We’ve started down a road of research that will hopefully help us to see the interaction of economics and politics, and how they affect us, more clearly. Our goal is to free ourselves of wrong thinking, thus equipping ourselves to be proactive in our pursuits. While we interact with different words and seek to understand them, we are undoubtedly using words that we still might need to come to grips with.
Recently we’ve taken a look at capitalism. Granted, there are various forms of capitalism, which would be advantageous for us to understand. The Wiki site discusses this to some degree. However, for our purposes, we are focused on free-market capitalism when we use the term. As we’ve discussed economics, there are another two terms that come up regularly do to their differences and our need to address what’s right and wrong about these schools of thought.
I remember when I first started studying economics to some extent about fifteen years ago. I heard Keynesian economics thrown around quite a bit, in an unfavorable light. In this, Providence smiled upon me and helped me to see what is wrong with the socialistic impositions of this school of thought. It was quite amusing, though somewhat embarrassing, that I went years pronouncing it ke-NEE-zee-ən, not even aware that there was a person named Keynes associated with it. With this in mind, it would be a disservice to our Regular Joes to assume that you know how to pronounce Keynesian, not to mention understand what it means.
It might help in understanding the pronunciation to know that the Keynesian economic school of thought, also known as Keynesianism, is named after John Maynard Keynes. His most famous book, the General Theory of Employment, Interest and Money, lays out his economics theories and has become a standard for western monetary policy. As a result, we refer to these policies as Keynesian, pronounced KEYN-zee-ən (or CAINS-e-an). Even here we hear some variation, but I was certainly wrong in my pronunciation before.
Something I found interesting was that, though I heard much about how wrong Keynesianism was, I never really heard a name for its opposition, other than free-market. It wasn’t until years later that I recall hearing anything about Austrian economics. And it was even longer before I had any clue as to why.
Today we’ll begin to consider Keynesianism. When it comes right down to it, the teaching of Keynes is very challenging to grasp a hold of. He was a brilliant man who was also respected by many of his adversaries for his ability to debate. However, his theories are socialistic in nature, embracing the tight control of national economies by a central government and/or banker. Though governments were already embracing socialistic tendencies before Keynes codified his ideas, his writing had the effect of validating these practices and providing a recipe for them to adopt more fully. As a result, by the ‘60s we see most capitalist countries giving way to this form of social liberalism.
A basic tenet of Keynesianism is the need to constantly stimulate expenditures. The idea is that by providing (stimulating, causing) more expenditures the government can create more jobs. One method of stimulating spending is to offer credit that is offset by gradual and controlled inflation. If you can put money into people’s hands then they will spend, stimulating the economy by producing greater demand, thus creating jobs. Through gradual and controlled inflation, repayment of such credit becomes easier to manage in the long run, enabling people to continue the cycle of spending in order to keep the economy stimulated and continue to provide jobs. Without this stimulation, Keynes argued, economies can become trapped in low employment. It appears that this credit at first was on a national level, where we see government sponsored work programs implemented for the purpose of stimulating the economy.
To be fair, much that is considered “Keynesian” today was not, in fact, directly espoused by Keynes (this article offers some light). Some of it is necessarily implied. Some is unforeseen necessity. And some is the result of advancements made to Keynes’ propositions. We won’t go deeply into these aspects for two reasons. One, it would take an inordinate amount of time to explain it all. Two, Another Joe really doesn’t have a good enough grasp of these nuances to offer a whole lot of information.
It would be prudent, however, for the reader to read parts of the Wikipedia article on John Maynard Keynes, specifically the section on “Legacy.” With this, we’ll leave you to your own devices for now. This should provide plenty of fodder for the student to consider where Keynesianism originates and, at least in a general sense, what it means. In our next installment we’ll attempt to address the effect of Keynesianism on economies.
Again, thank you for reading. Please submit any comments, corrections or even civil debate bellow.