The Keynesian development theory considers the macro equilibrium-growth ‘tandem’. Partial equilibriums’ static (e.g. aggregate demand & supply; full employment national income on the short term) difference(s) might induce the growth (as) dynamic, as consequence, but not in all hypotheses & hypostasis. Namely (concretely) growth expects to be valid when investment resources will meet the (correspondingly available) ones of labour – and not otherwise. In other words, only the unemployment economy is susceptible to bear growth immediately, and never the full employment achieved one – of course, except for longer time terms that permits restructuring, here including another full employment level and its corresponding national income.

Keynes was the one contradicting his former classic-liberal colleagues by arguing that intervention(ism) could be able to (re)make some equilibrium(s), growth and development, but then he equally keeps the merit of understanding & indicating limits of the interventions’ capability in such a way.

The other interesting point for the so-called ‘Keynesian State interventionism’ here revealed by Dariusz is something that, on the contrary, doesn’t make ‘Master’ Keynes too comfortable. Of course, he also was the one pointing on unemployment as a real – and not transitory or otherwise – problem of the modern economy. But up to the end of his logic, 'his' employment was rather following the ‘principle of interconnecting vessels’, i.e. ever ready and skilled to fill all available and disposable jobs. Or, the labour and employment-unemployment topic area proves much more complex and meets many policy problems that Keynes didn't do too much for.

Following

Keynesian economic philosophy strengthens the demand side of an economy, meaning the state puts money in people's pocket by creating employment. This is often achieved through deficit spending. The government becomes an investor (e.g. in infrastructure projects) and earns the monies invested through higher tax returns when employment picks up. This creates economic growth and it makes people earn money (if this is what you mean with the expression 'economic development'.

In less developed economies it tends to do both. In developed economies growth is the main interest. Unless, of course, the "developed" economy is actually littered with areas of business and production which are no longer efficient. Then it just drags out the inevitable! Compare immediate post-war Britain with 1970s Britain.

Christopher NOCK

The Keynesian development theory considers the macro equilibrium-growth ‘tandem’. Partial equilibriums’ static (e.g. aggregate demand & supply; full employment national income on the short term) difference(s) might induce the growth (as) dynamic, as consequence, but not in all hypotheses & hypostasis. Namely (concretely) growth expects to be valid when investment resources will meet the (correspondingly available) ones of labour – and not otherwise. In other words, only the unemployment economy is susceptible to bear growth immediately, and never the full employment achieved one – of course, except for longer time terms that permits restructuring, here including another full employment level and its corresponding national income.

Keynes was the one contradicting his former classic-liberal colleagues by arguing that intervention(ism) could be able to (re)make some equilibrium(s), growth and development, but then he equally keeps the merit of understanding & indicating limits of the interventions’ capability in such a way.

The other interesting point for the so-called ‘Keynesian State interventionism’ here revealed by Dariusz is something that, on the contrary, doesn’t make ‘Master’ Keynes too comfortable. Of course, he also was the one pointing on unemployment as a real – and not transitory or otherwise – problem of the modern economy. But up to the end of his logic, 'his' employment was rather following the ‘principle of interconnecting vessels’, i.e. ever ready and skilled to fill all available and disposable jobs. Or, the labour and employment-unemployment topic area proves much more complex and meets many policy problems that Keynes didn't do too much for.

Keynesian means different things to different people. In its original version (in the General Theory) it was all about demand management under circumstances of less than full employment. Therefore it was not really directed toward treating issues of growth (in the sense of added resources moving the production possibility frontier outward) or development (changing the mix of product toward higher value added goods and services). In a more general sense Keynesian type government spending and/or tax policy can affect either growth or development but which (if either) it does depends on the microeconomic details of such policies. If oriented toward encouraging (eg via tax breaks) investment in current industries that would be growth enhancing. If oriented towards creation of new industries that would be more development oriented.

Very interesting question. There is no empirical evidence and little theoretical predictions showing that Keynes recipes have long-run effects, and more specifically in terms of growth. Keynesian policies are designed to stabilize the business cycle instead, and most of the evidence shows that their effects disappear after 3 or 4 years, failing to produce a continues growth path. Now, state incentives to R&D or investment infrastructures seem to have positive effects on growth and development, but these policies are in the line of the supply side of the economy and out of the Keynesian scope. Thus, while Keynesian policies can temporarily reactivate the economy, these policies need to be attached to supply policies to create long-run growth.

Yea, it was about stabilising the business cycle, but then governments decided not to withdraw when the corner was turned and the employment/inflation circle restored. Why would they? Not many votes in saying "all's well, we're going to cut back now!" But the blame lay with democracy, not Keynes. By the 1970s the reality had changed. Internationalisation of trade meant less protection of home markets. New forex arrangements meant less control of interest rates etc. Again, no Keynes' fault.

NOCK

Dear Dariusz,

As far as I know, there cannot be development without growth. In addition, the replies from our expert colleagues pretty much sums up Keynesian interventionism in times of economic contractions. Indeed, Keynesian policies were/are short-term and demand side targeting policies, which were designed to deal with the ills of the "Great Depression" particularly. Given the tremendous slack in the productive capacity during the "Great Depression," Keynes suggested the use of mainly Fiscal Policy intervention as a way to prop up aggregate spending due to the liquidity trap problem with the Monetary Policy. However, the Keynesian policy suggestion was not to rely on deficit spending (i.e. fiscal stimulus) forever. Keynes used the term "leaning against the wind," which refers to running fiscal deficits during recessions and surpluses during expansions. As such, the national debt is/was not supposed to be affected much. However, politicians made the Keynesian suggestion (i.e. fiscal stimulus via deficit spending) their motto and kept running deficits even in good times (i.e. the US budget deficit currently widening to $310 billion -an increase of 77% on a yoy basis- in the first four months of the fiscal year).

Best,

--

M.D.

l'interventionnisme de l'Etat peut bien sur relancer la croissance économique à court terme et le développement économique à long terme en utilisant le multiplicateur keynésien et l'accélérateur keynésien en s'appuyant sur l'effet revenu et l'effet capacité.

As said by earlier by others, John Maynard Keynes was proposing an approach to deal economic recession popularly known as the great depression but it was later realize that his suggestion or views can only hold in a short term which may possibly leads to economic growth. But the question as to when does economic growth translate in to economic development? Is a debate among researchers.

Dear All, I tend to agree with others that Keyn didn’t care much about development. So, Keynes policies are short-run, if only because he said that in the long-run, we are all dead (even if more or less developed).

Yet, looking at practical issues and not at theory, it seems that when people remain unemployed for long period, they lose part/most of their human capital (understood as the capacity to produce at least as much valueas they cost to their employers). Reducing unemployment may therefore prevent the erosion of the stock of human capital, and therefore be pro-long-time-growth.

Paul: When used properly, I believe that Keynesian policy can and does promote economic growth. During periods of recession and/or economic downturn, the government should increase the money supply, lower interest rates, increase government spending, and/or cut taxes.

The challenge is that during economic recoveries and/or growth, the government should lower the money supply, raise interest rates, cut government spending, and/or raises taxes.

Very interesting question - let me re-write your question. The starts with:

In modern economies, various instruments of budgetary and fiscal policy are used, supporting the activities of business entities, and also instruments of socio-economic policy, including housing, etc., aimed at activating economic processes.

In view of the above, does Keynesian state interventionism mainly activate growth or economic development?

It is obvious that the approach and model Keynes offered and used was for different state of economy then. Though, I do agree with our colleagues' answers on most points - would say that interventions are necessary with a Clear Purpose or Aim and may be it would offer a particular solution under specific scenario for a short to medium period.

Dear Friends and Colleagues of RG

The issues of specific programs to improve the economic, financial, material and housing situation of households as key instruments of pro-development state intervention and significant components of the socio-economic policy of the state I described in the publications:

Article FAMILY 500 PLUS PROGRAMS AND FLAT PLUS WITH KEY INSTRUMENTS ...

Article Ability to Generate Financial Savings by Households in Poland

Article ECONOMIC AND FINANCIAL SITUATION OF HOUSEHOLDS IN POLAND – A...

I invite you to discussion and cooperation.

Best wishes

Dear Colleagues:

As you know public expenditure has a key role in promote economic growth. Besides, private investment follows the trend of public investment, this was the experience of the Mexican economy in the period 1978-1981.

State interventionism mainly activate growth, because development economic is more complex to reach it, there are many social, political, economic and externalities that constraints it.

Dear Friends and Colleagues of RG

The issues of specific programs to improve the economic, financial, material and housing situation of households as key instruments of pro-development keynesian anti-crisis state intervention and significant components of the socio-economic policy of the state I described in the publications:

Article FAMILY 500 PLUS PROGRAMS AND FLAT PLUS WITH KEY INSTRUMENTS ...

Article Ability to Generate Financial Savings by Households in Poland

Article ECONOMIC AND FINANCIAL SITUATION OF HOUSEHOLDS IN POLAND – A...

Article The role and application of Keynesian macroeconomic anti-cri...

Article Soft monetary central banking policy and Plan for Responsibl...

Article Importance and implementation of improvement process of prud...

I invite you to discussion and cooperation.

Best wishes

Dear Dariusz:

I think is not correct to use State keynesian, because State is a complex term, there are many definitions " A nation or territory considered as an organized political community under one government".

. Keynesian Theory. It is an economic doctrine inspired by the ideas of John M. Keynes that argues that through effective demand can expand the growth of the economy and government spending has a fundamental role.

Well explained Dariusz Prokopowicz, Paul Stock , Hubert Escaith

Dear:

Keynesian economic policy, promotes economic growth through effective demand that is a very efficient mechanism.

Both economic growth and development.

The Keynesian State promotes economic growth and economic development, the first through public spending and the second through social programs.

The Keyensian state intervention mainly activate economic development particularly in developing countries. In these countries private investment which is the main driver of economic development are lacking or miniscule presence due to various bottlenecks. So state intervention required to accelerate the development process. He

Hi Raj

In developed countries state intervention in the main driver of economic development.

I must disagree with the reply by Martha Pantoja. In developed countries state intervention in the form of infrastructure investment including education, road networks, etc. but the main contribution to development (I define that as structural change as well as growth in per capita income) comes from technological change -- which is assisted by the state but largely originates in the private sector. In less developed countries without a highly viable and energetic private sector the state can be more central to development as well as to growth. This requires a competent and reasonably honest government.

Dear Neil:

I know people in United States that recieve help, because of Government social programs; government programs that can help pay for food, housing, and medical care, among others.

it creates both growth and development

Dear Martha:

All that you say is correct, but none of it relates to growth or development by any reasonable definitions of those terms. Those expenditures relate to a) social welfare and b) economic stabilization (reducing the effects of income fluctuations on spending and therefore reducing the size of the Keynesian spending multiplier--so any initial shock has a smaller overall impact on GDP.

Dear Neil:

As yo know, government invests Government invests in infrastructure through public spending. Likewise, many of the goods and services are produced by public companies.

Dear Dairusz.

I check the meaning of interventionism and is the tendency to intervene, in the case of governments in the fields of politics and economics, Interventionism has a negative connotations. However, in your topic interventionism has a positive connotation.

Best Regards

Dear Martha

You are certainly correct that government does many things in terms of public goods that contribute to growth and/or development. However your original question related to Keynesian state intervention and that is what I addressed. Not all state activity is Keynesian, at least when I use the term I mean, as Keynes did, intervention to manage aggregate demand in order to control business cycles.

Dear Neil:

There is a confusion, because definition about State is in terms of Politics. Keynesian Policy is a strategy that which emphasizes the increase in public spending as an anticyclical policy, and its effects on output and employment

Precisely, and when you move to state control of aspects of the economy to "guide" or "seize the commanding heights" you have left the Keynesian paradigm and moved on to what is generally called "dirigisme" which is another matter altogether.

Dear Neil:

I didn´t know this term, I found this definition: "Dirigismo (from the French "dirigisme") is a political-economic concept used to designate a system in which the government exercises a strong directive influence in the economic sectors, generally not through interventionism or nationalization but the use of incentives to promote practices that are of public or general interest" (Wikipedia).

It´s clear that appplied economic policy in every country is strong influenced by the most power economic sectors.

It is the French who pioneered the modern practice but the origins of the modern version can easily be seen in the state established by Cardinal Richelieu and continued into the reign of Louis XIV and onward.

Dear:

It´s so old

The Keynesian development theory is a Statist's dream come true.

It seems to suggest that when things are going economically bad, government can borrow, spend, intervene, and do whatever it takes to push things along.

The idea being, that when things finally get going, that same government will tax the now-booming production and slow the run-away growth they've inspired, repaying the debts that were made in the hard times.

But there is a bug in the ointment called "human-nature."

The problem is, times are never seen to get better. We're always a step away from disaster.

Politicians only keep their jobs through PERPETUAL ALARMISM.

-The national health crises

-The hoards of invading immigrants

-The opioid epidemic

-Global Warming

--the list is guaranteed to remain endless...

There are never any good times in the world of politicians seeking re-election.

Right now America has the lowest unemployment rate in modern history and everyone is living rich, with cells phones and two cars, and air conditioning ....

But if you listen to many politicians we are all but a half-step away from starvation, sickness, and world ending catastrophes of one sort or another (i.e. over-population or maybe mass extinctions!).

So, Keynes justifies that we spend, spend, spend ... and when we've done that, we need to start spending some more.

The welfare state and the warfare state are insatiable.

The world is off the gold standard and pegged to an ever inflating dollar standard. Fantastic increases in productivity due to the application of computerization has prolonged the bursting of the financial bubble.

But history teaches that endless government money printing eventually causes productive disruptions.

Keynes didn't alter the basic rules of economics. He just gave politicians intellectual cover to spend like there is no tomorrow while patting themselves on the back for doing so.

To: Martha

One of the lacks that often handicaps economists dealing with the big questions is a lack of historical perspective. (A one time colleague who claimed to be a Marxist--whose paradigm emphasized historical context asked me what side Russia (USSR) had been on in WWII.) It is not enough to say "old" about the origins and nature of state intervention, it is necessary to actually read the histories and understand how and why matters such as state involvement in the economy developed. This does not necessarily mean getting deep into a political perspective such as that of Stephen Martin Fritz's.

Oops, correction Cardinal Richelieu was chief minister (in modern terms) to Louis XIII not XIV, The minister for Louis XIV who did even more to enshrine state direction in late 17th century France was Cardinal Mazarin. I never could keep those Cardinals straight.

Keynesian has an impact on the economy, but it also can contribute to development by bringing people back into employment. However it does not always work. There must be scope for public investment...

Dear Eberhard:

You must to take into account that many private companies generate jobs due to fiscal stimuli by the government.

The state moves the economy through monetary and fiscal policy.

Considering the emphasis on reducing unemployment, and may be poverty as well, Keynesian state interventionism would certainly activates economic development in addition to growth.

The 2009 recession in the U.S. was brought about by artificially low interest rates and the manipulation of the housing market to guarantee anyone who wanted a mortgage could get one.

The result was over-building a default.

This (as always) is blamed on GREEDY WALL STREET.

A similar pattern is developing today. Politicians are spending like crazy and pushing interest rates lower to create artificial demand. The future result is as predictable as it has always been.

The flaw in the Keynesian model is that it suggests government spending whenever the economy is in need of a boost. And government always dream that their economies are in need of a boost. So it just leads to perpetual mis-allocation of resources.

I must disagree with Mr Fritz. First, the suggestion that government spending be increased when there is insufficient aggregate demand to maintain full employment is only one of the possible policies for the purpose in that model (cutting taxes or raising the money supply are basic alternatives). Second, it is not a flaw of the model if governments misuse it. I do not think governments always think their economies need a boost. Sometimes they erroneously think that restraints are needed, and whether spending increases cause misallocation of resources depends on what kind of spending they do..

Finally, I think that the financial collapse in 2009 was not really due to low interest rates but to bad financial practices, some done with government encouragement, others due to unwise deregulation of financial institutions,. Greed may of course always be assumed to be present whether there is a crisis or not.

Keynesian economic policy affects economic growth Keynesian economic policy affects economic growth when the multiplier effect is positive.

Private investment is a variable dependent on public investment.

Ms. Pantoja, With all due respect, I am puzzled. I have a question: Do you mean that private investment project will be undertaken when there is public investment? As an example, let's say you invented a brand new process which turns plastic shopping bags into washable and durable paper. In addition, you have a patent on your invention and were able to raise $1b. from wealthy and willing investors to build a new factory to pursue your dreams. Also, the icing on the cake is that your profit margin is 50% net of everything. Where is the public investment? None. So, your investment would be an autonomous investment independent of the public sector and other things.

Mr Doral: Some private investment is indeed independent of public investment but much is not, with public and private investments being complementary. Take your example: If there were no public investment in roads, ports, etc there might be little profit in turning plastic bags into paper line products because the cost of shipping would be too high, both for getting the materials (bags) in and getting the paper to customers. Creating the new process might have required public spending on education, as might getting a useful work force.

Mr. Garston, Of course your modified version is correct. I was just trying to point out that some investments are "autonomous" and others are "induced." But we cannot conclude that Private Investments = f (Public Investments).

As you point out public investment has a key role in promote economic growth. State interventionism promotes economic growth and in a second stage it has to boost economic development, mainly in the most disadvantaged sectors of the population.

Ms. Pantoja,

The vertical distance between the red line (R) and the blue line (B) is the gross public sector investment. Though R and B are most of the time in synch, it looks like at times they deviate or at least are apart from each other, which should give us the idea that some of the private investments are "autonomous" and not a function of public sector investments (e.g. a major technological breakthrough).

Best Regards,

--

M.D.

Hello Murat

You´re right,

The Effect of Investment on the Gross Domestic Product, "some of the private investments are "autonomous" and not a function of public sector investments (e.g. a major technological breakthrough)".

However, I refer that The Effect of Investment on the Gross Domestic Product in general. Four factors drive Gross Domestic Product, GDP: government spending, consumer spending, investments (Public and Private) and exports.

Dear Colleagues and Friends from RG,

The above discussion inspired me to the following considerations:

In my opinion, well-conducted national, socio-economic policy based on Keynesian state interventionism can be an instrument to limit the negative effects of a possible future financial or economic crisis. The key issue is the government's financial capacity, i.e. the financial situation of the state budget. In the event of a budget surplus, there would be no problems to pursue an active socio-economic policy, including launching large public investment projects financed from public funds in business sectors.

In this way, additional jobs are created, income increases, and consumption increases. The result is an increase in production and tax receipts to the state budget. However, paradoxically, the greatest needs for conducting national socio-economic policy based on Keynesian state intervention appear in the situation of recession in the national economy, in a situation of crisis, high unemployment, a decrease in production, a decrease in investment, a decrease in tax revenues to the state budget, in a situation of often high debt of state finances, i.e. high budget deficit and public debt.

Paradoxically, the need for high expenditure from the state budget in order to conduct national socio-economic policy based on Keynesian interventionism arises when the financial resources available for this purpose in the public finance system are scarce. Therefore, in a situation of a good economic situation in the national economy, in a situation of high tax revenues to the state budget, in a situation of a budget surplus, financial resources should be accumulated, national investment funds should be created for the implementation of investment projects that will be implemented when the economic situation of the domestic economy is significantly affected deteriorated.

Therefore, the financial capital of the state's public finance system in the form of a budget surplus and also the accumulation and reinvestment of central bank profits should be accumulated in the period of high economic growth and should be a source of financing for active, pro-development, interventionist, Keynesian socio-economic policy during the economic crisis . Currently (end of August 2019) the risk of the emergence of another financial and economic crisis similar to the crisis of autumn 2008 is considered by most macroeconomic analysts as low. It is therefore a good period for the restructuring of heavily indebted public finances in many countries and the accumulation of funds to be used, when it may be only in a few years that another global financial and economic crisis will appear.

What do you think about this topic?

What is your opinion on this topic?

Do you agree with me on the above matter?

Please reply

Dariusz Prokopowicz The great problem government development projects is that they are invariably wasteful, remove capital from the private sector which could have been invested more wisely, and tend to support political rather than social aims and ends.

A recent example was the 1.5 mile (big Dig) tunnel built in Boston at the cost of 24 billion dollars. Under the watchful eye of government it cost 250,000 dollars per inch to dig.

Then there is the vaunted Obama American Reinvestment and Recovery Act billed at 800+ billion dollars.... can anyone name anything that came of it?

The Keynesian outlook suggests we spend to stimulate economic activity during times of slowing ... but government bureaucrats always imagine things are slowing somewhere and we always need to spend more.

Keynes also suggested (as you mention) the idea of paying off debts and accumulating capital during the good times. But in government the times are never so good as to not require more spending (just look around right now).

Keynes just gave a pseudo-intellectual veneer for endless government spending on anything and everything.

And when infinite government debt ends up with the economy going into a recession anyway ... what do the Keynesian's say is the solution?

MORE SPENDING OF COURSE!

When the economy is expanding the Keynesians want to credit government spending and oversight .... and when all that spending-and-oversight still leads to a contraction, the solution is invariably for more government spending and oversight.

In the decades ahead we will see the result of fantastic government spending and oversight in China ... The cost of the huge number of newly built {but completely empty) ghost-cities will make itself felt.

But debt is not the big problem. The people who have the money also express social authority. And as government spends and spends more-and-more social activity come under the auspices of the State and beyond that of the people.

Luckily, most western economies still manage to grow faster than the State apparatus that is always struggling to tax it, control it and corral it.