What is Keynesian Economics?

Keynesian economics refers to the theories of British
economist and monetary expert John Maynard Keynes (1883–1946), who in 1935 published his
landmark work The General Theory of Employment, Interest and Money.
A macroeconomist (one who studies a nation's economy as a whole), Keynes departed from
many of the concepts of the free-market philosophy—that is, the idea that the market
must be permitted to operate without government intervention. In order to ensure growth
and stability, he argued, government needs to be involved in certain aspects of a
nation's economic life. He believed in state intervention in fiscal policies, and during
recessionary times he favored deficit spending (creating a debt), the loosening of
monetary policies, and government public works programs (such as those of President
Franklin D. Roosevelt's New Deal) to promote employment. Keynes's theories are
considered the most influential economic innovations of the twentieth
century.

Keynes was a major participant at the Paris Peace
Conference of 1919, where the Treaty of Versailles was drawn up, officially ending World
War I (1914–18). He quit the proceedings in Paris, returned to private life in London,
England, and in 1919 published The Economic Consequences of Peace,
in which he argued against the excessive war reparations (payments as a form of
punishment) that the treaty required of Germany. Keynes predicted that Germany's extreme
punishment at the end of World War I would pave the way for future conflict in Europe.
His prediction came true in 1939 when Germany invaded Poland, thus initiating World War
II (1939–45).

Having played a central role in British war
financing during World War II, Keynes participated in the Bretton Woods Conference of
1944, where he helped win support for the creation of the World Bank, which was
established in 1945 within the United Nations (an international peace-keeping
organization). The World Bank promotes economic development by guaranteeing loans to
nations, providing easy credit terms to developing nations, and providing investment
funds (called risk capital) for private enterprise in less-developed
nations.

Further Information:
"Keynes, John Maynard." Britannica.com [Online] Available href="http://wwwlj.eb.com" target="_blank">http://wwwlj.eb.com:
180/cgi-bin/g?DocF=micro/319/2.html, October 30, 2000; "John Maynard Keynes."
Encarta. [Online] Available href="http://encarta.msn.com/find/Concise.asp?ti"
target="_blank">http://encarta.msn.com/find/Concise.asp?ti=04818000,
October 26, 2000.