The Ever-Relevant J. M. Keynes
Despite evolving economic theories, Keynesian principles remain vital in crises, advocating state intervention when markets falter—proving his legacy essential, though adapted, in modern policy.
John Maynard Keynes remains relevant despite the economic problems caused by the faithful followers of his theories. His influence today is indirect, adapted, and selective. He is still particularly pertinent during crises and recessions. In other words, whenever the economy “gets stuck,” Keynes returns: after 2008, during the COVID pandemic, and in periods of low demand. His fundamental idea that when the private economy does not invest or consume, the state must step in still holds strong. Because prices and wages do not adjust quickly, and people and businesses often do not act “rationally” or with a long-term perspective, the state intervenes directly.
In macroeconomics in general, his ideas still have momentum. Essentially, he “invented” macroeconomics as we know it. The notion that aggregate demand determines production and employment remains foundational for most government actors. Even liberal or “anti-statist” governments implement fiscal packages and support the economy with spending. In other words, they apply Keynesian policies without explicitly stating it. That is why it is foolish for some to accuse them of being “neoliberal”! Even the far-right government of the colonels in Greece in 1967 implemented expansionary Keynesian policies.
Of course, Keynesianism is no longer the only model. After the 1970s (stagflation period), economists turned to monetarism (e.g., Friedman) and neoclassical models (such as the Austrian School of Economics). For example, the government of Mrs. Thatcher, inspired by her Minister Keith Joseph. “Pure” Keynesian policy is now rarely applied. Keynes himself said, “spend in a crisis, save in growth.” But in practice, states spend even in good times, thereby creating debt.
Today, a modified version called New Keynesianism prevails, which accepts markets and expectations but recognizes the “imperfections” of the free economy.
Keynes becomes relevant again when there is a crisis of confidence, markets do not self-correct, and monetary policy (low interest rates) is insufficient. Precisely then, the environment resembles what he described in the 1930s.
We no longer live in a Keynesian world—but we cannot function without it.
