Keynes’ theory of recovery – a lesson forgotton

John Maynard Keynes lived from the later 19th century until the 1940s. He saw a world that developed right before his eyes. He was a major economic voice during the period immediately after World War I and developed his General Theory of Employment, Interest and Money as he watched the economies of Europe fall into depression in the 1920s. Keynes’ theory was all about demand management (our economist friends will get us for that one). As Keynes saw the world, you could pretty much count on producers producing stuff in the hopes of getting rich. The issues surrounding the post-World War I world were all about demand rather than production. Simplistically, Keynes theorized that when private demand for stuff failed, public demand for stuff should step up and fill that gap. If we were producing too much steel, the government should buy steel so the steel mills will keep operating. If we were producing too much food, the government should buy the excess food to maintain prices. You probably see where this is going. Keynes described the world where we all now live with the government as a major economic actor. Read more