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Mark Comeau

Say it loud: we’re all Keynesians now!

In the last few years, governments all across the Western World turned towards “economic stimulus” as a way of rejuvenating their seemingly battered economies. Politicians of all political stripes called for massive increases in government spending, often directed towards infrastructure, as a way of creating jobs and jump-starting the slowing flow of funds in national economies. However, a careful examination of our current economic situation and the history of government spending in tough economic times reveals that the solution lies not in a huge influx of borrowed funds, but in careful and prudent management of taxpayer’s dollars. The creation of the modern apparatus of ever-present and constantly interfering governments can be placed at the feet of one man: John Maynard Keynes. Following the end of the First World War, Keynes put forth the idea that the solution to continual economic growth lay with government stimulus of the economy, mainly in the form of infrastructure spending and public works. When the Great Depression sunk the Western world into seemingly inescapable economic quicksand, many governments - the United States in particular - turned towards government spending as a miracle cure. However, a fact often ignored is that these stimulus programs failed to cure the Depression: it was only the Second World War that primarily ended the period of economic malaise. For a large chunk of the twentieth century, governments turned to deficit spending in an effort to create perpetual economic growth. By the 1980’s however, the fiscal hole that had been dug reached epic proportions. The phenomenon of stagflation, high inflation rates combined with a large number of unemployed, shrugged off all desperate attempts to fix it. The recessions of the late twentieth century were solved not through government spending, but through reductions in the size of government, tax cuts, and an… Read More