Keynesianism , also called the Keynesian School or Theory, is a political-economic theory that advocates state intervention in the economic organization of a country.
Keynesian thinking states that the State should offer social benefits to workers, such as health insurance, unemployment insurance, minimum wage, paid vacations, among others.
In this sense, the State has duties to fulfill towards its citizens, providing them with a dignified life. This theory led to the emergence of the concept of Social Welfare.
In this way, Keynesianism is opposed to economic liberalism, which holds that the economy should be regulated by the market.
Origin of Keynesianism
Keynesianism emerged in the 1930s. XX and gets its name because it was elaborated by the British economist John Maynard Keynes (1883-1946). His economic theory was exposed in the work “General Theory of Employment, Interest and Money”, published in 1936.
Keynesian theory appears at a time when the capitalist and liberal system was going through production and unemployment crises. Thus, Keynes proposed something that governments had not tried so far:the regulation of the economy by the state.
Keynes argues that the market is not capable of regulating itself and that the state should participate in the economy through investments, companies and by regulating trade.
As an example, we cite the “New Deal”, implemented from 1933 to 1937, by the government of US President Franklin Roosevelt.
This plan made the State the main driver of the economy, promoting investments and infrastructure construction to generate employment. The purpose of the “New Deal” was to end the 1929 Crisis, which plunged the country into the Great Depression.
After the Second World War, the Keynesian economic model was used in some countries for their reconstruction. The result was the establishment of state-owned companies, market regulation and labor rights.
However, in the 1960s, the increase in social inequalities, inflation and unemployment made Keynesian thinking suffer several criticisms from liberals.
Summary of Keynesianism Features
The main characteristics of Keynesianism are:
- Opposition to liberal and neoliberal ideals
- Market protectionism and economic equilibrium
- Government capital investment
- Reduced interest rate
- Balance between demand and production
- State intervention in the economy
- Full Employment Guarantee
- Social Benefits
Keynesianism, Liberalism and Neoliberalism
Economic Keynesianism is opposed to the ideals of economic liberalism and neoliberalism, which value individual initiative and non-intervention by the state in the market.
Liberalism, based on the ideas of Adam Smith, argued that the market was capable of self-regulation, as it is governed by the law of supply and demand. The more a product or service is offered, the cheaper it will be. On the other hand, the more people looking for a product or service, the more expensive it will be.
In the 1990s, Keynesianism was forgotten in the face of the advance of neoliberalism in the context of globalization and the opening of the international market.
This was because neoliberalism is an update of liberalism and advocates the privatization of state-owned companies, the economic opening of national markets and the free movement of international capital.
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