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Keynesian Ideas


The end of World War II brought sobriety to world political leaders. With the ashes of the countries of Europe and Asia met to work as a team in the rebuilding. But they knew they could not do it without a stable currency. In July 1944, the most powerful men in State of 44 Nations met in Bretton Woods, New Hampshire. In that year we designed what was to become the international monetary system of the second world war.

It took them much discussion but representatives finally drafted and signed the articles of the Convention of the Fund monetary International (IMF) in the new global monetary system. It was then ratified by a majority of countries launching IMF. The International Monetary Fund was the first global organization with a clear international policy and authority to enforce the new monetary rules. Bretton Woods delegates also created the sister organization of the IMF, the World Bank formally called the International Bank for reconstruction and development (IBRD). This new agency was responsible for the financing of development projects in a country, on a large scale.

Memories of how domestic monetary policy in a country reduced in another wealth led to the formation of the Bretton Woods system. The idea was to create a stable system where all countries could prosper. The mind of a genius is fit into the postmodern was of gold John Maynard Keynes was a British economist whose ideas had a significant impact on modern economic and political theory. It also influenced fiscal policies of Governments on the budget, especially dealing with taxes and government loans. One of the great fathers of modern theoretical macroeconomics! Keynes defended the policy of governmental interventionism, where Governments used fiscal and monetary measures to mitigate the adverse effects of economic recessions, depressions and booms. His ideas are the basis for the school of thought known as Keynesian economics. Keynes spearheaded a revolution in economic thinking overturning old ideas which argued that free markets automatically provided full employment, provided that the workers would be willing to reduce his wage demands. Shortly before the end of the great depression, his ideas were put into practice by the major Western economies. During the years 1950s and 1960s, the success of Keynesian economics was so surprising that almost all capitalist Governments around the world have taken their policies. President Nixon came up to now declare we are all Keynesians. The ideas of Keynes became less influential in the 1970s, especially because already he could not defend his ideas he was dead! The Economist Milton Friedman and others scrutinized everything the free market which leads to distortions that we have idle predatory class as predicted by another genius Economist Thorstein Veblen. But the ideas of Keynes returned firmly to the plans of President Barack Obama and other leaders worldwide trying to rescue the economy in 2008. Time Magazine named Keynes one of the 100 most influential people of the 20th century and reported his radical idea that Governments should spend money that does not have could have saved capitalism.

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