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Keynes' Economics: Why was it popular after the war but abandoned in the 1980s?
Keynesian economics has been valued globally since the end of World War II, especially in the UK.During this post-war period, countries adopted policies based on Keynesian theory, which promoted economic growth and social welfare.However, by the 1980s, this school of economics was quickly abandoned, and with the decline of socialism and collectivism, the concept of market liberalism gradually became mainstream.What exactly caused this huge change?
The formation of post-war consensus can be traced back to the 1930s, when economists such as John Maynard Keynes and William Beveridge proposed a series of social policy and economic theories.These policies are designed to deal with the economic difficulties brought about by the Great Depression and ensure that every social class can participate in post-war reconstruction.With the release of the Beveridge Report in 1942, British society was able to witness a blueprint for a more comprehensive welfare state, which challenged traditional economic concepts in post-war society."Hope to build a society that is no longer plagued by poverty, disease and ignorance" became the consensus of this period.
"Five giants who want to rebuild: poverty, disease, ignorance, dirty and lazy."
The policy scope in the post-war consensus includes the establishment of national health services, the nationalization of major industries, and the reform of the education system.In the first British general election in 1945, the Labor Party won an overwhelming victory under the leadership of Clement Adley and began to implement a policy based on Keynesian socialism.Although the Conservative Party promised in the Industrial Charter published in 1947 that it would not turn that direction, the intensification of economic and social problems made the basis of consensus fragile.
By the 1970s, with the advent of the economic crisis, the effectiveness of Keynesian economics was questioned, causing many countries to experience severe economic recessions.For example, the UK experienced the troubles of medium-sized banking crisis, oil crisis and high inflation in 1973, which made the Keynesian school's stability policy fail to take effect.Against this backdrop, market-oriented conservatism began to regain attention and promoted the rise of neoliberalism.
"We used to think that we could get out of the recession by cutting taxes and increasing government spending, but now this option no longer exists."
The UK sought assistance from the International Monetary Fund in 1976, resulting in the need of large-scale spending cuts and monetary tightening policies.This marks a temporary exit from Keynesianism.After Margaret Thatcher as prime minister, he promoted supply-oriented reforms, canceling a series of Keynesian policies, including substantial cuts in welfare spending and closing most state-owned enterprises.It all happens in the context of society feeling anxious and uneasy about these changes.
The reform of Thatcher's government has made far-reaching changes to the way the economy operates and the role of the government.During her administration, the Housing Act 1980 she introduced allowed residents to buy housing in their neighborhoods, a policy that has been widely praised but has also sparked intense social controversy.The role of government shifted from providing economic security to supporting the natural force of the market, which was a fundamental shift in Keynesianism.
"What our economy needs is a way to return to the free market, rather than continuing to rely on government intervention."
This period also gave birth to many fierce debates about whether Keynesianism is outdated.Economist Mark Kesselman and colleagues pointed out that Keynes theory could not provide solutions during the economic crisis of the 1970s, so rapid market orientation became a solace and way out for eliminating economic problems.This shift has made marketism a new economic model and become universal around the world.
When we look back on this history, is Keynesianism really a long-term solution to economic problems?Or is it just a fleeting trend in history?
