The Keynesian and Neoliberal View of Unemployment Essay

Both of these policies, keynesianism and monetarism are important and supported by the citizens. These ideas of how economy should be conducted both want to ensure a stable economy for the people. That’s where comparisons end and differences began. Monetarists want absolute freedom in the economy from government interference. They insist that Keynesianism causes the downturns because government it so worried about stabilizing the economy and doesn’t let it fully growth. Keynestists believe government should help aid the economy and can track it’s progress. Therefore a more structured policy is in place to provide aid in keeping stability from outside interferences. Without the government watching, numerous problem can arise such are large businesses taking over the small businesses which can lead to businesses closing and loss of jobs and no one wants to start a business with that as a possibility.

During the late twentieth century, nations throughout the Western Hemisphere found themselves exhausted economically due to a combination of recessions which occurred from the late sixties to the early nineteen eighties-caused most in part due to energy crises and government regulations to combat inflation (due to counteract Cold War spending). Combined with growing economic interdependence, due to the need for foreign resources needed for the sustainable growth and expansion of consumer-based manufacturing markets in the developed world-beginning post World War Two, the United States and impactful developing states sought to create regional zones of economic integration that could provide solutions to internal economic concerns of employment, growth, and governmental sustainability, as well as provide a platform for prosperity in regards to capitalism, inter-market sustainability, and geo-economic authority within the region. In order to do this, beginning in the late nineteen seventies, pro-capitalistic states, such as Chile, Mexico, and most recognizably the United States- , and different economic institutions-such as the World Bank and the IMF- pushed for a new wave of liberalism, emphasizing revamped laissez-faire policies. This resurgence of classical economic liberal ideology, which is known as neoliberalism, emphasized growth

In 1936, The Federal Government cut spending with hopes the parts of national economy that was not under control by the government would step in and help with the economic issues, but the economy continued going downhill until WWII. For example the “Oil Crisis”, this caused prices to raise significantly. Instead of $3 a barrel it went to $12 a barrel.

Neoliberalism was seen as legitimate state development logic for two reasons. First, it entails a particular reading of the cause of the debt crises: misguided macroeconomic policies on the part of debtor nations, as opposed to over- lending by banks. (Soederberg, pp. 935-939) Developing countries were blamed for bringing about the debt crises

Neoliberalism, or an approach to economics and social studies in which control of economic factors is shifted from the public sector to the private sector, experienced a rise in the global north, which is hindering development. With the fall of the Soviet Union came the implementation of Structural Adjustment, which consist of loans provided by the International Monetary Fund (IMF) and the World Bank (WB) to countries that experienced economic crises. The Structural Adjustment was implemented in the global south, which allowed for liberal-capitalism to become globally hegemonic. With that being said, over the past couple of years, neoliberal capitalism has slowly declined due to economic/financial, political, and ecological crises.

One of the driving forces behind John Maynard Keynes (to be addressed as Keynesian-ism here after) was The Great Depression. The depression began in 1929--Keynesian-ism was written and introduced in 1936; the end of The Great Depression is dated at 1939--the same year as when World War Two broke out in Europe. This was introduced with great controversy as his economic philosophy was completely different from what was “classical” economics at the time.

Neoliberalism, an approach in the economic system has brought up many debates on whether it is beneficial to the global economy or if it hinderous, or a combination of both. The question is then brought up, what constitutes neoliberalism? Ha-Joon Chang, a Korean heterodox economist, defines the main principle of neoliberalism as the government’s restriction of intervening with the market (Chang). Neoliberalism advocates for free trade, privatization of publicly owned enterprises, the act of balancing budgets as well as maintaining low budgets, and deregulation. Neoliberalists also argue that the benefits of this approach directly correlate with how free the system is. In other words, “the freer the system, the better off the ordinary poor people have been.” (Friedman) Additionally, Jagdish Bhagwati, a major proponent of neoliberalism, claims that women are doing better in neoliberalism economies. Scholars also argue that neoliberalism promotes economic growth and it trickles down to the lower classes of the economic hierarchy.

The sociopolitical theory of neoliberalism began as the combination of traditional laissez-faire markets with some state or government involvement to prevent another economic collapse like the Great Depression. In a neoliberal society the state would have a minimal roll which redefined how the state was seen and works. When these ideas started to get implemented in the 70s, there was a privatization of previously state-owned industries, contracting out former state doings and the formation of collective goods. Neoliberal societies shift from centralized government to a privatized

Since the establishment of the Keynesian theory during the Great Depression, there was a continuous rivalry between Keynesians and monetarists. The ongoing debate was about which model can most accurately and correctly explain economic instability and which theory provides the best suggestions on how to achieve constant and steady economic growth. There are fundamental differences in these two approaches, for example over the usefulness of government intervention through fiscal policies, monetary aggregates and money market conditions as a policy guide, fixed and flexible exchange rates to name the few. Financial crisis that occurred in 2007-2008, boosted the debate among politicians, economists, scholars over the way the economics policies should be conducted.

The foundational roots of neoliberalism were planted by a political economy theory which advocated for markets to be completely liberated from any type of governmental interference. These markets would be free from competition and free enterprise was promoted which would allow for economies to grow. Neoliberal ideas have drastically changed how states operate for starters by promoting a market-based economy that values competition and efficiency. Neoliberalism has also directly led to the economic rationalization of the state, the restructuring of state sectors, and the dismantling of the welfare state. However, there were in fact many consequences of these changes. For example, the U.S. and U.K. have seen consequences in the form of abolishment of subsidies and tariffs, the corporatization

Karl Marx, definition about the crisis was different from Keynesian terms. Marx argued that the first crisis refers to the comprehension of surplus and the second crisis refers to the manufacture of surplus value, all these crises are characterized by demand and supply side. Demand side refers to the activity causing short-term fluctuations in the demand of goods and services. Supply side refers to efficiently growth created by dropping out barriers for people to produce goods and services and at the same time it creates invest in capital. The effect of these crises was similar, in both crises there will be a failure in the rate of profit, a decrease in the level of investment, a reduction in the rate of growth in demand and output (Gordon et.al, 1996). The United States faced a demand side crisis during the Great Depression of 1930. These crises brought negative effects to the capitalist economy, some of these

In the seventies, neoliberalism rose to prominence in the global stage especially in America. Beforehand, Keynesian policies were the norm due to their success in taking the nation out of the Great Depression with Social Security and the likes. However, the negative impacts of an oil crisis brought upon by OPEC and corresponding stagflation due to deficit spending would dull the allure of Keynesianism (Lecture 6). As a result, free-market economists like Milton Freidman would advocate for laisses-faire economic policies of economic

Emerging from the global recession of 1973-1975, the resulting surge of neoliberalism transformed the global economy into a secularized faith that draws on anxiety and responsibility for sustenance. Debt answers to anxiety and allows for a greater participation in the economy, subsequently, debtors become shackled to their indebtedness, which evolves into a continuous moral burden. The relationship between credit and debt has developed into a necessary technique of govern­ment under neoliberal regimes, as a means of securing order in an era that has seen a rapid growth of poverty and inequality. Consequently, the conversion from Keynesianism to Neoliberalism required five compulsory reforms: one, rollback of the welfare state to eliminate social safety nets, two, an attack on the power of organized labor to stagnate wages, three, precarization of labor markets to incite occupational anxiety, four, financialization of the economy to exacerbate income inequality and finally fifth, exponential expansion of debt, which restrains debtors and holds the system together. Therefore, Neoliberalism reorganized Keynesian capitalism to secure hegemony of finance capital, a project of the wealth-owning classes to reverse the impediments they had encountered during the era of Keynesian social welfare.

Keynesianism is an economic theory believed to have been developed and propagated by John Maynard Keynes, who was a British economist. Keynes postulated that economic growth and reduced unemployment can be aided via the executive`s fiscal policies inclusive of spending to reinvigorate the economy, tinkering with interest rates, and appointment of confirmed statutes on market economics. This theory was developed in the 1930s as a way of better understanding the Great Depression. Keynes championed for expanded government expenditures and reduced taxes to energize demand in order to extricate the global economy out of the Depression. Since its inception Keynesianism was connected to social democratic big-government policies. Scholars like (Barr, 2004) have realised that the relationship between Keynes and social democracy is more composite than believed. Keynes can be referred to as the draughtsman of the main elements of social democracy policy especially in regards to full employment but according to (Skidelsky 2010), he did not believe in the enlargement of the welfare state and public ownership.

As manufacturing intensified from World War II, so was the flock of U.S. citizens to the larger cities. The spike in industrialization meant more jobs in large cities where the factories were located. This was Keynesianism in full effect, more employment, more spending. What happened