What is Keynesianism definition/concept

As in any other scientific discipline, there are several theoretical models in economics. For Marxist theorists, the state needs to take a leading role in economic activity. Keynesianism

For liberals, the role of the State must be minimal and the most important thing for the economy to work is individual freedom and private initiative.

In an intermediate position, some economists are free market advocates, but under the tutelage of the state. This last theoretical view was defended by the British economist John Maynard Keynes (1883-1946). Their approaches created a doctrine, Keynesianism.

The historical context of Keynesian theory

At the end of World War I, Germany suffered the consequences of disproportionate inflation. At the same time, many people in the United States could not find jobs . The economic instability on a world level deepened with the crash of the New York stock exchange in 1929. In light of this situation of global crisis, in 1936, Keynes proposed a recipe in his book. Keynesianism

Keynes advised the reduction of financial burdens against Germany as a punishment after World War I. Despite his warnings, in the 1930s, part of the German people supported Hitler, who came to power arguing that the German debt to the countries that won the Great War was unfair and unacceptable.

the role of the state

The fundamental idea of ​​Keynesianism states that the correct path that should guide economic activity is to combine two aspects: free trade and effective state intervention. In this sense, the state has an obligation to control money, for example, by imposing interest rate supervision or else through the financial measures of a central bank. At the same time, the state needs to know the needs of a society in general. With the support and intervention of the state, economic forces can develop their activity within the free competition of capitalism.

For Keynes, capitalism must be corrected through the participation of the state. Otherwise, unemployment and economic crises can lead to catastrophic situations for society as a whole. Keynesianism

Supporters and Detractors

The main advocates of Keynesianism are the social democratic parties. These parties defend public spending in the main sectors of the economy and, on the other hand, the budget deficit.

The main critics are neoliberal economists. According to neoliberalism, the periods in which there was economic instability were generated precisely by the excessive control of the monetary authorities. Keynesianism

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