After the fall of economics into the maze of right and wrong concerning the global crisis, and after governments excessively intervened to redirect the course of the catastrophe in a desperate attempt to escape it as quickly as possible, our memory takes us back to the ideas of the renowned economist John Maynard Keynes. He brilliantly succeeded in pulling the United States out of the Great Depression in the early 1930s—before any other major power at that time. It is worth noting that the earlier crisis was considered the harshest in modern economic history. It is not scientific in any way for some of us to equate our current crisis with that one; the difference remains significant.
The difference lies not only in the scale of the crisis but also in its nature and the surrounding circumstances. The era is not the same. There was no globalisation at that time melting down economic and financial systems into a single mould, shaped by an overextended force like the United States today. The internet and information technology were not as pervasive in every detail of individual and corporate life as they are now, when communication time is virtually zero. Information was not, at least theoretically, free as it is described today. Everyone now has the ability to dive into a free sea of data that helps in decision-making, often without needing others.
What matters is that Keynes’s genius at the time rescued the United States before the rest of the world. Ironically, Britain—the economist’s own country—had rejected his ideas and accused him of madness. Yet the so-called land of the mad across the Atlantic embraced him, and eventually, the world listened after he performed a miracle. His ideas were simple: reject the naivety of pure capitalism built on the notion of the “invisible hand,” which was supposed to automatically rebalance the markets—something that clearly did not happen, and in fact made the crisis more complex.
Keynes advised the Americans to intervene rather than wait for the invisible hand or any miracle it might bring. The government did intervene, restoring movement to the balance of supply and demand, to financial markets, and later to the labour market. Most importantly, the government itself supported demand in order to stimulate supply from producers, thus moving the markets, followed by a boost in labour demand—this is what’s called general equilibrium. However, it was fuelled by government purchases, contrary to classical theories. As for financial markets, Keynes called for them to be upgraded with strict regulation and careful monitoring by the Federal Reserve, given the markets’ inherently sensitive nature. This was simply to ensure stability in the face of investor reactions, which are often described as hysterical or irrational.
This sounds extremely wise, and it seems Keynes’s genius was the true hero behind the exit from the old crisis. It also clearly indicates that there is a crisis in the principles of classical capitalism. Yet what is astonishing is that classical ideas had, just before the recent crisis, once again taken control of the global economy, especially under the overwhelming wave of globalisation pushed forward without caution. But what’s even more surprising is the belief held by some that John Keynes—who died in 1947 grieving over the conspiracy to establish the International Monetary Fund—can somehow be cloned, and that his miracle can be replicated. So, the American government and many others, in a naïve repetition of everything this man once did to pull them out of crisis, began large-scale operations of purchasing, nationalising, financing, subsidising, and so forth—massive government intervention. With the same ignorance that had led them before the crisis to embrace the ideas of the invisible hand (which had stolen their money), they returned once again to adopt Keynesian economics—deliberately ignoring, perhaps out of ignorance or denial, that this is a different world from the one of that man and his era, and denying the truth that “every time has its own call to prayer,” and that every crisis births its own leader who emerges from its dust to save the world.
This article is originally published by AlBorsa in Arabic and later AI-translated by South Push.