Keynes: The Return of the Master by Robert Skidelsky

(Allen Lane, 2009)

Keynesianism dominated economics and economic policy roughly between 1936 and 1973. The neoliberal crusade lead by Milton Friedman made use of the phenomenon of stagflation to demolish Keynesianism. It was swept to the margins of economic theory. It was taken over by ideas such as rational expectations, real business cycle theory, the efficient market hypothesis, and public choice theory. Two schools built on these foundations the neoclassicals and the neokeynesians (whom Joan Robinson called bastardised Keynesianism) provided theoretical backing for the bubble that produced the 2008 Global Financial Crisis.

Only Keynes could save the day. He had to be brought back, and is with us until today. From Obama’s gigantic fiscal stimulus to the expansion of the FED’s balance sheet, through Quantitative Easing in both America and in Europe, to Abenomics in Japan, and massive countercyclical demand management by the Communist Party of China, everyone is doing demand management nowadays. The Master is Back!