1. Cairns, the pride of heaven,
1883, Cairns was born in a wealthy family. His father was a professor at , Cambridge University, and his mother was the mayor of Cambridge. I studied Eton College in elementary school, and I studied at Cambridge University. When I was in my 20s, I became a member of King's College in Cambridge University. Later, I served as a public office in the UK Ministry of Finance. At the same time, he was the editor-in-chief of the Journal of Economics and the president of the Royal Economic Society of the United Kingdom. Looking at other people's resumes, they were born as the prodigy of heaven, a perfect tall, rich and handsome, rich and knowledgeable, and a perfect male god.
Interestingly, Keynes is also an entrepreneur, and he has been the chairman of an insurance company for 17 years. One thing he does every year is to write a letter to shareholders at the end of the year summarizing the economic situation of the company and Europe and the UK over the past year.
Today we know that Buffett will also write a "Letter from Buffett to (to) shareholders" to shareholders every year. In fact, this tradition was inherited from Keynes.
So we can see that on the one hand, Keynes has a lot of experience in administration and business operations; on the other hand, he is theoretically a leader in the field of European economics. This had a great influence on his later creation of "General Theory of Employment, Interest and Currency".
2. The creation background of "General Theory of Employment, Interest and Currency"
No coincidence was made. There may be God's will. Marx happened to die the year Keynes was born. Keynes' life was not too long. He died in 1946, which was only more than 60 years old. However, these 60 years have been more than half a century for the world at that time.
When Keynes was born, the industrial revolution in Europe was underway for more than 100 years, and Europe had become the ruler of the global economy and politics. It is generally believed that after more than 100 years of industrial revolution, mankind has established a new perfect political and economic system, and the development of human society has entered a new golden period. However, no one expected that the next breakout would be the first and the second of .
In the process, Keynes also witnessed his motherland - Britain. From the world's largest economy, the "Empire of Sun Still Setting", to a second-rate country, the British pound was replaced by the US dollar, and the United States became the new hegemon of the global economy.
At the same time, in 1929, the world broke out in the Great Depression, known in history as the "1929 Great Depression". For a long time after the Great Depression, the economies of European and American countries fell into a state of "stagflation" and the unemployment rate was very high. At that time, the unemployment rate in countries with strong economic strength such as the United States and the United Kingdom remained above 10% for 10 consecutive years. The unemployment rate in the United States was as high as 25% in 1933, while the unemployment rate in the United Kingdom was above 20% in the six years from 1930 to 1935. It is conceivable how bad the situation of those backward countries is and how difficult the lives of people are.
U.S. unemployment rate trend
In this environment, the Western world at that time began to be confused and could not find a big direction, and did not know what to do. People began to think that Marx deduced in "Das Kapital" that the moment of capitalism 's destruction was coming, and panic spread throughout the Western world at that time.
To deal with these problems, Keynes' "General Theory of Employment, Interest and Currency" came into being in 1936. So you see, although Keynes' life was short, it experienced the most turbulent period in history, and his theory was the description and response to these changes.
3. Keynes’ greatest theoretical contribution
Keynes first proposed the dualistic of total supply and total demand for macroeconomic management, and applied it to the national economy. This is Keynes's "General Theory of Employment, Interest and Currency".
Keynes's theoretical starting point of research on "General Theory of Employment, Interest and Currency" is that he believes that market economy is a non-full employment equilibrium state.In layman's terms, the ideal state of the market economy is that the total supply of society and total demand will reach a balance. However, the fact is that in the long run, it is difficult for the market economy to achieve a balance of supply and demand, and it always has a large number of labor force in a state of unemployment.
In this case, is supply determining demand in the market economy? Or does demand determine supply? Keynes then believes that supply cannot create demand, and supply changes through iterative optimization of demand.
So we often hear the saying, produce what consumers need, not produce what we think consumers need. It can be seen that the industrial transformation and consumption upgrading proposed by my country now. Industrial transformation actually corresponds to the supply part, that is, the part produced by the enterprise; consumption upgrades correspond to the demand part.
Who decides who will decide who industrial upgrading or consumption upgrading? According to Keynes' theory, industrial upgrading itself cannot generate demand. Therefore, it can be seen that on the road to industrial upgrading in China, whether it is manufacturing, service industry, finance industry, etc., all transformations and upgrading occur due to demand-side consumption upgrades.
As consumers' living standards continue to improve, people's yearning for a better life is becoming stronger and stronger, and their products have begun to upgrade from quality, low prices to higher requirements for products, including quality, brand, concept, etc. It is this change that is pushing the upgrade of the supply side backwards. Therefore, as a company, you must be able to produce products that meet the increase in consumption in order to achieve profits. This is the relationship between supply and demand, that is, supply is determined by demand.
After experiencing the Great Depression in 1929, Keynes believed that the invisible hand of the market could not guide the economy to restore the self-correction mechanism of full employment, which led to a country's long-term painful situation of high unemployment. So is it possible to eliminate this situation without using the violent revolution mentioned by Marx? Keynes believes there is.
From this point of view, it can be seen that Keynes does not advocate violent revolution, which may be related to his living in a better environment, because once a violent revolution breaks out, his superior life may be lost.
Therefore, in order to avoid violent revolution, Keynes believes that by adjusting fiscal and monetary policies, artificially interfering in the total supply and total demand of society, it has reached a relatively balanced state, thereby reducing the unemployment rate and returning the market economy to a stable state.
So we can see that before Keynes appeared, when a country was in depression and people's lives were in a miserable state, the solution was to govern without intervention, and let the invisible hands of the market automatically adjust. Then we see the consequences of market self-regulation failure, namely the Great Depression in 1929, and the world war in .
After Keynes appeared, when a country's market self-regulation failed and depressed, entrepreneurs no longer dared to enter production. The state should intervene and activate market vitality through national investment and make up for the shortcomings of market self-regulation failure.
This is an important point that Keynes put forward in his "General Theory of Employment, Interest and Currency". He does not deny the existence of the "invisible hand", but at the same time, he believes that when the market fails, the country must adopt active monetary and fiscal policies to regulate the supply and demand relationship of the market in order to quickly restore the national economy to its normal state. That is, state intervention in the economy. So Keynes' theory is also called " National Interventionism " in a sense.
At that time, after Keynes proposed such a theory, it was criticized by many fundamentalists, believing that Keynes was a traitor to Adam Smith , because Keynes did not follow the "invisible hand" theory proposed by Adams and abandoned the market's self-correction mechanism. For more than half a century, global macroeconomic theory was divided and discussed on Keynesian theory .
Later, it was not his motherland, the United Kingdom, that proved the feasibility of Keynes' theory. But the United States is far away from the ocean.In 1929, the United States experienced that Great Depression. By 1933, when Roosevelt was the president of the United States, he implemented a new policy that changed the fate of the United States, known in history as " Roosevelt's new policy ". The theoretical support behind this is Keynes’ proposed state intervention in the economy.
What intervention did the US government led by Roosevelt make during the New Deal period?
has built 180,000 engineering projects, including 1,000 airports, 12,000 sports fields, more than 800 school buildings and hospitals and other public facilities. When these government-invested projects began to be implemented, Roosevelt wanted to solve the biggest problem in the United States, employment issues, so there is a very important policy in the new policy called " for labor-for-relief ". That is to say, I will help you, but I can’t give you money. What should I give you? I will give you a chance to work.
For this reason, two important government agencies were established at that time, one was called the "Project Establishment Agency" and the other was called the "National Youth Administration". Together, these two agencies employed a total of more than 23 million people in just four years, accounting for about half of the entire U.S. labor force population.
In other words, at that time, half of the employment opportunities of the United States' labor force were provided through government investment. With the success of Roosevelt's New Deal, the US economy recovered rapidly. Keynes and his "General Theory of Employment, Interest and Currency" became famous for a while. More and more people are beginning to think about the correctness of Keynes' theory.
Finally, we return to modern society, and in the world, all national governance, whether in China, Europe, Japan or the United States, there is no fundamental marketism. In ancient Chinese words, it means to govern by inaction and market self-regulation. No country dares to say that when a market crisis occurs, the country will not intervene. Similarly, complete state intervention in the economy does not exist, just like the planned economic system implemented by the Soviet Union and China in the past, abandoning the market. Therefore, modern national governance is more about Keynesian , that is, a national governance system that integrates "invisible hand" and "visible hand".
Keynes's life can be said to be turbulent and legendary, and in the second half of his life it was hard work. He has been working hard on world issues all his life. After his death, he engraved a line of epitaphs he wrote to himself on his tombstone: "Don't be sad for me, my friend, don't cry for me, because I will never have to work hard again in the future. Psalms and sweet music will resound in heaven, and I will not even sing!"
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