Why Were Keynes' Policy Ideas 'so Difficult to Accept in the 1930s  Term Paper

  • Length: 10 pages
  • Subject: Economics
  • Type: Term Paper
  • Paper: #38937121

Excerpt from Term Paper :

Keynes's policy ideas so difficult to accept in the 1930s?

This is a paper that analyzes the above questions and answers it by identifying the factors that were responsible for the rejection of Keynes ideas during the 1930s. It has 12 sources.

It is quite usual that people do not readily accept changes in their lives easily. A change in routine and economic patterns would certainly disrupt people's lives, which they would certainly not great warmly. This is because of the fact that it would mean readjusting themselves to almost everything that they do.

A change in economic relationships too would mean that virtually everything in society would change. This is because of the fact that nearly everything in society is economic based (Begg, 2000).

When there were problems visible in society, Keynes formulated economic policies that he believed would solve economic crises if a country adopted them. However, this was not to be, as his theory was not greatest with the greatest enthusiasm.


On examining different economic patterns in various countries one will be able to see the way that they have lived and either progressed or suffered as a result of their economic concepts and political situations. Keynes lived at a time when he witnessed much economic depression in the world and proposed a policy that could have solved it.

The period around the time when Keynes formulated his policies was around the time of the Great Depression. This was a time when people were suffering endlessly due to economic down turn. It was a time when people began to wonder how an economy could crash so dramatically (Chick, 1983). (There was much suspicion that there might have been some sort of wrong step taken in economic decisions at this time. There was truly a need to solve this problem through intervention that would be similar to the economic systems that were being followed in Europe at that time, as the United States had based their economic system on the British system. However, there wasn't any proposal at that time from any conventional capitalist. Keynes then proposed a policy, and this was one that people of that time thought that such a proposal was one that opposed capitalism Clarke, 1936). They assumed that implementing such policies, as those that Keynes proposed, would mean that the country would be implementing a communist system. Aside from this there was also the economic problem that the country was facing. This refers to the Great Depression, the economic depression that the United States experienced in the 1930s (Chick, 1983).

The Great Depression was certainly a time when America was put through a tremendous test. The people of the 1930s suffered immensely because of the fact that there were no proper jobs available for them to earn a decent living that were willing to. The places that were offering jobs were paying these poor workers far too little for them to afford themselves meals for the survival of them and their families (Stewart, 1986).

The first half of the 1900s has seen the working class Americans suffer time and again. They always had to fight tooth and nail to get a decent wage so that they could survive. They were often denied this and were normally paid half of what would really suffice their needs. Just like the general strike, the strike of the steel industry workers, etc. similar protests were being made during the great depression due to the fact that there were still many businesses running for good profited at a time when the workers of the same businesses were not being paid enough to survive. Once again like the time of the big strikes workers were over worked and collapsed through fatigue trying to put in a maximum number of hours.

The condition of the workers during the Great depression as described in the novel is a bit different than what is described in the movie. This is because there has been an attempt to display the kind of behavior that the ruling class expects of the working class in times of economic problems. There is also a hint of a threat towards the working class members who deviate from what is expected of them.

The fact that the working classes were being alleviated from their impoverished situation in Europe may have ignited a flame of hope in the Americans to survive the economic depression. It is clear that capitalism survived all eras in European history, and so the Americans too expected that the same would take place in their country.

Throughout its history, but especially during its ascendancy in the 19th century, capitalism has had certain key characteristics. Basic production facilities, land and capital are privately owned (Winch, 1969).

Owners of land and capital as well as the workers they employ are free to pursue their own self-interests in seeking maximum gain from the use of their resources and labor in production. Consumers are free to spend their incomes in ways that they believe will yield the greatest satisfaction. This principle, called consumer sovereignty, reflects the idea that under capitalism producers will be forced by competition to use their resources in ways that will best satisfy the wants of consumers (Bleaney, 1985).

Self-interest and the pursuit of gain lead them to do this. Under this system a minimum of government supervision is required; if competition is present, economic activity will be self-regulating. Government will be necessary only to protect society from foreign attack, uphold the rights of private property, and guarantee contracts. This 19th-century view of government's role in the capitalist system has been significantly modified by ideas and events of the 20th century.

Since capitalism meant freedom for the individual in the past, in the modern world as well people still want the same thing. Even though there are people who are not capitalists in the essence of the word they do support the system because of the fact that it means freedom from oppressors.

For 25 years after World War II the mixture of Keynesian ideas with traditional forms of capitalism proved extraordinarily successful. Western capitalist countries, including the defeated nations of World War II, enjoyed nearly uninterrupted growth, low rates of inflation, and rising living standards (Munting, 1991).

Beginning in the late 1960s, however, inflation erupted nearly everywhere, and unemployment rose. In most capitalist countries the Keynesian formulas apparently no longer worked. Critical shortages and rising costs of energy, especially petroleum, played a major role in this change (Munting, 1991).

New demands imposed on the economic system included ending environmental pollution, extending equal opportunities and rewards to women and minorities, and coping with the social costs of unsafe products and working conditions. At the same time, social-welfare spending by governments continued to grow; in the U.S., these expenditures (along with those for defense) account for the overwhelming proportion of all federal spending.

The current situation needs to be seen in the perspective of the long history of capitalism, particularly its extraordinary versatility and flexibility. The events of this century, especially since the Great Depression, show that modified "mixed" or "welfare" capitalism has succeeded in building a floor under the economy. It has so far been able to prevent economic downturns from gaining enough momentum to bring about a collapse of the magnitude of the 1930s. This is no small accomplishment, and it has been achieved without the surrender of personal liberty or political democracy (Bolatho, 1982).

The inflation of the 1970s came to an end in the early 1980s, mainly because of two developments. First, restrictive monetary and fiscal policies led in 1981-82 to a deep recession, both in the U.S. And in Western Europe. As unemployment rose, inflation slowed. Second, energy prices dropped as worldwide oil consumption moderated. In the mid-1980s most Western economies recovered from the recession, but then the stock market crashes of 1987 introduced a new period of financial instability. Economic growth slowed, and many nations -- in particular the U.S., where the national, corporate, and personal debt had reached record levels -- dropped into recession, with rising unemployment, in the early 1990s (Munting, 1991).

Economic and social doctrine, political movement inspired by this doctrine, and system or order established when this doctrine is organized in a society. The socialist doctrine demands state ownership and control of the fundamental means of production and distribution of wealth, to be achieved by reconstruction of the existing capitalist or other political system of a country through peaceful, democratic, and parliamentary means.

The doctrine specifically advocates nationalization of natural resources, basic industries, banking and credit facilities, and public utilities. It places special emphasis on the nationalization of monopolized branches of industry and trade, viewing monopolies as inimical to the public welfare. It also advocates state ownership of corporations in which the ownership function has passed from stockholders to managerial personnel. Smaller and less vital enterprises would be left under private ownership, and privately held cooperatives would be encouraged.

These are the tenets of…

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