Keynesian economics is essentially the idea that when consumer spending is low among the general population, and the economy contracts, then the government must give handouts to consumers and business to stimulate spending, offset the low demand, and encourage growth and investment. I have several problems with this, though I would love to hear opinions from the opposing view. First of all, in order for Keynesian economics to work efficiently, the government must borrow money and spend it in times economic recession, and then pay back the money during times of economic growth. The problems is, developed, industrialized governments generally do not pay back this debt, resulting in massive debt. When the government borrows money, they must promise to repay that loan with interest. To repay that, they would need to create more money. You can imagine in your mind of new currencies being printed. When money supply is increased, inflation goes up. When inflation goes high, people revolt. It also increases government's expenditure on salaries and infrastructure, leading to more borrowing. Again a vicious cycle. We have seen similar patterns to this happen in Greece, Russia, and Spain, and it is predicted to happen in France. The U.S debt already is approaching an all time high at $20 trillion! If we apply the principle of Keynesian economics and thus causing inflation to skyrocket, and essentially just digging a deeper hole for ourselves, then perhaps we need to look at other solutions than Keynesian economics. My second problem is that usually governments borrow money from private entities and banks in order to provide for lower, struggling classes in times of recession. However, this leaves virtually no room for investment in small businesses and start-ups. When I started my small business as a kid, I had to get grants from nonprofits and other small businesses, thus allowing me to grow my business and create wealth. If banks are giving money to the government to spend indefinitely, then where is the money to lend to businesses? And if the government keeps spending money without the intention to invest or create new business, then how can anyone expect the economy to grow? If there is a higher demand for more savings and less supply (the government keeps borrowing money from them), then interest rates would inevitable skyrocket. My third problem is that Keynesian economics and government handouts create an entitlement culture and foster corruption that, overall, really sets back progress. While I certainly believe that the government should provide a safety net for people and individuals that struggle, I think that the idea that businesses can rely on the government to offset their debt completely goes against the principles of capitalism and provides opportunities for corruption in government. Unfortunately, Keynesian economics is already applied in most industrialized nations. While I have certainly made my position clear, I would love to hear arguments as to the benefits of Keynesian economics and debate as to whether or not the benefits outweigh the costs, or vice versa.
