Volume 2: Hayek vs. Keynes- Keynesian history post ww2

   After World War 2, it was almost as if the balance of power started from scratch. Negotiations between all parties regarding the allocation of territories and spheres of influence allowed the Soviet Union to increase its role in the world. England's recuperation efforts would postpone their return and the creation of the UN began to settle things down. But not without a lot of change. The competition between nations began to increase. Soviets promoting their communist political and economic theories and the UN attempting to contain the lust for power. It was a clash between the capitalist system vs. communist.

Keynesian economics throughout the years

     In the previous volume, I explained how Keynes developed his macroeconomic theory which used government as a tool to invest in the private sector to stimulate employment which resulted in more purchase power for civilians as well as more tax money. This was the basis of the New Deal that Roosevelt implemented. He created government programs like the soil conservation act in 1935 to create employment in recreational areas to bring back infrastructure while at the same time creating employment that set off a chain reaction that leads to economic upliftment. 

     After world war 2 and until the 1970's there was what people considered the golden age of the world economy. Because of the great depression and how successful Keynesian economics proved to be in the effort, it became widely respected by economists around the world as a great way to help nations with recessing economies. However, people still questioned its functionality when countries were doing well. Their rationale was that the jobs created during the depression were temporary jobs creating an artificial and temporary economic boom that would return to normal once government investment backed off.

However when the oil crisis hit the US. Once again Keynesian economics was called upon by Kennedy as this recessionary gap hit. With increased wages and tax changes, the US was now pushing past its potential economic output. In the end, however, this created an inflationary gap which ended up causing troubles on the supply side in the 70's when employment was beyond the capacity at 3.6% in 1968 and inflation had soared to 4.3% the highest rate recorded since 1951. Once again Keynesian economics was in question

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