Keynesianism is an economic theory that is opposed to Liberalism , because it defends the intervention of the State in the control of the national economy, in order to make the country achieve full employment.
This political-economic doctrine was created by the English economist John Maynard Keynes (1883 – 1946) as an alternative to the liberalist model, which reached its peak at the end of the second decade of the 20th century, when the famous Crisis of 1929 occurred .
The United States, during Roosevelt’s presidency, used the Keynesian model in an attempt to save the country from the great crisis of 29. This economic doctrine was the basis for the famous New Deal plan , which aimed to lift the USA out of the “Great Depression”.
The Keynesian theory was officially presented by Keynes in the work ” General Theory of Employment, Interest and Money ” ( General Theory of Employment, Interest and Money ), published in 1936. In fact, this book became the basis and reference for new studies on Economics and Administration.
Many people think that Keynes defended the nationalization of the economy, as the socialist countries followed based on the Marxist theory, but he was a defender of the capitalist model. However, this economist also believed that the State should be responsible for controlling certain factors, such as guaranteeing social benefits to workers so that they have a minimum standard of living.
For this reason, Keynesianism has also become known as the “welfare state” .
See also: meaning of Capitalism .
Characteristics of Keynesianism
Some of the main characteristics that define Keynesianism are:
- Development of political actions for economic protectionism;
- State intervention in areas of the economy where private companies cannot or wish to act;
- Opposition to liberalism and neoliberalism;
- Social benefits to the population (minimum wage, unemployment insurance, health insurance, etc.);
- Reduction of interest rates;
- Guarantee of full employment;
- Balance between production and demand.
Keynesianism and Neoliberalism
Keynesianism is the opposite of neoliberalism. The latter, like classical liberalism, defends the low participation of the State in the economy, while the former provides for State intervention in matters that private companies neglect.
According to the ideas of Adam Smith, the forerunner of liberalism, capitalism itself contained mechanisms that served as socio-economic self-regulators of society. Thus, for liberals, the state should only guarantee private property.
With the Crisis of 29, the so-called “Invisible Hand” of capitalism proved ineffective as the only alternative to keep the economy balanced.
It was from this uncertainty that Keynesianism had a place, stating that the State should interfere in society and the economy to ensure that all citizens had a life with a minimum of dignity.