During a recession, Keynesian economics suggests that govt spending will stimulate economic growth. John Maynard Keynes would be dismayed at the present government of his native country as Britain joins Europe with draconian govt spending cuts. Americans of the conservative persuasion see British resolve and the unpopular fiscal policies of the Obama administration as signs that Keynesian economics is on the way out.
What you should learn about Keynesian economics
The cash cycle is what Keynesian economics is all about. Individuals need to spend cash for the economy. Everyone benefits when someone spends. The economy got really bad while the cycle of cash essentially stopped during the Great Depression. Keynes argued that the govt must spend to revive the cycle of cash. His ideas were shut down as most believed in laissez-faire capitalism at the time. His ideas weren't that. Keynes’ ideas were taken to heart by the Roosevelt administration, which spent to build roads, dams and other public works projects. The U.S. economy did really well for about 50 years after World War II came along requiring a ton of government spending.
Europe does not like the idea of Keynesian economics
The global financial crisis exposed massive government deficits in Europe as the continent’s economy crashed. U.S. Treasury Secretary Timothy Geithner recommended Keynesian economics to European governments. Instead, Europe is heading the other way with austerity measures. 500,000 jobs can be lost with the military, pensioners, middle class and poor losing out with the $130 billion spending cut. A higher national debt along with less growth and less tax revenue can be what the British governments ends up with, the Guardian accounts Nobel Prize winner Joseph E. Stigliz saying.
Keynesian economics and the midterm election
Many think the Obama administration ought to start acting like Britain since the U.S. economy obviously isn't doing any better with the govt stimulus. Right wing pundits eagerly anticipating Republican gains in Congress are trumpeting the 2010 midterm election as the official declaration that Keynesian economics have failed. The downturn will finally take place if the govt stimulus ends, the White house claims. Another group states deficit spending needs to stop. The economy is doing better now.
Citations
Wisegeek.com
wisegeek.com/what-is-keynesian-economics.htm
New York Times
nytimes.com/2010/10/21/world/europe/21austerity.html?hp
National Review
nationalreview.com/corner/251088/obamas-economics-are-loaded-bear-j-d-foster
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