Keynesian economics
Also called: John Maynard Keynes · Topic: The Making of a Global World · NCERT: Beyond NCERT
Meaning
Keynesian economics is the set of ideas of the British economist John Maynard Keynes. He set them out in The General Theory (1936). In a slump, people and firms stop spending, so jobs disappear. Keynes argued that the government should then step in and spend more, so that demand and employment come back. Free markets alone cannot promise full employment. These ideas shaped the managed world economy that was built after the Second World War.
Example
At the Bretton Woods conference (July 1944, New Hampshire, USA), Keynes was a leading British figure. The plan agreed there followed a Keynesian lesson from the inter-war years. Mass production needs steady full employment, so governments must have the power to manage flows of goods, capital and labour. During the Great Depression, Keynes also argued that India's gold exports helped world recovery. They helped Britain's recovery, but did little for the Indian peasant.
Don't confuse with
- Laissez-faire: This is the older idea that the government should keep out of the economy and leave everything to the market. Keynes rejected it for times of slump.