Is the traditional Keynesian approach still valid in today's globalized economy?

[assidhu]

Hi guys, i was wondering if i could get some insight on a question and also some advice to see if my answer is heading in the correct direction

Question

"The Keynesian period , in retrospect, was highly dependent on the assumption of a particular combination of economic and political conditions. This limited its relevance utility to specific set of states with, at the time, certain characteristics. Even in that peroid, it would pose difficulties for other states with other characteristics. Now, with with substantial changes in the world economic system, a purely domestic Keynesian approach is clearly in adequate." Discuss this: what were the characteristics of national economies and of the international economy that Keynesian assumed? Thus, what difficulties might it pose for states with other sorts of characteristics? What changes in the nature of the world economic system have further undermined a nationally-focused Keynesianism? Does domestic Keynesianism have a future? Does internationalized version? If so, why and how and within what limits or assumptions? If not, why not?

My break down of the question thus far

• What is the basics of Keynes theory as is domestic policy and objective?
The basic fundamental points to the Keynes theory when related to the aspect of domestic policy and its objective is for governments to control the long term rate of interest which causes an increased rate of investment, growth and employment for the state. This results in an increased gross domestic product (GDP) for the particular state conducting a Keynesian approach to domestic policy.

• When did it first occur, characteristics of political economy throughout various states?
This approach was first developed in 1936 by John Maynard Keynes, in his writing of The General Theory of Employment, Interest and Money. The main motivation for Keynes to develop the Keynesian economics school of thought emerged as a product of 1930s depression that affected many developed states of the global political economy. Many of these developed states such as the United States (US), United Kingdom, and even Canada among others faced slow economic growth. Many economical factors played a role in causing the depression. Most of these causes were attributed to poorly guided private and public sector spending decisions which resulted in decline in consumer demand. This caused financial panic over several industries due to reduced profits and generated income, leading to a global economic downturn which forced massive jobs cuts and high unemployment rates. Government’s exacerbated the depression by implementing “beggar-thy-neighbour” policies, where countries had tried to protect their own aggregate demand by cutting back imports. As a result, this problem had spread to other countries who reacted by creating their own economic protectionist measures by creating mercantilist policies which try to reduce net importing and increase net exporting in a “zero sum” game. Another key element in creating the 1930s depression was gold standard. The gold standard was linked to nearly all states of the world in a financial network of fixed currency exchange rates which played a key role in transmitting the US downturn to other states. This downturn was the result of the stock market crash, which played a key role in reduced domestic spending resulting in the economic downturn domino effect to other sectors and eventually to the entire global economy with dozens of states being negatively affected.


• Which states used it and why?
Keynesianism was dominate 30 years following the Second World War amongst developed states. Its greatest acceptance into economic policies around the world was in the 1960s. During this era, governments increased adjusted their fiscal policies to expand their government spending.


• What were the characteristics of the national economy and the international economy that Keynes assumed?
• What difficulties would pose for other states with different characteristics?
• What changes in nature of world economic system have undermined a national focused Keynism?  with the onset of globalization and a massive increase in world trade, nationally focused economies must cooperate with one another to effective in implementing a working policy ”Obama saying by American interferes with global trade and effects other states”  increase of multilateral agreements and intuitions that oversee world trade (WTO, IMF)  sophistication of financial world markets is growing faster than regulatory bodies (ei. Current credit crisis) better information technology (financial IT infrastructure = wire transfers over the internet with little experience of an individual to do so) that allows for increased mobility of capital is at an all time high  the role of a central bank in steering the economy today vs. 50 years ago  inflation effecting exchange rates which effect net export and imports  effects on balance of payements
o Do these points here undermine the Keynes approach?
o These points may undermine a nationally focused Keynes however they may foster internationally focused Keynes approach
• Does domestic Keynism have future? no
• Does an internationalized version have a future? Perhaps
o If so why and how and within what limits or assumptions, if not why not?
 If not why not?

please help for more insight, thanks in advance

 

[assidhu]

can anyone please help me?

 

[ascapoccia]

First, some issues with what you wrote. Keynes developed this policies before 1936, and was advocating them before then (for example, his "economic consequences of the peace" held many of the ideas put forth in "the general theory".) Also, the Great Depresion was deepened by the horrible monetary policies put in place, based on classical theory. This was a much greater factor than the ending of free trade and tariff wars of the period. Keynesian ideas began to be implemented after this point (ie, still during the depression, not just after ww2). also, IMF and WTO were both made right after ww2, so they are during what you define as the keynesian period. And you make absolutely no reference to the Bretton-woods sytem, which is quite important (ie, requires capital controls, but allows for independent monetary policy).

Also, you have stated what you believe to be challegnes to Keynes assumptions, without stating those assumptions. no one can help you in your analysis if you don't give the full statement of your problem and assumptions. thus, whether your points about the chagning international system are valid depends on what you say keynes assumed.

furthermore, do not say things like "should" without giving reasons and/or proof for why things should be that way. economics may be a social science, but you need reasoning, logic, and evidence to support your argument, or else it is worth very little.