Can Keynes Save Us?
With the passage of the $787 billion “American Recovery and Reinvestment Act” in February, 2009; the United States, under the direction of newly elected President Barack Obama, has joined countless Western nations in rediscovering a macroeconomic school of thought tarnished by stagflation and left behind during the economic woes of the late 1970s. The postulation that demand, not supply, is the key variable governing economic activity was championed by economist John Maynard Keynes in his 1936 magnum opus The General Theory Employment, Interest and Money. Keynes argued that the solution to a depression was to stimulate the economy through government spending, thereby temporarily increasing overall employment, increasing demand, which in turn increases supply, and eventually returns the market to equilibrium. Credited by many for having helped to end the Great Depression, Keynes is now looked to for the answers to the current financial crisis engulfing the world. Can government intervention fix an economy? Critics argue that the free market needs no chains; they contend that government created the problem. Regardless, Keynesianism is on full display in the fiscal legislation being pushed through the 111th Congress as well as the monetary policy of the Federal Reserve under Chairman Ben Bernanke. Whether said theory will succeed or fail is yet to be determined.
John Maynard Keynes was born in 1883 in the English city of Cambridge to a loving, bourgeois academic family. From 1892-1897 he attended preparatory school where the teachers described him as brilliant, but occasionally, lacking in determination. In 1902 Keynes left for King’s College, Cambridge, to study mathematics. Keynes was a member of the secretive “Cambridge Apostles” society and frequently rubbed elbows with England’s most brilliant minds. Keynes continued to ascend the social hierarchy of Cambridge and before graduating he became the President of the Cambridge Liberal Club in...