ABSTRACT
The global economy entered the twenty-first century with a distinguished track record of a long period of economic progress and stability. Human civilization at its pinnacle has no comparable parallel or record of growth and development, accomplished on the strength of an abounding stream of technological innovations and sustained by cohesive new economic policies. In contrast, the pre-war era of the last century witnessed unprecedented instability, uncertainty and insecurity. A period of two world wars, the collapse of the gold standard, the Communist revolution and the rule of Marxism, record hyperinflation and Nazism, stock market boom and bust, the Great Depression, beggar-thy-neighbor trade policies, and fluctuating exchange rates, presented a picture of fragmentation and sharp volatility in the world economy. In contrast to this stressful period, the post-war era has been marked by cooperation in global trade, monetary and economic affairs under the auspices of GAAT, IMF and World Bank, and has witnessed stability and growth in the developed and developing world. Keynes’ The General Theory of Employment, Interest and Money, published in 1936, offered a fresh and novel perception of the behavior of an economy and its key drivers. It revolutionized the macroeconomic management policy and paved way for the policy of counter-cyclical growth and stability. Marx had prophesized the collapse of capitalism through the depression cycle. Western capitalist nations faced their worst crisis when they all gradually slipped into the Great Depression in the 1930s. Keynes emerged as the savior of capitalism with his novel theory, giving the new economic logic for government intervention and deficit financing as the lasting cure of massive unemployment and depression. The conventional wisdom of traditional laissez-faire economic theorists preached a free market, government nonintervention and balanced budget. To Keynes, they were all antithetical to sustainable growth. The slow but steady acceptance of Keynes’ philosophy in the late 1930s gave the capitalist world its new lease of life.
