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Keynes' denial of conflict: why The General Theory is a misleading guide to capitalism and stagnation

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  • Thomas I. Palley

Abstract

Keynes' General Theory was a massive step forward relative to classical economics, but it was also a step backward in its denial of the conflictual nature of capitalism. There is need to understand Keynes' technical contributions regarding the workings of monetary economies, but also need to understand the flaws within his thinking and the consequences thereof. Keynes made a fundamental contribution elucidating the mechanism of effective demand, and he also has claim to be the preeminent monetary theorist. However, owing to his denial of conflict, he had a flawed view of capitalism which is why establishment Keynesianism struggles to explain contemporary stagnation. That flawed view also undermines the case for Social Democracy. Contrary to conventional wisdom, his view of capitalism is supportive of Neoliberalism and Keynes can be viewed as a compassionate (Third Way) Neoliberal.

Suggested Citation

  • Thomas I. Palley, 2023. "Keynes' denial of conflict: why The General Theory is a misleading guide to capitalism and stagnation," FMM Working Paper 88-2023, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:fmmpap:88-2023
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    File URL: http://www.boeckler.de/pdf/p_fmm_imk_wp_88_2023.pdf
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    Cited by:

    1. Arne Heise, 2024. "Keynes and the drunkard under the lamp post: Making sense of Palley," Japanese Economy, Taylor & Francis Journals, vol. 50(1), pages 47-62, January.
    2. Matías Vernengo, 2023. "Was Keynes a Liberal or a Socialist?," FMM Working Paper 94-2023, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

    More about this item

    Keywords

    Keynes; The general theory; conflict; capitalism; stagnation; bastard Keynesians;
    All these keywords.

    JEL classification:

    • B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B3 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • P1 - Political Economy and Comparative Economic Systems - - Capitalist Economies

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