John Maynard Keynes, vol. 2, The Economist as Savior, 1920-1937.

• Author: Galbraith, John Kenneth

Any survey of economists as to who was the most influential economic figure of the century would bring a wide, if unnatural, agreement, extending to those most conservative in the faith: It would be John Maynard Keynes. He would also be a strong contender as the most influential intellectual voice of his time. It was his not slight achievement to have changed the way the modern economy is thought to perform and to have changed radically the view of the relationship of the government to economic life. Once, the economic system was thought to have a life and dynamic of its own. Since Keynes, its performance is assumed to be the clear responsibility of the government.

It was Keynes' enduring view that a basic tendency of the modem economy was not necessarily to the employment of all available and willing workers; it could be to an equilibrium of low performance, of unemployment. And it was his companion case that this equilibrium could only be broken and relatively full employment assured by government fiscal intervention--by the government spending money in excess of its revenues to put people to work. This, with the further multiplier effect, would enhance the flow of aggregate demand and thus increase production and employment. A more than incidental consequence would be that the country would get the fruits of this employment--the housing, highways, bridges, airports, post offices, schools, hospitals, parks, conserved forest lands, whatever came from men and women working rather than subsisting on the barren reward from unemployment compensation and relief payments--in Keynes' world, the dole.

No one should suppose that these, ideas are either dated or confined in any way to one part of the ideological spectrum. It is only that they may be applied without being admitted, even identified. During the late 1980s, Ronald Reagan established himself as the most committed Keynesian of modem times. Following the sharp recession of his first months in office, he presided over a major expenditure and employment program, which led to unprecedented peacetime government borrowing and a deficit that ranged up to $238 billion in fiscal year 1986. That the principal object of expenditure was armaments--the defense buildup--does not alter the underlying economic fact. In the absence of this massive stimulus, the economic performance during his presidency would have been very different, and sadly so. Stagnation, and an unforgiving level of unemployment...