Have developed countries implemented Keynesian policies to counter the Great Recession? If yes, to what extent and where? If not, why not? Are governments stuck in the current policy mix?
I am trying not to prejudge either way. Perhaps the optimal policy would be more politically unfeasible austerity? Or instead, an unprecedented, but politically unfeasible, increase in the scope and role of the government?
See the interesting book by Paul Krugman - End this depression now! (2013) - for the well argued (neo)keyesian view.
US: too little stimulation, too much austerity; EU: too much austerity and institutional incapibility for orchestrated stimulation.
You may be interested in my paper 'Expansionary Versus Contractionary Government Spending' just published in Contemporary Economic Policy. It suggests that the effectiveness of government spending as a macroeconomic policy instrument ultimately depends on the nature of the spending ie whether it's consumption or productive investment.
The problem with KT is its reliance on government orchestrating it. That means objectivity and efficiency are thrown out of the window. The result is precious capital is spent with very little payoff to the public. Instead of the purported multiplier phenomenon KT ends up producing the opposite effect. Money is wasted, money moves towards were the wealth is already concentrated and increased inflation afflicting the poor more.
In a free market economy goes thru cycles. Nothing can be done about it. Just as the cycle comes down to correct the excesses it will come back. There is no need for activism.
Then what is politics without activism and do gooders saving the world?
Sorry if I am replying to myself and resurrecting my dead thread, but I would like to post an update to this topic:
-- I read Jonas Pontusson and Damian Raess "The Politics of Economic Crisis in Historical-Comparative Perspective", and this made me think that the answer depends on what one considers to be Keynesian Policies (KP), or what brand of KP is applied.
If you consider KP to be fiscal stymulus packages in the form of public deficits then yes-- the fiscal stymuli as % of GDP (including "autometic stabilizers")-- according to op.cit.-- amounted to 8.4% in the US, 8.3% in the UK, 4.9% in France and 4.3% in Germany. But those deficits were in large measure applied to bailing out the financial industry, which averted a significantly worse outcome, but did not restore sustained economic growth, mostly (and this is my opinion) because households perceive the world as a much darker place than before: many jobs have disappeared, some have returned but they feel precarious, and the future capability of governments to provide a decent safety net is no longer granted.
Buy I tend to think about old fashioned Keynesianism as governments taking an active role in the economy by carrying out huge infrastructure projects, expanding public services and hiring a large number of unemployed as teachers, bus drivers, engineers, researchers, road builders,.... Well this did not seem to happen, because of todays constraints (?) and also because those policies have been unfashionable for a very long time.
Although it's interesting to note that one of the recently announced pillars of "draghinomics" mentions starting eurozone-wide infrastructure projects to ease the pain of structural reforms. Then, perhaps, the policy discourse is starting to shift...
Any thoughts on this?
There is no empirical support for fiscal policies being effective as a demand management tool (at least in the USA). Financial crisis recessions don't bounce back quickly regardless of demand management policies. The economy has to re-establish equilibrium and it takes a long time.
Please see my question:
https://www.researchgate.net/post/Return_to_Keynes_is_it_sufficient?_tpcectx=profile_questions
https://www.researchgate.net/post/Return_to_Keynes_is_it_sufficient_2?_tpcectx=profile_questions
If you anwer to this question, please use the second one.
You raise an important question which should be more widely debated in light of the persistently poor performance of the global economy.
I suggest it would be more fruitful to return to the pre Keynesian era when the supply side (where investment decisions are taken), loanable funds, and problems with fractional reserve banking were emphasized. The banking system was at the heart of the 2008-10 global financial crisis and Keynesian inspired budget deficits and public debt have contributed to the subsequent macroeconomic malaise, as I argue in this paper.
Keynes' quote on deficit financing of public spendings "desperate expedient“ (Collected Writings of JMK, vol. XXVII, 1987, pp. 353—354). If we are to define what is Keynes' keynesianism, so to say, we must look into what he said about economic policy prescriptions. So, I do not thing that the world really had keynesian economic policy, but we nicknamed several policies keynesian. In the link below, you can find a recall of Keynes' own writings on monetary and fiscal policy, and I may believe that Keynes is not coming back because he has never been in.
https://www.google.com.br/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiR1pOp0tDXAhUJfpAKHWSOBH8QFggmMAA&url=https%3A%2F%2Fwww.jstor.org%2Fstable%2F42779610&usg=AOvVaw07PAcgxdB2N8VPwVmIB0uE
