Explain the Rise and Fall of Keynesianism Essay - 1

Explain the Rise and Fall of Keynesianism - Essay Example It then goes on to discuss the all the theories that led to the rise of the Keynesianism and other potentially his radical forms of theories (Milgate and Eatwell 62). As asserted by Leeson (263), one of the factors that led to the rise of Keynesianism was the Keynes stewardship and experience with the treaty Versailles. This pushed him in making a break from the previous theory models he had put across. He involved many individuals into a treaty which led to the formation of the Economic consequences of the Peace (ECP) (Auerbach). From the book, he was established as an economy that had practical political skill to influence the policy making of the world economics at any summit. The peace treaties brought hope and expectation to the people’s development (Blinder 279). This also ensured unity and togetherness among the people. This further resulted in stability in the region and the nation at large which is requisite for a regional and economic development. Leeson (264) adds t hat another factor is the gold standard. This was a monetary system which used a particular economic unit based on a fixed weight and amount of gold. There were three types of gold standards: the first one was the gold specie standard in which the monetary unit is associated with the value of circulating gold coins or has the value of certain circulating gold coin together with other less valuable coins (Milgate and Eatwell 69). The second one, the gold exchange standard which did not involve the use of gold but a government guaranteed fixed exchange rate with another country which does not use gold (Blinder 281). Finally we have a gold bullion standard system which does not circulate gold but authorizes the selling of gold bullion on demand. This use of currency made Keynesianism a strong and powerful economy. Through this, many economies were attracted from different parts of the world in order to look for currency from them (Bleaney 265). During the 18th century when there were w ars within Europe and trade deficit with China, silver as a currency was drained from the economy of many Western European countries. Countries like United Kingdom created a massive recoinage program which acted as a currency reservoir for the UK. Unfortunately it came out that there was an exchange of unequal gold and silver currencies between the United Kingdom and Keynesianism. This later made Keynes so powerful and hence the rise (Yoshikawa 178). Keynesianism benefited from neo liberalism greatly. This is because the political philosophy they acquired enabled them to support economic liberalization. This allowed the Keynesianism to have their own economic theory and dominate it among the most powerful countries by then such as the United Kingdom and United States. Leeson (266) asserts that they had also a free trade and market control that was an advantage which made them became powerful economic and revenue gainers in the market. In addition, Keynesianism had control also over open markets and privatization of the market (Leeson, 268). They could also deregulate the laws that are enacted by other market policies in their favor. Keynesianism also had an upper hand in enacting his own market policies which would favor their market structure (Auerbach). This made them more powerful in controlling the economy of the region and hence their rise in power. Keynes had a stable monetary policy which had effectively demanded to