O Keynesianism, also called School or Keynesian Theory, is a political-economic theory that defends the intervention of the State in the economic organization of a country.
Keynesian thinking states that the State should offer social benefits to workers, such as health insurance, unemployment insurance, minimum wage, paid vacations, among others.
In this sense, the State has duties to fulfill with its citizens, providing them with a dignified life. This theory led to the emergence of the concept of social welfare.
In this way, Keynesianism is opposed to economic liberalism, which holds that the economy must be regulated by the market.
Origin of Keynesianism
Keynesianism emerged in the 1930s. XX and is named after the British economist John Maynard Keynes (1883-1946). His economic theory was exposed in the work “General Theory of Employment, Interest and Currency”, published in 1936.
Keynesian theory appears at a time when the capitalist and liberal system was going through production and unemployment crises. Thus, Keynes proposed something that governments had not tried so far: the regulation of the economy by the state.
Keynes argues that the market is not capable of regulating itself and that the state should participate in the economy through investments, companies and regulating trade.
As an example, we cite the "New Deal" (New Deal), implemented from 1933 to 1937, by the government of US President Franklin Roosevelt.
This plan made the State the main driver of the economy, promoting investments and construction of infrastructure to generate employment. The objective of the "New Deal" was to end the Crisis of 1929, which plunged the country into the great depression.
After World War II, the Keynesian economic model was used in some countries for its reconstruction. The result was the establishment of state-owned companies, market regulation and labor rights.
However, in the 1960s, the increase in social inequalities, inflation and unemployment caused Keynesian thinking to be criticized by liberals.
Summary of Characteristics of Keynesianism
The main characteristics of Keynesianism are:
- Opposition to liberal and neoliberal ideals
- Market protectionism and economic equilibrium
- Capital investment by the government
- Interest rate reduction
- Balance between demand and production
- State intervention in the economy
- Guarantee of full employment
- social benefits
Keynesianism, Liberalism and Neoliberalism
Economic Keynesianism is opposed to the ideals of economic liberalism and neoliberalism, which value individual initiative and the non-intervention of the State in the market.
Liberalism, based on the ideas of Adam Smith, argued that the market was capable of self-regulation, as it is governed by the law of supply and demand. The more a product or service is offered, the cheaper it will be. On the other hand, the more people looking for a product or service, the more expensive it will be.
In the 1990s, Keynesianism was forgotten in the face of the advance of neoliberalism in the context of globalization and the opening of the international market.
This happened because neoliberalism is an update of liberalism and defends the privatization of state-owned companies, the economic opening of national markets and the free movement of capital international.
We have other texts for you:
- economic liberalism
- New Deal
- Welfare State
- neoliberalism
