Keynes and the Stimulus

Late Friday night, Congress passed the $787 billion stimulus bill we’ve heard so much about the last few weeks.  It’s still not exactly clear what this will mean for folks here in North Carolina and more particularly Greensboro, but this article from the News and Record indicates the state can expect to receive about $6.1 billion. 

I don’t know much about economics, but I have seen John Maynard Keynes’ (1883-1946) name bandied about quite a bit lately by economists discussing the stimulus — for example, on Paul Krugman’s blog.  

Keynes, an Englishman, was one of the great economists of the 20th century.  He took issue with the laissez faire concept of capitalism, feeling strongly that capitalist economies were not self-regulating and at least sometimes required government intervention; as the current economic crisis has led to strong support for government action, Keynes has very much become the “great economist” of the moment and the authority for many contemporary economic thinkers.      

By coincidence, while on my lunch break the other day, I walked in the Bargain Box uptown, looked through the books, and found several volumes which I bought, including a copy of John Strachey’s Contemporary Capitalism (1956).  To be honest, I really just bought Strachey’s book because it had the ownership signature of Edwin M. Yoder — he used to be a reporter at the old Greensboro Daily News, and later went to the Washington Star and Washington Post (at the Star, he was awarded a Pulitzer Prize for editorial writing in 1979).   But, as it turns out, Strachey was a Keynesian and the book includes a pretty good synopsis of Keynes’ proposals on how government can regulate a capitalist economy.

These proposals include lowering interest rates, based on the notion that cheaper money will encourage entrepreneurial enterprise, and deficit financing, whereby increased government purchasing stimulates business output, improves market sentiment, etc.

But the third Keynesian proposal is where we find ourselves now with the stimulus bill’s public works program.  “The third remedy,” Strachey writes, “is concerned with the possibility of the State itself undertaking direct entrepreneurial functions. . . .  For clearly another way of getting more money into circulation, and so increasing total demand, alternative to leaving more money in the hands of tax-payers, is to put more money into people’s hands by employing them upon public works of one kind or another.  Keynes did not primarily mind what kind of public works these were:  almost anything would do so long as it put more money into people’s hands.”            

Keynes also suggested a fourth idea:  that sometimes wealth needed to be redistributed from the rich to the poor, on the assumption that during an economic slide the poor were more likely to spend and thus stimulate the economy, while the rich tended to hoard. 

Greensboro Public Library does not own a copy of Strachey’s book.  But even better, we have Keynes’ own General Theory of Employment, Interest and Money.  And we also have several books about Keynes and his ideas:  The Age of Keynes by Robert Lekachman; Essays on John Maynard Keynes, edited by Milo Keynes; John Mynard Keynes:  A Personal Biography of the Man who Revolutionized Capitalism and the Way We Lived by Charles H. Hession; John Maynard Keynes by Robert Skidelsky; The Life of John Maynard Keynes by Roy Forbes Harrod; The Shadow of Keynes:  Understanding Keynes, Cambridge, and Keynesian Economics by Elizabeth S. and Harry G. Johnson; and Macroeconomics After Keynes:  A Reconsideration of the General Theory by Victoria Chick.

If you’d like to read a briefer biography of Keynes, please try our Biography Reference Bank.  And to follow articles about the economic crisis, you can use CQ Researcher or Facts on File.

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2 Responses

  1. […] I will refer readers to my previous post on Keynesian economics.  Relevant to the above discussion are Keynes’ views that capitalism is not […]

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