We need not introduce more greatness for John Maynard Keynes; there is no doubt that he created a new time for our world. Although the capitalist economy is based on the market, it will have more disadvantages. However, the emergence of state monopoly capitalism has solved the problem, and it based on Keynes Theory.

What is Keynes Theory? “Keynesian economists argue that, as aggregate demand is volatile and unstable, a market economy will often experience inefficient macroeconomic outcomes. These can be mitigated by active policy responses, in particular, monetary policy actions by the central bank and fiscal policy actions by the government can help stabilize output over the business cycle. Keynesian economists often advocate an active role for government intervention during recessions.” (WIKIPEDIA). From history event, there is no doubt that it is so important to our life because the government will have the better solution to manage our market, help it has a health developing.

Now, I will talk about some disadvantages of Keynesian theory to today society. Firstly, the Keynesian theory just pays attention to economic efficiency, and it always ignores the social equity. When government pushes some economic policies, if they also add more equitable distribution system, maybe it will lead to reducing the widening gap between wealthy and poor. However, while implementing the expansion policy, we will put emphasis on the principle of free market distribution, in which case the most beneficiaries are often large companies and influential groups and affluent groups, and the poor are often the least beneficiaries. This situation is often even further widening the gap between the rich and the poor. According to the US census, the share of 10% of the nation’s most abundant population (income of more than $ 100,000) in 2005 accounted for the largest share of national income since the Great Depression of the 1930s – 48.5%. US 1% of the richest population (earning more than $ 348,000) accounted for the largest share of national income since 1928 – 21.8%, an increase of 19.8% from the previous year, more than double that of 1980. The richest 300,000 people in the U.S., which account for 0.1% of the whole population income is equivalent to 150 million low-income population of all income, the average income is equal to the other half of the mean income of 440 times, the gap between wealthy and poor over the past 25 years. Although the total revenue in the United States increased by nearly 9% in 2005, the average income of 90% of the population fell by $ 172, or 0.6%. The Gini coefficient in the United States increased from 0.394 in 1970 to 0.46 in 2004 (0.466 in 2004). Unfair wealth distribution will lead to many social problems.

Secondly, in Keynesian theory, the politicians were “moral people,” and he did not think that politicians were “economic man.” Keynesian stimulus needs short-term policies that tend to be exploited by opportunist politicians or parties and become a useful tool for manipulating elections. Since the birth of Keynesianism, some Western voters have increasingly argued that the government should take on more responsibility for emerging economic problems. Some research evidence also shows that the economic cycle and the political cycle have a greater relevance. Some politicians, often before the election, take advantage of the expansion of the policy, to create short-term prosperity, regardless of long-term consequences, and in the election, will take another economic system, reduce expenses, tight financial, resulting in economic fluctuations.

Thirdly, the Keynesian theory just saw that the material fulfillment to human, but did not pay attention to the spirit satisfaction of the person. People are both physical and spiritual; both personal and social. The way of Keynesianism to meet people’s need, is through the continuous manufacture of material wealth, to fill the needs of human diversity, so the effect of solving the problem is very limited. In this case, although there may be material prosperity, people’s cultural and moral construction is facing a crisis. Over the years, the moral crisis in the Western world is also deepening. British riots are an example. Constant materialism makes people feel empty inside, finally become a material person.

In my opinion, each country should establish its independent economic system. In the today international situation, we cannot just believe that globalization, although it has various advantages to developing our country, we still saw it’s shortcoming. On the one hand, globalization and division of labor improved economic efficiency; on the other hand, globalization, and division of labor have also increased the risk of economic development in various countries. The government should respond to globalization and division of labor by their respective realities and should seek a balance between risk and benefits. For some countries with reduced danger of resistance, they should be cautious and open, especially for the opening of the financial sector.

In the next place, the government should pay more attention to the multiple equalizations of resource configuration. Equilibrium of resource allocation should include four equilibriums: time equilibrium, spatial equilibrium, value equilibrium, and physical equilibrium. Resource allocation of the time balance is to achieve a reasonable flow of resources in different periods of time, cash flow and real flow should be balanced in the time and space flow smoothly rather than sometimes it is a streamlet; sometimes it is a flooding, it needed steady flow rather unsteady flow. For instance, the issuance of government bonds, the use of financial derivatives should be considered in the time interval within the balanced allocation of the problem. The spatial equilibrium of resource allocation is to realize the coordinated and balanced development of resources between different regions. The balance of the value of resource allocation is the smooth and coordinated realization of the change of entity value itself. The most important thing is the smooth and coordinated change of price. The physical balance of resource allocation is to realize the balanced development of different industries in the real economy. The essence is that the economic structure and the industrial structure are balanced and coordinated.

Keynesian theory has given us a good example to prove that government should use some policies to supervise our market, but we still can’t ignore some disadvantages from his theory, therefore when we were developing our economic, we should improve it by today society.

 

 

 

Government should put some effort in improving our basic economic system to alleviate some disadvantages of Keynesian theory