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IPFS News Link • Economic Theory

Nestmann: We're All (Hyper) Keynesians Now

• by Mark Nestman

Nixon's statement was an acknowledgment that he agreed with the ideas put forward by John Maynard Keynes. In his 1936 book The General Theory of Employment, Interest, and Money, Keynes recommended higher government spending and tax cuts to stimulate demand to help pull the global economy out of the Great Depression. He believed that business cycles — periods of expansion followed by recessions — were the inevitable consequence of capitalism and that deficit spending during economic downturns was essential for recovery to occur.

Nixon's endorsement of Keynesian economics was shocking. At the time, he was widely viewed as endorsing the views of free-market economists who believed governments should not intervene in business cycles. They believed Keynesian economics was dangerously close to socialism or even communism.