Keynes' Increasing Relevance (02:30)
During the recent crisis, the U.S. and Britain spent money they didn't have to rescue the economy, on the basis of the ideas of Keynes. Keynes supported capitalism but thought government needed to intervene in crisis.
We watch rally cars sponsored by British tire manufacturer Pirelli. Pirelli received economic stimulus money to persuade it to keep manufacturing in Britain.
Deficits and Saving Capitalism (01:18)
Britain worries about mounting debt, but Keynes held that deficit spending sometimes necessary to save capitalism. Keynes' critics hold that government policy itself takes the economy out of equilibrium.
Keynes Influence (02:09)
We see Keynes speaking in a broadcast to Britain. Amid post-War prosperity, people assumed Keynes had solved the economic problem. 70s inflation brought his decline. 2008 crisis brought about Keynesian revival.
Keynes at University (02:12)
Keynes went to Eaton and Cambridge and fell in with the bohemian Bloomsbury set, which contributed to his intellectual boldness.
Keynes on German Reparations (04:15)
Keynes wrote The Economic Consequences of the Peace in response to post-WWI reparations forced on Germany, arguing that devastation to Germany would hurt worldwide prosperity and peace.
Impositions on Greece (01:34)
Strong countries are dictating terms to the weak in Europe, forcing tough budget cuts which produce riots, repeating the mistakes Keynes condemned after WWI. Ruining the debtor hurts the creditor.
Keynes on Unpredictable Economy (03:11)
Keynes tried to use probability theory to predict markets, with mixed success, then concluded that economies are unpredictable; the 2008 crisis illustrates this.
Economic Predictions and Human Nature (01:44)
The Depression shattered Keynes' faith in the predictability of the economy. Economies are made of people, not numbers. People's animal, herd instinct creates bubbles.
Normally, people buy less of something as it gets more expensive. Bubbles form when price increases cause people to buy more in expectation of further increases, which pop, as in 2008.
Keynes' Civilized Values (01:23)
Keynes came to his understanding that economies might sink without automatically recovering as a result of the Great Depression, which he feared corroded civilization despite his own luxurious life.
Keynes' Radical Idea (01:57)
Classical economics said the economy would revive if workers agreed to wage cuts. Keynes held that pessimism could block recovery indefinitely.
Stimulus Spending (02:34)
In Arizona, a huge solar plant is going up, part of a vast Keynesian experiment. With credit unavailable from banks, businesses rely on government.
Fiscal and Monetary Policy (01:44)
Keynes held that when spirits are low, people and business will not invest no matter the interest rates; government spending must fill the gap.
Hoover and Roosevelt (01:43)
Hoover responded to the Depression with spending cuts and tax hikes, a failed policy. Roosevelt favored increased spending.
Hoover Dam and Keynesianism (03:23)
Keynes visited America in 1934, but the U.S. was already implementing Keynesianism through projects such as the Hoover Dam. Boulder City, built to house Hoover Dam workers, illustrates the Keynesian multiplier.
Keynesian Response in 2009 (01:54)
WWII spending ended the Depression where the New Deal failed. Faced with another possible Depression, leaders gathered in 2009 in London and worked out a Keynesian rescue package.
Keynes, Debt and British Austerity (02:22)
Prime Minister David Cameron argues debt is the cause, not the solution, to the economic crisis. Arguably high Western debt levels leave little scope for Keynesian remedies.
Need for Bretton Woods (02:04)
During WWII, Keynes sought to design institutions to bring international cooperation. At Bretton Woods, he helped plan the post-War economic system.
Bretton Woods (01:29)
The U.S. and Britain agreed on the need to control currency fluctuation, and conceived the IMF and World Bank. Keynes failed to get the U.S. to export less to balance world trade.
German Exports and Peripheral Europe (03:20)
Germany wants struggling Eurozone members to implement tough measures, offering loans in return. Keynes thought rich exporters needed to export less to help struggling countries compete; higher German wages would be a solution.
Legacy of Keynesianism (01:30)
Keynes transformed economics. The political mainstream accepts Keynes on the necessity of intervention. Government borrowing costs are low, but debt is high, making it uncertain whether Keynesian remedies will help, however.
International Economy Today (01:23)
Bretton Woods set a basis for international cooperation, but we're now struggling to make it work. Keynes' imagination and optimism drove his work.
Keynes's Contradiction (00:41)
In 1946, Keynes suffered a fatal heart attack. Keynes taught government should try to bring the economy under control, but also that economies are fundamentally unpredictable- a contradiction.
Credits: John Maynard Keynes and Keynesianism: Masters of Money- Three Economists Who Changed the World (00:50)
Credits: John Maynard Keynes and Keynesianism: Masters of Money- Three Economists Who Changed the World
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