The early-summer national and international efforts against the currently cruel economic recession that began around the world about four years ago often seem—at least to this observer—to feature ideas notably ignorant of victorious anti-depression combat eight decades ago.
The historic victories featured the powerful governmental fight against the punishing 1930s depression promoted by British economist John Maynard Keynes and U.S. President Franklin D. Roosevelt. Take a look.
John Maynard Keynes (1883-1946) The most prominent 20th century economist, Keynes (pronounced like "Canes," not "Keens," as in "The Keynes Mutiny" below) was also a financial genius. Like David Ricardo, he could predict the stock market with great accuracy. Before Keynes, most economists still followed Adam Smith's idea of laissez-faire: leave the market alone and it (or rather the invisible hand) will run itself. No need for government intervention. If the government would only stay out of the economy, it would run great. Right? Sure, at least until the Great Depression came along. The Great Depression showed that, in times of severe economic crisis, it may become necessary for the government to give the economy a boost, in order to get it back on its feet. In 1936, Keynes published one of the most influential economics texts ever written: The General Theory of Employment, Interest, and Money, usually called simply The General Theory. Until this time the area of microeconomics was basically all there was to economics: economists delt with the market, supply vs. demand, and generally small-scale issues. Keynes emphasized a broader view, macroeconomics, which views the relationships between markets, foreign trade, private and public (i.e. government) spending--in short, the combined effect of every aspect of the economy. . . .
John Maynard Keynes and the Revolution in Economic Thought
British economist John Maynard Keynes believed that classical economic theory did not provide a way to end depressions. He argued that uncertainty caused individuals and businesses to stop spending and investing, and government must step in and spend money to get the economy back on track. His ideas led to a revolution in economic thought. . . .
During early days of the Great Depression, President Herbert Hoover resisted calls for government intervention on behalf of individuals. He reiterated his belief that if left alone the economy would right itself and argued that direct government assistance to individuals would weaken the moral fiber of the American people. . . .
Hoover was easily defeated in the presidential election of 1932 by Democrat Franklin D. Roosevelt. . . . many facets of the New Deal--Social Security, the Federal Deposit Insurance Corporation and the Securities and Exchange Commission to name only three--have remained features of American life from the 1930s until the present. . . .
This huge expansion in the role, size and power of government in American social and economic life is aptly summed up in Republican President Richard Nixon's famous 1971 remark, "We're all Keynesians now." #