Keynesianism in practice?
in Keynes and Marx
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This chapter focuses on the policy and practice of the remarkable post-WWII boom and its unravelling in the 1970s. According to many accounts, the period of managed capitalism and sustained growth and stability gives meaning to the term ‘Keynesianism’. Experience never matches theory exactly, but reconsidering whether or to what extent the long boom followed Keynes’s prescriptions can usefully inform an understanding of what happened in history and also how policy and practice might be changed today. The first section, concentrating on the experiences within leading rich-country economies, argues that much of economic history and policy is hard to square with Keynes’s ideas. The second section considers the international system in this period, identifying elements of which Keynes clearly would have approved, particularly in the implementation of controls on cross-border capital movements. But there were also strongly anti-Keynesian elements, particularly in the way the post-WWII Bretton Woods system disciplined trade-deficit but not trade-surplus countries. The third section considers the crisis of the 1970s and the abandonment of the Bretton Woods system. Policies that at least appeared to draw on Keynes were implemented without conspicuous success. Lacking the historical counterfactuals, it is hard to judge whether alternative policies – whether anti-Keynesian or more determinedly Keynesian – might have worked better. The crisis, however, was widely perceived as a crisis of Keynesianism, and the section considers its implications for Keynesian policy prescriptions and the meaning of Keynesianism.

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