Keynes’s Relevance Today by Fausto Vicarelli

By Fausto Vicarelli

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319-20) Thus, far from the fearless deficit financer Keynes's position might better be summed up: 'Emphasis should be placed primarily on measures to maintain a steady level of employment and thus to prevent fluctuations. , p. 323). From Keynes's (and the Kennedy-Heller position of the 1960s) point of view the rising budget deficits and rising share of transfer payments in government expenditure in the face of stagnant output and rising unemployment in the 1970s represent not the failure of Keynesian policy but rather a failure to apply that policy.

37ff). Keynes returned to this theme when he stressed, in the General Theory, the crucial importance of stability in the purchasing power of money (Keynes, 1973, VII, p. 236-42). It is interesting that supply-siders have now come to embrace the false 'Keynesian' position on the advantages of deficits, but that stability of the value of money has required a monetary policy with real interest rates in excess of expected returns to new investment projects. This has produced declining rather than expanding levels of output.

Between 1928 and 1935, the need to 'conquer unemployment' had become far more intense; so it is not surprising that with this background, he chose full employment as his target. He did not altogether forget that it can be a dangerous target. He defined full employment, in effect, as the maximum that could be reached by expansionary measures; he did not deny that there was some residue of unemployment which would still be out of reach. (I have myself found that it makes for clarity if one calls the unemployment which is curable by the measures that he was recommending 'Keynesian unemployment', thus keeping the distinction, while avoiding his 'involuntary' and 'voluntary', which, as generally recognised, do not give a fair impression.

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