It
emphasizes on the role of government in helping people make a rational choice.
The Keynes believes that people is not always rational in certain condition.
For example, in the time of economic depression, people will tend to save more
money and will lead to worsening of the economic condition. People save money
means less product were sold, less production, less worker are needed and led
to cycles of doom. Therefore the government role is to help people to spend
more in order for the economy restructure and propel. For Keynesian, it is
acceptable to have a temporary deficit for the benefit of the long term.
Keynesian believes by "putting the money" in peoples pocket combine
with the monitored on the economic movement will allow a cooperative measure done
by the state which is absent in the Adam Smith in 'invisible hands' economic
approach. [i]
The manipulating of the workers
creates a class that is trapped into the social strata and remains there. Marx
has expected the monopoly of capitalism will occurs in the future and lead to a
crisis. On the other hand, Keynesian says the society still needs the role of
government to monitor the market to economy still growing and the government
can still continue to function. The role of government in managing the
capitalist class is much clearer when in the aftermath of the World War I and
World War II, when the business sector cannot continue its routine because of
so many destruction of life and property. Here comes the approach of neo
liberalism that Keynesian believe in the
intervention of the government to ensure the business can run, people
can go to work and pay taxes. The theory put into its application in the era of
Liberal Prime Minister in United Kingdom , Herbert Asquite where he introduces
Old –Age Pension Act 1908, Free School Meal in 1909, Labor Exchange act 1909,
and the National Insurance Act 911 which all enhance the greater intervention
of government towards economic development. This can be seen as the remark of
government interference in the market contradicts with the Adam Smith on laisez
faires state. For example, in the year 2012, the biggest expenditure of the
government is on the social security where it allocates almost a quarter of
overall expending £192 billion. UK also spend 3% of the budget to increase the
public transport. [ii]
[i]
David Balaam & Bradford Dilman, Introduction to
political economy.5th Edition.2011.Pearson Education
Incorporated.2008 United States.
[ii]
What does the Government Spend its Money on?, Economics Helps http://www.economicshelp.org/blog/142/economics/what-does-the-government-spend-its-money-on/
[accessed on 22 November 2012]
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