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Study notes

Keynesian Economics (Socialism)

  • Levels: A Level
  • Exam boards: AQA, Edexcel

In stark contrast to concepts such as class consciousness, historical materialism and the dialectic, Keynesian economics is associated with the moderate strand of socialist thought. Social democrats seek to implement an economic strategy shaped by the thoughts of John Maynard Keynes.

Although Keynes was a liberal, his arguments in favour of state intervention can also be applied to those on the centre-left of the political spectrum. It is also worth noting that Keynesian economics was very much in vogue during the cross-party consensus of the post-war era, and have experienced something of a revival in the aftermath of the credit crunch.

Keynesianism is based upon the assumption that the government should intervene within the economy to mitigate the problems of market failure. In the context of socialism, Keynesian economics can be used to implement policies associated with equality and social justice. Keynesianism is also consistent with the social democratic position upon the view that ‘the man in Whitehall knows best.’ Keynesian thereby provides an intellectual challenge to laissez-faire economics. Moreover, Keynesian economics entails a firm rejection of the planned economy advocated by Marxists.

Keynesianism is at heart a philosophy which favours a mixed economy with a role for both the public and private sector. It rejects the unregulated free-market approach associated with those on the libertarian-right of the political spectrum, and the far-left stance in which the state allocates resources. Indeed, Keynes wanted to uphold capitalism and prevent a drift towards a planned system based on common ownership. Keynesianism thereby offers a half-way between these two alternatives. Not surprisingly, such ideas become conventional wisdom amongst social democrats within the Labour movement.

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