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Tuesday 22 Aug 2017 | 15:38 | SYDNEY
Tuesday 22 Aug 2017 | 15:38 | SYDNEY

One more time: 'We're all Keynesians now!'

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17 October 2008 16:21

Yesterday, I gave a guest lecture at ANU's Crawford School on 'The Return of the State'. When we first planned the talk – almost a year ago – the subject was intended to be mildly provocative. Now, of course, its just the conventional wisdom. Still, delivering the lecture was fun, and in the extended Q&A session, we had an interesting discussion about the intellectual framework that might be used to support the current shift back to a greater economic role for government.

One interlocutor argued that while the move to a more market-based approach to running the world economy that took place in the 1980s and 1990s – the broadly successful battle by free-marketeers to seize the Commanding Heights of the world economy — had a coherent ideological program to draw on, in the form of the writings of Milton Friedman and others, in contrast there is nothing similar today supporting the swing back to government. 

But is this true? 

It’s certainly the case that there are plenty of vocal critics of the (until recently) prevailing economic orthodoxy, including economists like Joseph Stiglitz and polemicists like Naomi Klein. But it's hard to see this adding up to a coherent, widely accepted critique. Instead, you can make the case that what has been happening is more along the lines of technocratic responses to a series of dramatic market failures. 

That’s not to say that there’s no alternative view that’s applicable to our changing world. Once more, it seems, we are busy discovering that we are all Keynesians now. Dramatic government intervention to save capitalism from the capitalists? Check. Large-scale fiscal spending to stave off economic depression? Check.

The greatest economist of the twentieth century is now staking his claim to the twenty-first.

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