2008–2009 Keynesian resurgence

The influence of Keynes's theories waned in the 1970s due to stagflation and critiques from Friedrich Hayek, Milton Friedman, Robert Lucas Jr., and other economists who had less faith in the ability of government intervention to regulate the economy, or were otherwise opposed to Keynesian policies.

These experiments had been influenced more by morals, geopolitics and political ideology than by new developments in economics, even though Keynes had found some support in the United States for his ideas about counter-cyclical public works policy as early as 1931.

[6] However, Keynes did not agree with all aspects of the New Deal; he considered that the almost immediate revival of business activity after the program's launch could only be accounted for by dangerous-to-rely-on psychological factors, such as the boost to confidence effected by Roosevelt's inspiring oratory.

The article also states that Keynes was one of the three most important economists ever, and that his General Theory was more influential than the magna opera of his rivals, namely Adam Smith's The Wealth of Nations and Karl Marx's Das Kapital.

A series of events that contributed to this economic situation included Richard Nixon's imposition of wage and price controls on 15 August 1971 and unilateral cancellation of the Bretton Woods system in 1972, his ceasing the direct convertibility of the United States dollar to gold, as well as the 1973 oil crisis and the recession that followed.

[16] In the world of practical policy-making as opposed to economics as an academic discipline, the monetarist experiments in both the United States and Britain in the early 1980s were the pinnacle of anti-Keynesian and the rise of perfect competition influence.

"[23] Yet American and British policy makers continued to ignore many elements of Keynesian thinking such as the recommendation to avoid large trade imbalances and to reduce government deficits in boom years.

[25] For the first half of the 2000s, free-market influences remained strong in powerful normative institutions like the World Bank, the IMF, and in prominent opinion-forming media, such as the Financial Times and The Economist.

[59] In a speech delivered in March 2009 entitled Reform the International Monetary System, Zhou Xiaochuan, the governor of the People's Bank of China, revived Keynes's idea of a centrally managed global reserve currency.

[71] As late as April 2009, central bankers and finance ministers remained cautious about the overall global economy; by May, the Financial Times was reporting that according to a package of leading indicators there were signs that recovery was imminent in Europe too, after a trough in March.

[79] On 8 December 2009, President Obama unveiled what the Financial Times described as a "second stimulus plan" for additional job creation[80] using approximately $200 billion of unused funds that had been pre-approved for the Troubled Asset Relief Program.

[82] In July 2010, economics journalist Robin Harding wrote for the Financial Times that most American economists are in agreement regarding the large influence of the United States stimulus on the economy, although he mentioned high-profile dissenters such as Robert Barro and John B.

[84] A July 2010 paper by Moody's Investors Service's chief economist Mark Zandl and former Federal Reserve Vice Chairman Alan Blinder predicted that the United States recession would have been far worse without the government intervention.

[99] In his 2009 book The Keynes Solution, post-Keynesian economist Paul Davidson makes another historical case for the effectiveness of Keynesian policy, referring to the experience of the United States during the Great Depression.

The letter, signed by many supporting economists, advocates a new international financial architecture based on an updated 21st century version of the Keynes Plan originally proposed at Bretton Woods in 1944.

In the years leading up to the resurgence, Germany had been home to some of the most outspoken critics of Keynesianism, yet according to economist Sebastian Dullien writing in December 2008, "important voices in the German economic profession are now calling for a large stimulus package, passed as quickly as possible".

[105] The New York Times reported that in the March 2008 annual meeting of the American Economic Association, economists had remained hostile or at least sceptical about the government’s role in enhancing the market sector or mitigating recession with fiscal stimulus.

In February 2009, Robert Shiller and George Akerlof argued in their book Animal Spirits that the current United States stimulus package was too small, because it did not take into account loss of confidence or do enough to restore the availability of credit.

Third, they'll have to do their best to incorporate the realities of finance into macroeconomics.By mid-2010, interest in Keynes' ideas was still growing within academia, even though the apparent consensus among prominent economists had fractured and the revival in Keynesian policy making had to some degree stalled.

While from late 2008 to early 2010 there was broad consensus among international leaders concerning the need for coordinated stimulus, the German administration initially stood out in their reluctance to fully embrace Keynesian policy.

[126] In a June 2010 article, referring to the cooling of enthusiasm for further stimulus found among policy makers at the 2010 G-20 Toronto summit, Sachs declared that Keynesian economics is facing its "last hurrah".

[130] In 2009, historian Thomas Woods, an adherent to the Austrian school of economics, published the book Meltdown, which places blame for the crisis on government intervention and points to the Federal Reserve as the primary culprit behind the financial calamity.

Especially in Europe, there was an increase in rhetoric calling for immediate fiscal tightening, following events such as the Greek debt crisis and the displacement in Britain of the Labour government with a coalition dominated by the Conservatives after the May 2010 elections.

In July 2010, leading European economic policy maker Jean-Claude Trichet, president of the ECB, stated that it was time for all industrial nations to stop stimulating and start tightening.

[136][137] In a July 2010 article, Financial Times columnist Philip Stephens argued that recent events show the markets to have re-established themselves as leading influences on western economic policy, while Brad DeLong wrote that he considered himself and fellow Keynesians to have lost the argument for fiscal stimulus.

[139] In September, Steven Rattner opined that the 2012 United States presidential election was shaping up to be a contest between the economic policies of Keynes and Friedrich Hayek, or "a clash of ideologies the likes of which America has not seen in decades."

[145] Also in November, The Courageous State book was released by the anti-tax evasion campaigner Richard Murphy, calling for a revival of the Keynesian resurgence, which he argues is the best economic policy for the interests of ordinary people.

[150] In March however, while accepting that the resurgence had stalled, Paul Krugman expressed optimism about the long term prospects of achieving a lasting shift towards Keynesianism in both mainstream economics and policy making.

[154] In January 2013, Japan's recently elected conservative government announced a ten trillion yen Keynesian stimulus package, which was to include public works and create an expected 600,000 new jobs.

While some economists and government policy makers remain sceptical, Martin Sandbu for the Financial Times said a return to Keynes original positive views about demand management is underway.