Why Keynesian Economics Is Not Our Predominant Economic Policy

Keynesian economics, when implemented effectively, can indeed serve as a powerful tool in stabilizing and stimulating an economy during contractionary periods. The theory aligns with the notion that during economic downturns, government intervention—through deficit spending on infrastructure projects and public works—can help to boost employment and put additional money in circulation. Conversely, during times of economic expansion, the government should gradually withdraw these stimulus measures and pay off any accumulated debts. However, this balanced approach is not what defines the current predominant economic policy.

The Flawed Predominant Policy

Instead of adhering to the principles of Keynesian economics, our current economic policy is characterized by continuous stimulus. This means that taxes are cut and spending is increased when the economy is weak, and then further increased when the economy appears to be strong. Unfortunately, the concept of paying off debts during times of strong economic performance is rarely, if ever, brought into play. This policy leads to a never-ending cycle of economic stimulus.

Addressing Market Instabilities

While Keynes recognized some of the inefficiencies and instabilities within capitalist systems, his prescriptions fail to fully address the underlying market instabilities that often act as profit drivers. Poor banking practices, for example, can be immensely profitable but create significant instabilities. These instabilities can lead to financial crises and economic downturns, which Keynesian economics alone may not fully mitigate.

The Shift Away from Keynesian Economics

From the early 1930s to 1980, Keynesian economics was the dominant approach. However, during the Reagan administration, there was a shift towards supply-side economics, commonly known as trickle-down economics. This shift was driven by the idea that reducing taxes and cutting regulations would stimulate economic growth and benefit society as a whole. However, the reality is quite different.

The Disappearance of the Middle Class

The implementation of supply-side economics has contributed to a significant erosion of the middle class. Today, many young people find it challenging to leave their parents’ homes, let alone afford to buy homes, get married, or start families. A startling 50% of households live paycheck to paycheck with no savings, and 48% of Americans do not have money set aside for retirement. The idea that we should return to Keynesian economics is tantalizing, as it might offer a pathway toward more economic stability and wealth distribution.

The Reality of Economic Policy

Despite the flaws and instability in the current economic system, it is important to understand that our economic policies are not driven by the needs or interests of the majority. Instead, they are designed by, and for the benefit of, the wealthy corporate class. In the United States, economic policy is entirely dominated by the wealthy and powerful, with virtually no regard for the well-being of the general population. While various economic theories such as Keynesian, supply-side, and free-market economics might be presented as scientific or philosophical, in practice, they often serve to concentrate wealth and power in fewer hands.

Conclusion

Economics, much like religion, offers a plethora of seemingly valid theories and models. However, the ultimate objective is rarely genuine wealth and prosperity for all. Instead, policies are crafted to maintain and exacerbate the inequality that benefits the elite while the rest of society struggles.iais leaning towards a more hands-off approach, but it is crucial to recognize that true economic stability and prosperity require a more balanced and inclusive approach such as Keynesian economics.