Economist, Journalist (1883-1946)
John Maynard Keynes is arguably the most influential economist of the 20th Century and is credited as the father of Macroeconomics. He is most famous for his view that governments must engage in deficit spending to avoid prolonged periods of unemployment during recessions.
Keynes, in his famous book the ‘General Theory of Employment, Interest and Money’, revolutionized economics when he argued against the mainstream view that free markets would automatically provide full employment.
Keynes asserted that employment depends on aggregate demand (AD) and, as AD is the sum of consumption, investment and government spending, employment depends on government spending. Consequently, Keynes contended that the government must intervene in the economy during boom and bust cycles, and many Western economies followed suit and adopted this policy in the 1930s.
The 1970s hosted the problem of stagflation and, subsequently, the Western world abandoned Keynesianism and switched to Monetarism.
However, the 2007 global financial crisis saw Keynes’ ideas return as economies the world over required monetary and fiscal stimuli from their governments.
Furthermore, Keynes is famous for suggesting that private investment depends on ‘animal spirits’, that is, the instincts that drive human behaviour. He was also an advocate of the postwar system of fixed exchange rates.
“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”
– John Maynard Keynes