THE LARGER CONSEQUENCES

The message of the General Theory was sharply critical of unregulated laissez-faire. Most neo-classical theorists, it will be recalled, expressed reservations about the circumstances in which unchecked market arrangements could be counted on to yield socially desirable results.

Keynes's critique of laissez-faire rested on quite different foundations. The burden of his argument was to demonstrate that an unregulated market system was likely to be chronically unstable and incapable of assuring the full utilization of productive resources. Not only did his analysis demonstrate the need for active government intervention in the economy, but it also proclaimed that thrift was not necessarily a social virtue. Indeed, when resources were under-employed, thrift was a social vice. To a public schooled in the puritan ethic, this insight was not easy to grasp.

It is not remarkable that these unconventional views should have been misunderstood when first expounded. Some critics regarded Keynes's doctrines as dangerously radical and as a threat to the perpetuation of a capitalist order. A considered judgement of the content of Keynes's thought supports quite the opposite conclusion. Revolutionary though the General Theory was in its approach to economic analysis, the policy recommendations derived from it were largely prompted by conservative considerations. Keynes hoped that the essential features of the capitalist system could be preserved. But its virtues could be safeguarded only if the social unrest generated by mass unemployment could be eliminated by appropriate reforms. Laissez-faire, as he had demonstrated, was essentially a fair weather system. It was capable of remarkably productive performance when conditions were favourable, but it was also inherently unstable. Governments had a major responsibility for regulating the economic climate in ways that would permit the market system to achieve its full potential.

In large measure Keynesian teaching has been absorbed into economic thought and policy in most Western countries. Indeed, the adoption of a Keynesian approach by Western governments has not been least among the factors responsible for the high degree of stability exhibited by their economies in the years since the Second World War.