Reflection Paper Essay

Reflective essay
John Maynard Keynes provided a different view of economic policies from those that were set by the classical economists. The classical economists believed in letting the economy be at the market forces of demand and supply, thus eliminating government intervention. This Laissez-faire principle could not hold in the 1930s and early 1940s and this set ground for a different economic view. Keynes’s view was, therefore a better alternative during this period. This is because it seemed to offer a solution to the great depression that was present during this time. The period 1930s through the early 1940s involved massive unemployment and decreased economic activity. The economy was trending on dangerous levels. A solution needed to arise and therefore, Keynes’s ideas were to be welcomed. This implies that the ideas were radical and fit for the context of searching for a solution.

Economists in the 1930s and early 1940s periods were stuck in the economic problems for the reason that the policies they believed in did not solve the problems. The Laissez-faire capitalism scenario had the economy in cycles whereby at one point the economy was well and at others it fell into a depression. Bankruptcy and massive unemployment was the recession beating but this was followed by recovery where prosperity took the course. No one was in control of this cycle. The problem with this kind of interpretation is the undermined function of the government and therefore, underutilization of public resources. There had to be a way to involve government intervention so that the resources are properly utilized and the severity of recession controlled. This, therefore, justifies John Maynard Keynes propositions in this era. Were it not for the awakening of the 1930s through Keynes approaches, the world might not have avoided the terrors of these decades. Keynes coming forward to propose his belief and not swaying was called for.
Keynesian economic policies have improved the current world because they have given alternatives to the major economic problems of unemployment and inflation. Keynesian policies are founded on the premise that the government needs to intervene in an economy as a way of controlling economic variables such as aggregate demand. According to Keynes, aggregate demand is the main cause of inflation in an economy in that an increase in it leads to an increase in prices. Keynes also noted that wages and prices can be sticky, which is the cause of unemployment during a recession. Therefore, the government needs to intervene through taxation and government expenditures to keep these variables in check. An increase in taxation will reduce aggregate demand and consequently reduce the level of inflation in the economy.
On the other hand, an increase in government expenditure stimulates demand in the economy and as a result, the economy moves out of a depression. In the current world, the achievement of macroeconomic goals depends on a country’s choice of the fiscal and monetary policies. Clearly fiscal policies and government intervention are Keynesian propositions.
 
The world gains much from the application of the Keynesian principles. However, this depends on the strength of a government and the appropriateness of the policies employed during a particular time. Some governments do not apply relevant policies because of the unique situations they face, which makes them worse off.
Reference
https://online.vitalsource.com/#/books/9780133769159/cfi/6/22!/4/2/6/14/10/14@0:1.39

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