The End of the Keynesian Era: Essays on the Disintegration of the Keynesian Political Economy

The End of the Keynesian Era: Essays on the Disintegration of the Keynesian Political Economy

The End of the Keynesian Era: Essays on the Disintegration of the Keynesian Political Economy

The End of the Keynesian Era: Essays on the Disintegration of the Keynesian Political Economy

Excerpt

I have tried to assemble a collection of essays whose focus is on the malfunctioning of our present system of political economy. The use of the phrase 'political economy' is deliberate and, in my view, helpful to understanding. Once government started to assume substantial responsibility for economic affairs, the old separation between politics and economics broke down. In the nineteenth century it was possible and usual to believe that economic life would be affected to a decreasing extent by political 'interference'. This was based on two, complementary, assumptions. The first was that there existed economic laws which, if followed, would maximise everyone's advantage. The second was that certain political, institutional, and psychological conditions could be taken for granted, notably the hegemony of what Keynes was to call the 'educated bourgeoisie', who would understand these economic laws, and the environment necessary for, their successful application. The twentieth century has invalidated both these assumptions. Unregulated economic systems proved liable to crippling fluctuations. And, with the growth of democracy, political tolerance for these fluctuations markedly declined. As a result, government took responsibility for stabilising economic activity at a high-enough level of output to maintain something like full employment. This meant, inevitably, that a large area of economic action now depended on political, not market, processes. If political process is more broadly defined, to include bargaining between organised producer groups over such matters as wages and prices, it is apparent how large a segment of contemporary economic life has become 'politicised'. This means that economic action can be less and less explained by theories dealing with the behaviour of individuals acting in the marketplace; that economic problems . . .

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