ESSAY ONE - ESSAY ONE: Introduction Keynesian economics...

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ESSAY ONE: Introduction Keynesian economics – General Theory (1926) Quick overview Keynesian economic dominated during the Golden Years (1950s-1970s) He promoted a mixed economy (mix free market economy and centrally planned economy) private and public ownership, capitalism and also government intervention. State and the private sector play an important role. Government intervention is a huge thing! Keynesian approach could not fix the problems of inflation and unemployment at the same time that followed collapse of Bretton Wood and the Oil Crises in the early 1970s. This is where monetary economics started to gain strong ground (it has been around since 1940s though) Friedman “market fundamentalist” to the end Did not like the economic approach of using centralized planning. He believed that it could lead to abuse and even totalitarian regimes He suggests deregulation, limited government control. In fact he suggests that the only thing the government should do is step back and let the markets run themselves His big supporters were Regan and Thatcher. Thatcher becomes the figurehead for the “American approach.” Global liberalization, free trade, free capital flow all come out of that. He believed that open markets was the one best solution to everything. This is exactly the point where everybody would argue with him and so should you. He would suggest that open markets would increase incomes and would reduce poverty eliminating inequality. Just as he did not like big arguments he also did not like big institutions such as WTO, IMF, World Bank (they are supposed to bring free trade but since they are influenced by governments, they are actually counterproductive in that). He blames these institutions, especially IMF for what happened in Mexico and in East Asia. o Mexico: IMF claims it bailed out Mexico, but in reality it gave the money to banks and financial institutions that loaned money to Mexico. This created internal recession and the poor people were faced with higher prices and reduced income o East Asia: The above caused EA Crises as banks believed that they could invest into countries with higher interests (higher risk) but be bailed out by IMF. Then you have the whole Bank Run deal when the situation gets bad. He was also outspoken on personal choice. He believed that personal choice should reign supreme and that that would be helpful for society and the economy.
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He advocated that (retirement savings(social security saving)/prostitution/drug use/military draft) should be left to the individual to decide, not the government. With drugs, he stated that the present drug control policy is unreasonable and way
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ESSAY ONE - ESSAY ONE: Introduction Keynesian economics...

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