Keynesian Economics British Progressive Politics

Introduction

The late 1920s and 1930s were dubbed the “Roaring Twenties.” They were dubbed that name because World War I had ended in victory and peace had returned, and together with it, prosperity had also come (Johnson 2019). The war had proved to be very profitable for manufacturers and suppliers. Manufactures and suppliers had prospered during the war years and become very rich because they owned the factors of production (Johnson 2019). Leisure activities such as jazz clubs, cocktail bars, flourished in the UK. Basically, there was a lot of hedonism in the country. The changes that took place did not only relate to the lifestyle that the people lived, but there were great changes in the political landscape. The ruling party at that time was the Liberal party. However, the 1920s and 1930s gave birth to progressive politics. Progressive politics sought to change and deliver on the promises of democracy. The war had ended, monopolies ruled industries, corruption abounded, and unemployment levels were very high. Progressive politics sought to battle all those issues that were being experienced in the county. Interestingly, one of the critical contributors who shaped progressive politics is John Maynard Keynes. The ideas of Keynes shaped not only economic thought during that time, but it also shaped political thought during that time. Therefore, it is important to assess the contribution and implications of Keynes’ work to British progressive politics and political ideas in the late 1920s and 1930s.

John Maynard Keynes

So influential was John Maynard Keynes that an entire school of thought is named after him. Some of his ideas were provocative and evolutionary while almost all of them were controversial. He challenged the economic theory of his time, and currently, Keynesian Economics has used a yardstick by almost all economists. John Maynard Keynes was born in Cambridge, and he attended King’s College where he earned his degree in mathematics in 1905 (Liberty Fund, Inc. 2019). He remained there for another year where he studied under Alfred Marshall and Arthur Pigou who were scholars of the quantity theory of money (Liberty Fund, Inc. 2019). He lectured in Cambridge intermittently from where he became a famous journalist and speaker at Bloomsbury Group which included greats like Virginia Woolf and Bertrand Russell (Liberty Fund, Inc. 2019). He was propelled to celebrity status when he wrote: “The Economic Consequences of the Peace” in 1919 where he argued that the punitive reparations payments against Germany were too big and they would leave Germany perpetually poor and unstable (Liberty Fund, Inc. 2019). The theory for which he is still remembered for now is dubbed the Keynesian Model of Economics, and that is a theory that had the greatest bearing on progressive politics of the late 1920s and 1930s.

Keynesian Economics Theory

Keynesian Economics Theory is a theory that argues that the government should increase demand to boost growth. The theory maintains that consumers demand is the key driver of an economy (Amadeo 2019). The theory supports expansionary fiscal policy whose main tools are government spending on infrastructure, education and unemployment benefits. The only key drawback of the theory is that the more it is applied, the higher the inflation levels of a country increase. The theory was developed in the 1930s when the Great Depression was happening and where other theories had tried to explain it, but they did not measure up. Keynes investigated the key reason for the high unemployment levels in Britain, and that led him to develop The General Theory of Employment, Interest, and Money (Liberty Fund, Inc. 2019). Keynes argued in The General Theory of Employment, Interest, and Money that government is very critical as a driver of demand. Basically, the more the government spent, the higher the demand would be in the economy. Another premise of the theory maintained that if the government wished to maintain full employment in the economy, then it had to increase its spending in the economy (Amadeo 2019). He argued that during depression wages should not be decreased since that would reduce the amount of disposable income in the hands of citizen hands which would then reduce the demand for goods in the economy. As such, it is important for the government to spend more in the economy to maintain and improve the demand which would then adjust the market to equilibrium. Comparatively, the classical economist argued that government intervention is not necessary since if and when the market is left to itself, it will regulate itself. It is the forces of demand and supply that would regulate the market; thus there is no need for government intervention. The argument of classical economists deferred from Keynesian economic theory which advocated for government intervention. It was Keynes advocacy for government intervention that influenced progressive politics in the late 1920s and 1930s.

Progressive Politics

The term progressive politics has been heard a lot in the news, but few people know what it means. To understand Keynes contribution and implications to progressive politics, it is important to understand the nature of progressive politics. The birth of politics can be traced back to the 1890s through to the 1920s. The desire for change arose because people felt that the promise offered by democracy was failing (Flanagan 2016). There was corruption in almost all levels of government; unregulated capitalists exploited workers which continued to propagate the class divide. Additionally, there was massive rural-urban migration which was shifting the country from an agricultural one to an urban and industrial one (Flanagan 2016). There were massive technological changes that were taking place bringing a lot of novelty into the lives of the citizens. It was in the backdrop of these factors that progressive politics was born. Progressive politics suggested undertaking massive reforms that would bring more justice and equality to society (Flanagan 2016). Progressive politics did not seek to overturn capitalism rather mitigate its worst effects and excesses. Progressive politics had effects not only on politics but on social justice and the economy as a whole. Progressive politics was coming of age at a time where Keynes’ work was becoming more famous. In a sense, Keynes work contributed and had implications on progressive politics and the turn that it took.

Contribution and Implications of Keynes’ Work on Progressive Politics

Keynes’ work contributed and had implications for progressive politics. Progressive politics was driven by key moral concerns for the common good of the people which led them to oppose monopolies, promote social programs to help the poor and advocate for the provision of goods that would cater to the public. Teixeira and Halpin (2011) note that even though progressive politics had the right idea about transformation they did not have a lucid theory of economic management that would enable them to reach their proposed goals. The classical economic theory could not be used to meet progressive politics since the theory suggested that the government should not get involved in economics. Moreover, classical theory advocated that the government should not interfere with the economy and allow the factors of demand and supply to adjust the market upwards or downwards to meet the set equilibrium (Raico 2010). Keynes contributed to progressive politics by presenting a different economic framework through which they could meet their objectives. Keynes advocated that the government should participate in the economy since left unto itself the economy would not adjust itself (Piereson 2012). The theory had an appeal moreover since it was developed during the Great Depression. The Great Depression defied the economic views that existed during that time and leaving the market to adjust itself was not an option. The government and various political parties had to do something, and Keynesian economics was the framework that they had been seeking all along.

Keynes saw things differently in relation to government intervention. He argued that the normal state of an economy would not tend towards full employment since total demand could fall short of the supply (Teixeira and Halpin 2011). Additionally, demand could reduce if and when investment in the economy is not happening. Furthermore, Keynes maintained that there was no adjustment process that would happen and lead the economy back to equilibrium. As such it was up to the government to invest in the economy through government spending. Progressive politics seemed to consider Keynes advocacy seriously since government spending did increase during that period. Key spending that was heavily invested in is housing. World War I led to the destruction of a lot of homes, unemployment levels were high during that time, wages were fluctuating, and government intervention was needed to adjust the economy back to equilibrium. As such the government invested heavily in infrastructure and other public goods since left to itself, the market would not adjust itself. Due to the relatively high demand for housing in the UK government decided to get into the housing market. Historically, the government decided to join the housing market due to the housing shortage caused by the World Wars, slum clearance, and the high number of new families that did not have housing (Hashemi 2013). After World War I, the housing shortage was around 600,000 in 1919 which then increased to 805,000 in 1921 (Bowley 1945). Government spending during that time helped to improve employment since both skilled and unskilled labor was needed. In such a situation, Keynes contributed to Progressive Politics since he advocated for government intervention in the economy.

Keynes implications can be seen in the creation of the Welfare State. According to Renwick (2017), the welfare state was created in the 1920s in response to the unprecedented levels of poverty that were being experienced in the country. The Great Depression had led to many people losing their jobs at a time when people really needed their jobs. Moreover, the worse things became, the more people lost their jobs; the more the Great Depression continued, the more people lost their jobs. The Welfare State was the progressives’ way of increasing demand through the fiscal policies that were stated by Keynes. The government injected more finances into the economy in a bid to combat the high levels of unemployment that was being experienced in the country. Moreover, the Welfare State was the government’s way of investing in public goods such as various types of infrastructure such as roads, public schools, science and other types of public goods. The key public goods that were invested in the most during that time was housing. World War I led to the destruction of a lot of homes and many citizens lived in abject poverty (Hashemi 2013). Keynes contributed since he advocated for government intervention. The post-war conditions of the UK created an urgent and massive demand for housing, skilled labor, and raw materials (Hashemi 2013). The high costs of construction cause the government to consider innovative and sustainable means through which they could meet the high demand for housing. New technologies of the building were created during that time while traditional methods of building were made more efficient by applying the latest techniques to them. There was a disparity in the demand and supply, and government spending as advocated by Keynes helped create the equilibrium.

Keynes attitude toward government intervention in the economy and economic management was not technocratic. For Keynes investment in public goods and various infrastructure that would not be provided by the private market served two purposes. First, government intervention would help in managing demand (Teixeira and Halpin 2011). Second, it would make society more industrious and cultured over the long term (Teixeira and Halpin 2011). For Keynes making the economy better as a means to an end rather than an end itself. The purpose of the intervention was to generate enough wealth to allow the ordinary citizen to live a good life. Such a view where intervention was not an end itself but an action(s) that served the greater purpose of taking care of all the people in the country appealed to progressive politics. Progressive politics sought to allow the ordinary British Citizen to enjoy the good life that was being enjoyed by the privileged members of British Society. To meet that end, progressives found a framework that justified more government spending in more public goods.

Through Keynes, progressives found a justified reason to combat monopolies which were considered to be a primary source of the country’s woes (Flanagan 2016). In a sense, Keynes introduced “Antimonopoly Progressivism.” Antimonopoly progressivism was rethinking the relationship between the government and businesses. That translated into new laws being introduced and amendments being made to current laws to modify a system that sided with businesses (Flanagan 2016). Therefore, the laissez-faire attitude through which capitalism had run amok was curtailed through new laws that restrained the way they did trade. Therefore, Keynes contributed to progressive politics by giving them a basis for antimonopoly progressivism. Discover additional insights on Impact of the Internet Usage on Social Capital by navigating to our other resources hub.

Conclusion

John Maynard Keynes was a British economist. He came up with The General Theory of Employment, Interest, and Money which is simply known as Keynesian Economics Theory. The theory was developed during The Great Depression. The theory differed from the Classical Theory of Economics since it advocated for government intervention in the economy as opposed to letting the forces of demand and supply adjust the market. Keynes’ work had contributions and implications on British progressive politics in the late 1920s and 1930s. Progressive politics simply supported the improvement of general society through various reforms and advancements in economic development, science and technology, and social organization. Keynes’ work contributed to progressive politics since it gave them an economic framework to guide their beliefs. Keynes’ influence led to government intervention in terms of investing in public goods that the private sector would not be able to provide. The government invested in more infrastructure, proper schooling, housing, and many other public goods.

The purpose of spending was to regulate demand and improve employment levels. The end of World War I coupled with The Great Depression led to unprecedented levels of unemployment which had to be combatted through investing in the economy. The key infrastructure that the government invested in is housing which combatted unemployment since both skilled and unskilled labor was needed. Keynes’ work also contributed to progressive politics since it led to the creation of the Welfare State which helped take care of the unemployed people in the country. His work also impacted progressive politics since it led to antimonopoly progressivism where changes were made in the law to ensure that the laws no longer favored businesses leaving them to run roughshod over the people. Therefore, Keynes’ work contributed and had implications on progressive politics of the late 1920s and 1930s since it gave them a framework that articulated the role of government as a macroeconomic actor.

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References

• Amadeo, K., 2019. Keynesian Economics Theory. The Balance.
• Accessed 18th April 2019. Bowley, M., 1945. Housing and the State 1919-1944. London: George Alien & Unwin. Flanagan A, M., 2016. Progressives and progressivism in an era of reform
• crefore-9780199329175-e-84> Accessed 18th April 2019. Hashemi, A., 2013. Review of the UK housing history in relation to system building. Alam Cipta, vol. 6(1), pp. 47-58. Liberty Fund, Inc., 2019. John Maynard Keynes – 1883-1946.
• Accessed 18th April 2019. Piereson, J., 2012. John Maynard Keynes and the modern revolution political economy. Society, vol. 49(3), pp. 263-273.
• Raico, R., 2010. Was Keynes a Liberal? Accessed 18th April 2019. Renwick, C., 2017. Why we need the welfare state more than ever. The Guardian.
• Teixeira, R. & Halpin, J., 2011. The origins and evolution of progressive economics.