Home > Free Essays > Economics > Economic Theories > The General Theory of Employment, Interest and Money

The General Theory of Employment, Interest and Money Essay

Exclusively available on IvyPanda Available only on IvyPanda
Updated: Mar 26th, 2021

Introduction

The argument presented by John Keynes is an illustration of the paradoxical twist that prevailed during the time when the document was prepared. He developed this theory in his attempt to explain the great depression; hence, sway individuals, corporations, and governments from classical practices. This argument was to a large extent applicable to European countries, which at the time deemed themselves superior. At the time, Europe was expanding its industrial capacity, and value for money in relation to employment, economic growth, and consumerism was in the lime light. Hence, this theory was mainly relevant to Europe as a directive to the country’s use of money.

Keynes’s general theory is not static, and it does not focus on a single element of money; rather, it encompasses a varied holistic approach that examines different realms of money and the economy. It was a perfect reflection of the economic situation of Europe that sought to challenge some of the classical ideologies regarding the use of money, especially in bad economic times characterized by unemployment and high inflation rates.

Keynes challenges classical theorists who believed in full-employment and the fact that poor economic times should be followed by the termination of unsustainable economic activities. In addition, he does not support the idea of inflating the prices; otherwise, the propensity to consume would not be achieved and the efforts to revive employment would be in vain.

Main body

The document reflects the period it was produced in that during this time money was in limited supply; hence saving the money was associated with thrift. Apparently, the ideas of Keynes formed the basis for the current theories associated with money, demand, supply, and associated push and pull factors. The 1930s was a time when countries were unstable due to inter-wars, colonization, and the fight for freedom.

Hence, reinforcing the circulation of money at this time was illogical given the fact that most countries were focused on gaining sovereignty. In addition, the existence and exchange of money at this time challenges the period in which the document under review was produced because money was mainly in the possession of the feudal lords and aristocrats. In addition, whereas Keynes gathers ideologies from great scholars, these ideas are not congruent with the referred period; hence continue to challenge the application of the theory at the time. One ideology asserts the need to give every individual an equal chance of being employed as well as promote innovation and invention by supporting manufacturers, and arts, and handicrafts.

Whereas this theory reflected the endeavors of the British who had gone out in search of more resources to reinforce and expand their dreams of industrialization, the same would not be said about other countries. On the other hand, this document challenged the manner in which the British solely relied on employment to sustain its economy; hence the reason why it went in search of cheap labor through slavery. Yet, Britain and associated superpowers would have used their local manpower to generate more money and promote national economic growth. Keynes’ argument challenged the current period at the time by forecasting the consequences of an individual’s inability to consume, which apparently were not a major cause of concern at the time.

Money was associated with the prosperity of a nation’s economy as long as it remained in circulation through increased consumption. Whereas money has been considered the outcome of good business, Keynes has indicated that money is the determinant of good business. He affirms this fact by stating that a business should not be closed down just because it is not performing as it should. More and more money should be spent until expected results are realized. Money is a determinant of the propensity to consume; hence, the more money one makes, the more that he or she consumes and the converse is the case.

Increased consumption guides one towards full-employment, and once this has been achieved, inflation cannot affect the income that one gets. Hence, money is shown as the platform of all economic activity because sufficient consumption leads to an increase in demand that subsequently induces investment. It is such spending that challenges classical notions of saving for the uncertain future.

But, Keynes is adamant on the fact that increased trade, which is fluid and destined to occur on a daily basis is more beneficial than a static investment whose price is uncertain. Such a phenomenon is attributed to the fact that money is deemed useless if it cannot be spent. Even in the event of bad economic economics, the available money should be used to enhance production and meet people’s demands.

Conclusion

The political implication of Keynes’s argument is that governments should provide supportive structures to encourage individuals to manufacture and create handicrafts. Subsequently, this leads to the development of a means of generating income and the creation of employment opportunities that steer a country’s economy further. The moral implication of the argument presented by Keynes is that individuals have the moral responsibility of spending money to generate more income. Actually, it is no use in saving money that could otherwise be spent setting up some lucrative business somewhere or promoting the growth of the business.

Hence, governments should develop policies that support such moves. Contrary to high-held beliefs, Keynes does not support the concept of property acquisition, which is the main reason why people save money. He argues out that upon acquiring adequate property, for instance, land, of what use is it if it cannot be used in a form of trade to give way to consumerism. Hence, the reason for the recent surge in the real estate business; the land is not fluid and does not enhance the propensity to consume. Being virtuous and thrifty is prejudice to man because it thwarts consumerism.

Keynes offers great insight into the political world by insisting that even though people seek employment, they will be willing to work with a lower real wage than a lower nominal wage. In this sense, the government and associated corporations are largely responsible for the prosperity of any nation because it is through the provision of well-salaried jobs that the propensity to consume is enhanced. Subsequently, national economic growth is achieved.

Most countries that have adhered to Keynes’ ideology of a liquid market have taken the responsibility of promoting consumerism. Other than the exchange of money with tangible goods, money on its own in the context of stock markets and diversified financial services beats the gold standard of merely saving and borrowing money. Hence, the reason for stability of the financial sector regardless of wars, terrorist attacks, and natural calamities. Political figures should learn to develop and support dynamic policies that act as pillars for their nations’ economies to ensure the cycle of supply and demand does not cease to exist like in the case of the Great Depression.

This essay on The General Theory of Employment, Interest and Money was written and submitted by your fellow student. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly.
Removal Request
If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda.
Request the removal

Need a custom Essay sample written from scratch by
professional specifically for you?

801 certified writers online

Cite This paper
Select a referencing style:

Reference

IvyPanda. (2021, March 26). The General Theory of Employment, Interest and Money. https://ivypanda.com/essays/the-general-theory-of-employment-interest-and-money/

Reference

IvyPanda. (2021, March 26). The General Theory of Employment, Interest and Money. Retrieved from https://ivypanda.com/essays/the-general-theory-of-employment-interest-and-money/

Work Cited

"The General Theory of Employment, Interest and Money." IvyPanda, 26 Mar. 2021, ivypanda.com/essays/the-general-theory-of-employment-interest-and-money/.

1. IvyPanda. "The General Theory of Employment, Interest and Money." March 26, 2021. https://ivypanda.com/essays/the-general-theory-of-employment-interest-and-money/.


Bibliography


IvyPanda. "The General Theory of Employment, Interest and Money." March 26, 2021. https://ivypanda.com/essays/the-general-theory-of-employment-interest-and-money/.

References

IvyPanda. 2021. "The General Theory of Employment, Interest and Money." March 26, 2021. https://ivypanda.com/essays/the-general-theory-of-employment-interest-and-money/.

References

IvyPanda. (2021) 'The General Theory of Employment, Interest and Money'. 26 March.

Powered by CiteTotal, easy essay citation creator
More related papers