Home > Exchange Rates, Fiscal Policy, Interest Rates > A2 Revision – Keynesian and Post-Keynesian Period

A2 Revision – Keynesian and Post-Keynesian Period

I have discussed with my A2 class the end of the Gold Standard and the new era of self-regulating markets that started in the 1980’s under Reagan (US) and Thatcher (UK). This relates to Unit 5 in the A2 syllabusMain schools of thought on how the macroeconomy functions – Keynesian and monetarist.

Robert Skidelsky, in his book “Keynes – The Return of the Master”, outlined the Keynesian and Post-Keynesian periods. The Keynesian period was the Bretton Woods system whilst the “New Classical” Washington consensus system succeeded it. Both are outlined below:

The Bretton Woods system was designed to improve the rules and practices of the liberal world economy which had grown up sporadically in the 19th century. However in 1971 the fixed exchange rate system collapsed (see post Fixed exchange rates and the end of the Gold Standard) and the full employment objective was cast aside. Futhermore controls on capital were removed in the 1990’s. The new system introduced was more free market based and took the name of the Washingotn Consensus System.

According to Skidelsky the two regimes were shaped by two different philosophies. The Bretton Woods system broadly reflected the Keynesian view that an international economy needed strong political and institutional supports if it was to be acceptably stable. The Washington consensus was driven by free market principles of self-regulation and limited government intervention.

Advertisements
  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: