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At the turn of the twentieth century, Capitalism was the only economic model that ruled the world. The failure of the free market, as expressed by the Great Depression, gave birth to two of the world's most influential economic theorists of all time: John Meynard Keynes and Frederick Von Hayek.
The Great depression, and WWI, caused a significant debate over which economic theory might best benefit mankind. John Meynerd Keynes introduced the concept of Macroeconomics to the world as to one explanation of the problem of mass unemployment. During the Great Depression, the people hoarded whatever money they had saved, and it was because of this; Kensey concluded, that when the markets crashed, the economy was destroyed. Keynesian economics discouraged the practice of too much saving (underconsumption) and not enough consumption (spending). However, I do think that he got very lucky by the commencement of WWII. The government took his advice and borrowed a great deal of money and spent it on the war effort. Because this created an enormous opportunity for new employment - despite the growing government debt - Americans were saved from the perils of poverty. Yet, he further concluded that if the poorer segments of society were given sums of money, that they would most likely spend it -promoting economic growth, but also setting a high degree of unequal distribution of wealth. Kenseyian economics, inadvertently paved the way to Socialist thought, which inevitable gave rise to Communist Marxism.
Marxism, led by Vladimir Lenin introduced governmental control of the economy in Russia by setting price limits and set wages. Communist Marxism seemed to promise a more just economy, where governmental policy was decided by concerns for the poor and equity. Deregulated Capitalism, at that time, was blamed for much of the worlds woes, and was especially identified as the cause of the catastrophe of the Great Depression. The people were desperate for a better solution. But when Communism also began fail, Lenin proposed the concept of a mixed economy by allowing private ownership of land and small businesses. However, proponents of strict Communist theory opposed this new policy, and exactly one year after its instigation, Lenin was dead. Soon after, Joseph Stalin came to power, and fascist thought quickly spread to economically vulnerable countries.
At the same time, Frederick Von Hayek, although initially sympathetic to Socialism, became the leading proponent of the free market. And Frederick Von Hayek's economic theory is what is leading the world economy to this day. However, people ( and especially the more liberal minded, intellectual Europeans ) are now questioning whether or not a deregulated free market economy is the answer; which leads us back to the original questions that dominated the world post WWI. In fact, I have to wonder whether global terrorism is a reactionary response to this type of political policy. Is it because the US is currently the leading proponent of this theory, that we are increasingly being seen as the enemy worldwide? Does the future hold another economic upheaval of Hayek's Capitalist theory? Will history repeat itself? And isn't this the very core of our current election?
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