider about KeynesianEconomic Policy, is that itdoesn’t equally apply to alltimes. Keynesian economicsdoes a great job to combat thedrain of an economic recessionand ease the crests and troughsof a business cycle, but it oftenworks inefficiently during timesof prosperity. At these times, theincreased spending andregulation can often lead toredundancies and waste thatcan actually lead to moreeconomic hardship in the future.• this is, however, not to say itdoes not have its place
Basic Idea• The basic idea of Keynesian Economics is thatthe Economy cannot always be left completelyto the private sector; that the government cantake an active role to smooth the businesscycle with the spending and regulation of amixed market economy.
Relevance Today• Today, more so than in most times ofAmerican history, KeynesianEconomics is an important daily issue.We are currently battling a cripplingrecession that is being called theworst since the great depression.• This system is an crucial tool that can,and is currently, being used to combatthe downturn.• Perhaps more government spendingcan be used to create job creation andeducation programs, or moreregulation can be used to prevent thedestructive lending practices thatbegan this entire mess years ago. Onlytime can tell how these theories willplay a part in shaping our lives in thefuture