A Requiem for Supply-Side Economics
It was Nixon who remarked after taking the US off the gold standard that “we are all Keynesians now.” That was the high water mark for Keynesian economic theory. Keynes’ proposal that government ought to step up during times of economic contraction and be the consumer of last resort was the lasting idea of his teachings. His ideas have been adopted by virtually every democratic government in the world since 1936 when he published his “General Theory of Employment, Interest and Money”. The principal contribution of the ‘General Theory’ was the idea that the government had an obligation to do something during times of economic contraction to maintain aggregate demand by being the aforementioned consumer of last resort. This demand management seemed to strike a chord with politicians who could promise more, actually deliver some small fraction of that and none the less slop around in the economy a lot more than they were accustomed to.
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