Keynesian economics: The transition to the Washington consensus

Type :

Term papers

Pages :

5 pages

Format :

.doc

Published date :

07/29/2009

Category :

Economics & finance

Sub category :

Economics

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Summary :

Introduction
The Keynesian revolution
Understanding Keynesian theory
Bretton Woods: Postwar reconstruction
The golden age
Keynesian economic model
The Washington consensus: Cutting through red tape
The Stagflation crisis of the 1970s
Conclusions
Works cited

Abstract

Recent political events concerning the international economic downturn have revived the discussion of keynesian economic theory due to the apparent failure of free market neo-liberalism. On 26 September, 2008, French President Nicolas Sarkozy remarked that "we must rethink the financial system from scratch, as at Bretton Woods" [Parker, Barber, Dombey, 2008] while this sentiment was echoed by British Prime Minister Gordon Brown on 2 April, 2009, at the G-20 Conference in London when he declared an end to the "washington consensus" previously directing global economic policy [Sparrow, Baldwin and Stewart, 2009]. As such, the history of twentieth-century economics requires elucidation in order to explore the faults with the neo-liberal model, and to comprehend the keynesian model which preceded it during the postwar recovery. Its establishment as a consequence to the Great Depression (1929-32) in America, and as a product of the Bretton Woods Conference (1944), would see the keynesian model implemented as the guiding framework for global reconstruction and wealth-building following the Second World War until its replacement in the 1970s by the neo-liberal washington consensus of John Williamson. This latter shift will be explained as a movement against the keynesian consensus between government and business, and as a re-formulation and continuation of classical liberal (or neo-classical) economic theory.

The paper aims to consider the replacement of keynesian by neo-liberal economic theory, and to establish whether or not the process was inevitable. In order to analyze this hypothesis, it will first establish the history of keynesian economics through as a reaction to conditions which provided for the financial collapse of the Great Depression, and its implementation at Bretton Woods.