Taking into account the present economic conditioin of our country, the history of economic disasters such as "The Great Depression" and the world economy, John Keynes' theories on the "Multiplyer Effect" and the "Circulation Theory", can help to determine why he has been hailed as both the saviour and the destroyer of the capitalist system.
To start, we can analyse the battle between Keynesian and Monetarism ideas and why the clash of the two can highlight reasons that Keynes' theories may have saved or destroyed the capitalist system. Monetarism, a selection of theories put forward by Milton Friedman, suggests that the goverment should have little say in any kind of buissness. During Margaret Thatcher's reign as PM (Prime Minister) in the 1980's, she used this idea duirng her term.
Althought part of monetarism was successful during Thatchers term, Keynes had to step in with his theories to sort out the 80's recession. His main theory used was a term known as "stagflation". It starts off with increasing government spending which, in turn, gave people more jobs or "government waste" jobs which people would always be needed for. The idea that you should "pay people to dig holes and fill them up again" is a prime example of this. People get jobs, the money they earn is used to perchases, which in term sorts out the recession.
On the negative side of things, people earning more money means that prices in shops increase. This happens when employment rises. The rise in employment rises the Aggregate demand, leading to higher prices in shops. This then means that people cannot afford things anymore. Wages will rise, people will get paid more to do their jobs more "government waste" jobs become available which pay more than normal. These jobs were prominent during the US "Great Depression" and lead to the forthcoming problem. Overshooting or undershooting the aggregate demand will lead to inflation, where the pound becomes almost worthless. Unemployment and inflation rise which is where the term "stagflation" eventually comes into play. This Keynesian theory suggests that inflation will never be low, suggesting that this destruction to a countries economy makes Keynes a probably destroyer of the capitalist system.
An idea that made Kenynes a temporary saviour for the capitalist system was the "stimulus package". In times of economic downfall, the government would print money to give to people to spend. To give a practical example for this we can use the USA. Let's say that george bush decided to give everyone in the country $200 to spend at their will. There is a man named Dave that runs a television retail service. With this spare $200 people go and buy his televisions as they have the money to do so. This is good for Dave as he has made a massive profit and the money that he has earned, he is able to spend in other places. So to make himself more money, he uses the "stimulus packages" that people gave him for televisions, to buy a larger number of better televisions. This money he has spent has now gone to someone else which also helps the economy. This is a reason why Keynes may be hailed as the saviour of the capitalist system, as it
leads to a higher Gross Domestic Products, increasing consumerism, which eventually leads to an economy boost. The boost is a good thing and because of this Keynes can be hailed as a saviour of the capitalist system as this theory allows a countries economy to grow.
However, with every action comes a reaction and the boost that the economy gets because of the "stimulus package" is only temporary. The money which Dave spent on his new televisions, has now gone to waste because people no longer have the available cash to spend. Dave is forced to sell the televisions at less than he paid for them, leading to his eventual bankrupsy, lack of money and finally unemployment. This completely disrupts the natural market, and will lead to a fall in the economy, clarifying the fact that even thought Keynes could be seen as a saviour of the capitalist system, it is not permanent. In this light, Keynes can be seen as the destroyer of the capitalist system.
The "Paradox of Thrift" is a term which can help to understand why Keynes may be seen as the destroyer of capitalist society. This is a reaction to the "circulation theory", another of Keynes' ideas. This can also be a result of the "stimulus package" mentioned in the previous lines. The money from the "stimulus package" gets put into buisnesses which then spend money on other companies etc. The money is then spent the same way, going back into "circulation" as is to say. This does make Keynes a saviour of capitalist society, but that is without possible complications which i will now explain. Where the "Paradox of Thrift" comes into play is where rather than spending money, people will save it. The money which could have been spent on a buisness, is not spent which leads to the recievers also having to save money because of a lack of income. This does benefit the people saving, but the money is not going back into the economy, once again decreasing the GDP, the AD and increasing unemployment because buisnesses may save money by sacking employees. This increase in unemployment once again makes Keynes the destroyer of capitalist society.
To conclude, Keyens can be hailed as both the saviour and destroyer of capitalist system. While Keynes' ideas are exceptional on a temporary basis, like the "stimulus package", the after effects of his theories create astoundingly negative effects on the economy as a whole. The "circulation effect" cannot be wholly successful, especially when the results show increases in everything bad for the economy. Keynes can be hailed as the middle man of the capitalist system, his theories provide a good basis to becoming a saviour of economic growth, but some of the concequences or reactions to his theories could destroy the capitalist system.
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