John Maynard Keynes

 
 
 

Vocabulary

rank	influence	interest (2)
basis	analyse	series (2)
avoid	convince	depression (2)
shift (3)	available	take measures
policy	affair (2)	maintain (2)
urge	treasury	reparation
loan	borrow	counter (3)
expect	emphasis	encourage
enable	consumer	depend (2)
rate (2)	interfere	demand (2)
title (2)	essential	breakdown
tract	reform	consequences
adviser	treatise	prominent
slump	challenge	seek-sought
faith (2)	stimulate	disapprove
stabilize	constant

 

John Keynes

John Maynard Keynes (1883-1946), was one of the most influential economists of all time. His General Theory of Employment, Interest, and Money (1936) ranks among the most important books on economics.

Keynes’ Analysis

Keynes analysed economic processes that lead to depressions and described policies to avoid depressions.

He was one of the first economists to argue convincingly that government should take measures to counter a depression. His ideas helped shift emphasis away from laissez faire, the economic theory which maintains that government should not interfere in economic affairs.

Keynesian Economics

The basis of Keynesian economics is simple. The level of economic activity depends on the total spending of consumers, business, and government.

If business expectations are poor, investment spending will be cut, causing a series of reductions in total spending. If this should happen, the economy can move into a depression, and stay there.

To avoid a depression, Keynes urged increased government spending and easy money (lower interest rates and making more money available for loans).

These actions, he argued, would encourage investment, increase employment, and enable consumers to spend more. The analysis showed that high levels of demand were essential for both full employment and economic growth.

Biography

Keynes was born in Cambridge, England, and studied at Cambridge University. He served in the British Treasury from 1915 to 1919. Keynes became internationally prominent when he wrote The Economic Consequences of the Peace (1919).

The book attacked the reparations (payments) that the Allies demanded from the defeated Central Powers, and predicted the breakdown of the Versailles peace settlement.

Publications

During the 1920’s, when England had serious economic difficulties, Keynes wrote a series of books and essays that attacked the economic policies of the government and laid the basis for his great book of 1936.

The most important of these works were A Tract on Monetary Reform (1923), The End of Laissez Faire (1926), and A Treatise on Money (1930).

The Great Depression

Capitalism faced its most serious challenge during the Great Depression, a worldwide business slump that began in 1929. In the 1930’s, many banks, factories, and shops closed. Millions of people lost their jobs, homes, and savings.

Many also lost faith in capitalism, and political leaders sought new economic theories.

Rejection

As a result, Keynes gained notice. Though neither a socialist nor a communist, he rejected the traditional capitalists’ belief that government should keep out of economic affairs.

Keynes became a government adviser in 1940, and a director of the Bank of England in 1941. He was knighted in 1942 and received the title of Baron Keynes of Tilton.

The Great Depression lasted until the early 1940’s, when huge amounts of government military spending for World War II (1939-1945) finally stimulated the world economy.

The Monetarists

During the 1960’s and 1970’s, a group of economists called monetarists disapproved of many of the theories of Keynes and his followers.

Instead, the monetarists urged that governments increase the money supply at a constant rate to stabilize prices and promote economic growth.

Nonetheless, Keynes’ works changed economic theory and policy, and is the basis of the economic policies of many non-Communist nations today.

Questions

1. John Maynard Keynes was only an academic, a researcher, a professor. True or false? Was Keynes an academic, a government official or both?

2. Was his main impetus based on attaining maximum economic growth?

3. What was his main idea or thesis?

4. According to Keynes, what causes depressions?

5. What is the solution to avoiding or recovering from depressions?

6. How would this raise the economy?

7. The Great Depression profoundly shaped Keynes’ work, beliefs and life. Is this correct or wrong?

8. Keynes believed in socialism. Yes or no?

9. Has everyone agreed with Keynes’ ideas?

 

A. Do you agree with Keynes and Keynesian economics? Why or why not? Are Keynes’ ideas good, bad, in-the-middle, both good and bad (they have their advantages, benefits, drawbacks and disadvantages)?

B. Describe the economic system or policy of your country. Has it been influenced by Keynes?

C. Who are the most prominent or famous economists in your country?

D. Are there economic problems in your country and in general? What are the causes of economic difficulties?

E. What are the solutions to economic woes?

F. What will happen in the future, in terms of economics?