The Rise and Fall of Keynesianism

Abstract

John Maynard Keynes has been by far the most eminent economist of the twentieth century. When he was very young he was admitted into the most influential circles of economic theorising in Britain and the world, and soon began to shine in economic policy-making in the global arena. Keynes was first and foremost a monetary theorist who was not afraid to be polemical in defending the practical implications of his work. In the 1930s this fully paid-up member of the British intellectual and political elite launched a frontal assault (or so he thought) on economic orthodoxy. Elements of the tradition of Steuart, the banking school and Marx resurfaced in Keynes’ attack on the orthodoxy: the complexity of the functions of money in a capitalist economy, particularly the importance of money hoarding; the inherent tendency of capitalist accumulation to move towards disequilibrium and crisis; and the role of uncertainty and expectations about the future in shaping the path of capitalist accumulation. These elements taken together provided the rationale for Keynes’ support of government economic intervention, both fiscal and monetary.