What Is Interventionism?

Introduction

State interventionism

Introduction

State interventionism is a Western country

Experienced

Keynes, a British economist who published "The End of Laissez-faire" as early as 1926, published the book "General Theory of Employment Interest and Currency" in 1936 in the context of the " Roosevelt New Deal ", which systematically proposed the state's intervention in the economy His theory and policy immediately had a huge impact in the Western world. The emergence of General Theory was called the "Keynesian Revolution." Keynes rejected the traditional state non-intervention policy, and strived to expand the government's functions, and through government intervention to make up for the lack of effective demand and achieve full employment.

Keynes advocated that the country adopt an expansionary economic policy to promote economic growth by increasing demand. That is to expand government spending and implement a fiscal deficit. Stimulate the economy. Maintain prosperity. After World War II, this trend developed into a neoclassical school.

Keynesianism established its theory of social security economy, the theory of effective demand, based on demand management. In response to the Great Capitalist World Economic Crisis of 1929-1933, in 1936, the famous British economist John Maynard Keynes used the method of total analysis in his masterpiece "The General Theory of Employment, Interest and Currency", The theory of insufficient effective demand and the corresponding state intervention thought are put forward. The so-called "effective demand" of Keynes refers to the fact that the total demand price of goods is equal to the total supply price, that is, the total demand when equilibrium is reached, which is the total demand or total purchasing power of a country. The change in the relationship between the total supply price and the total demand price determines the total employment of the society. When the price of aggregate demand is greater than the price of aggregate supply, the enterprise will expand production and increase the number of hired workers, and the total social employment will increase. Conversely, when the aggregate demand price is less than the aggregate supply price, the enterprise will reduce production and reduce on-the-job workers. . This overall and reasonable supply-demand relationship is the effective demand. The basis of Keynes's employment theory is the principle of effective demand, which can be expressed by the formula: Y (social effective demand) = C (effective resident demand is consumer demand) I (effective capital demand is investment demand). Keynes believed that the insufficient social effective demand was caused by insufficient consumer demand and insufficient investment demand, and the deficiency of the latter two was determined by three psychological laws. The three psychological laws are the law of consumption propensity (the ratio of income to consumption), the law of marginal efficiency of capital (expected profit rate), and the law of flow preference (the intensity of desire to maintain income and wealth in the form of money). The law of consumption propensity means that consumption growth lags behind income growth, resulting in insufficient consumer demand; the law of marginal efficiency of capital and the law of liquidity preference refer to the trend of lower expected profit margins, which are incompatible with the interest rate, and thus cause insufficient investment demand. Due to the effect of the three psychological rules, insufficient investment is caused, which leads to insufficient social effective demand and the existence of involuntary unemployment. In order to solve the problem of insufficient effective demand, Keynes argued that when setting the goals of economic policy, it is necessary to stimulate demand so that the capitalist economy can achieve full employment. He believes that during the economic crisis, capitalists have lost confidence in the future, and borrowing investment has to pay interest, so monetary policy has little effect on stimulating demand. He proposed that the government should actively intervene in the economy and implement an expansionary fiscal policy. Expand government spending and implement deficit finance, that is, the government's fiscal policy should be liberated from the traditional budget balance thinking, and move towards a proactive and active deficit budget to stimulate social and economic activities and increase national income. Appropriate inflation policies can also be implemented, that is, the state issues additional notes through the central bank system under its control, expands credit, and lowers interest rates. On the one hand, this can make the entrepreneur expect the net profit to increase, which will increase the desire to invest; on the other hand, the increase in the circulation of banknotes will cause prices to rise, which will not only lower the actual wages of workers, but also increase them relatively. The marginal efficiency of capital has strengthened investment incentives, and it is considered that it is not smart to keep more cash, so the "flow preference" that hinders investment incentives will become smaller and smaller, and investment demand will rise. In addition to encouraging investment by capitalists through taxation policies, the government must directly start working together, expand social welfare facilities, increase consumer propensity, achieve sufficient aggregate demand and full employment, and eliminate and alleviate the economic crisis. In Keynes's state intervention thought, social security occupies a very important position. He advocates readjusting the distribution of national income through methods such as progressive taxes and social welfare. He also proposes the elimination of slums, the implementation of the minimum wage law, and the restriction of working hours. He advocated positive states, opposed negative states of liberalism, and emphasized safeguarding bourgeois democracy. After the Second World War, Keynesian macroeconomic theory occupied an absolute dominant position, which became an important ideological basis for the establishment of the country and the main theoretical basis for the formulation of public policies in capitalist countries. People called his "General Theory of Employment, Interest, and Money" the "Keynesian Revolution" in economics, and some even described him as "Copernicus in the field of economics." In terms of social security system theory, Keynesianism is a new milestone, which directly promoted the establishment of the social security system worldwide after the Second World War. ^[1]