KEY ECONOMIST
John Maynard Keynes
A brief introduction
Ayomide Thomas
S
ome label him as the father of modern macroeconomics, and although others question his theories
and ideas, there is no doubt that John Maynard
Keynes is one of the most influential and adroit
economists ever to have lived.
Born on 5 June 1883 in Cambridge, much was expected of
Keynes from a young age. With his mother being the town’s
first female Mayor and his father being a well-respected
economist and philosopher, Keynes naturally excelled in
academia. He did so willingly, studying mathematics at Cambridge University before subsequently working in the India
Office where he published critically acclaimed books and
dissertations, such as Indian Currency and Finance in which
he described the workings of India’s monetary system. He
later published The Economic Consequences of the Peace
during his time working as the principal representative of the
British Treasury, in which he highlighted the flaws of the
Treaty of Versailles and predicted the Second World War
occurring as a result of Germany’s resentment of the treaty.
However, his real success came by the publication of The
General Theory of Employment, Interest and Money, perceived by some as the manual of modern macroeconomics.
This book gained considerable popularity and provided a
platform for his ideas and theories to be acknowledged
worldwide.
“Long run is a misleading guide to current affairs. In the long
run we are all dead.”
Spoken by the man himself, the most important thing to remember when studying Keynesian economics is that shortterm effects take priority over the possible consequences in
the long run.
Keynes believed the level of aggregate demand (the demand for all the goods and services in an economy) is the
main determinant of economic growth; made up of consumption, investment by firms, government spending and net exports. Due to low levels of consumption, investment and demand for exports during times of recession, he strongly believed in the need for the government themselves to boost
aggregate demand through the use of fiscal policy, in order
to help the economy to recover.
Prior to the publication of The General Theory, the widelyaccepted neoclassical economic theory suggested that economic growth was self-adjusting e.g. a fall in aggregate demand would cause a fall in production and wages, which
would cause inflation to fall which in turn, would cause em-
ployers to employ more people and increase production.
This cyclical method of economic thinking was in essence disproved by the severity and depth of the Great Depression, and
this gave Keynes a platform on which his ideas could be
heard.
Upon recovery from the Great Depression, President Franklin
D. Roosevelt, after his lack of success in cutting spending during recessions, adopted fiscal policy by increasing government
spending in the economy - one example of this is his decision
to create public sector projects, which provided both employment and demand for the services produced in them. Keynes
himself died in 1946 but his ideas are as popular now as they
were then. President Obama’s decision to introduce the stimulus bill in 2009, which saw $831 billion spent on the economy
by the government during the recession. The result was the
creation of 4 million jobs and economic stability at a time
where the US economy was only a matter of time away from a
total economic meltdown.
To him we owe the very existence of capitalism - as it seemed
on the brink of extinction during the Great Depression – as well
as its prosperity in the modern-day global economy. His revolutionary style of economic thinking paved the path for many to
follow. Thus, it is no wonder that he gained his title as the father of modern macroeconomics.