1. Introduction Keynes published and introduced his economic theory in 1936, during the Great Depression, and gave guidance for government in formulation of monetary and fiscal policies. His model was widely acknowledged during recession times when classical economic model somehow failed to effectively and productively solve some economic problems such as unemployment. Although China’s economy is believed to have “Chinese characteristics” and cannot hastily adopt a Western model, Keynesian economics is still believed to receive embracement in China, as government intervention is wider and deeper than most of other economies of such large size. Therefore, the main issue this essay concerns with is the influence of Keynesian on China’s economy reflected by GDP. This work will discuss Keynesian economics and its effects on China’s economy in the following order. First of all, a brief background of the Keynesian economic model is introduced. Main focus of the general theory and the difference compared with classical models are explained next in the same major section. They followed by the theory’s application, modification and opposition. The second major section mainly discusses Keynesian’s effects on China’s economy. Firstly, the country’s economic history and the introduction of Keynesian need to be noted. Then this paper discusses the influence of its politics and its opening up policy, and the relationship with Keynesian economics. The recent financial crisis as a special incident and Chinese government’s response to it are then discussed, including proof of the practice of Keynesian in China, especially the four trillion stimulus package. A critical evaluation is then given, aimed at analyzing the effects of China’s macroeconomi... ... middle of paper ... ...pps/news?pid=newsarchive&sid=aIpq7IF4BM9Q Lucas, R. E., & Sargent, T. (1981). After keynesian macroeconomics. Rational expectationsa and econometric practice, 1, 295-319. Palley, T. I. (2006). External contradictions of the Chinese Development Model: export-led growth and the dangers of global economic contraction. Journal of contemporary China, 15(46), 69-88. Ross, J. (2012, February 5). Deng Xiaoping and John Maynard Keynes. Retrieved April 26, 2014, from Key Trends in Globalisation: http://ablog.typepad.com/keytrendsinglobalisation/2012/02/deng-xiaoping-and-john-maynard-keynes-1.html Trescott, P. B. (1996). How Kenesian economics came to China. Method and Hist of Econ Thought, from EconWPA. Zhou, S., Shi, M., Li, N., & Yuan, Y. (2011). Effects of Chinese Economic Stimulus Package on Economic Growth in the Post-Crisis China. Economics Research International, 2011.
Following the Chinese Revolution of 1949, China’s economy was in ruin. The new leader, Mao Zedong, was responsible for pulling the economy out of the economic depression. The problems he faced included the low gross domestic product, high inflation, high unemployment, and high prices on goods. In order to solve these issues, Mao sought to follow a more Marxist model, similar to that of the Soviet Union. This was to use government intervention to develop industry in China. In Jan Wong’s Red China Blues, discusses Maoism and how Mao’s policies changed China’s economy for the worse. While some of Mao’s early domestic policies had some positive effects on China’s economy, many of his later policies caused China’s economy to regress.
Keynes’ work: The Means to Prosperity, and The General Theory of Employment, Interest and Money created modern macroeconomics and influenced countries during the 1930s and 1940s towards interventionist policy and economic nationalism (Yergin, 1998.) His ideology and work led him to orchestrate the Bretton Woods conference in 1944 which, “contributed greatly to the golden age of controlled capitalism (where) even the most conservative political parties in Europe and the United States embraced some version of state interventionism” (Steger, 2003.) The Bretton Woods regime fell during the early 1970’s but Keynes economic ideology would not be abandoned until the adoption of Reagan’s Neoliberalism and the fall of the Soviet Union in the early 1990s (Steger, 2003.) Keynesian economic ideology was the predominating economic theory during Gilpin’s life and would contribute greatly to his claim of world economic nationalism.
In 1968, Karl Polanyi argued that ‘ the human economy... is embedded and enmeshed in institutions, economic and noneconomic’. To some extent, this argument can be used to support the issues raised in an article published in ‘the Guardian’. The article was in relation to the slowing down of china’s economy, and the implications that would inevitably affect developing and emerging markets around the world. Polanyi’s argument can assist in understanding why a Chinese slow down has occurred, and the extent in which it will affect global economies. The article raises many questions such as why china’s economy is so important in global economics, and what implications could take place if china’s economy gets worse.
Keynes and Hayek each approach the economy from a different perspective. In Keynes’ estimation, it is all about the flow of money. The economy is improving when money is moving, and thus, stability is achieved as much as is possible. Consequently, spending, and more specifically government spending, is the key to unlock the door blocking economic growth. By contrast, Hayek contends that money is not everything. What the money is used for, whether it be saved, invested, loaned, or spent, also plays an important role in the progression of the economy. Growth comes from saving and investing not consumption and spending. The stability of the economy, according to Hayek, is brought about by the forces of supply and demand.
Kroon, George E. Macroeconomics The Easy Way. New York: Barron’s Educational Series, Inc., 2007. Print.
Chow, Gregory C. "CHINA’S ECONOMY: REFORM AND PERSPECTIVES." Princeton University. N.p., 15 Apr. 1999. Web. 23 Apr. 2014.
John Maynard Keynes, British economist, journalist, was born on June 5th 1883, in Cambridge, England. His father, Dr. John Neville Keynes, was an economist and a philosopher. Keynes attended Eton and then Cambridge University. At first he studied Mathematics but then turned his attention to Economics when he was offered the job at the British treasurer after the First World War when the British economy was at pressure. A man who gained a modicum amount of wealth during 1919 to 1938, married to Lydia Lopokova in 1926 and passed away in April 21st, 1946. Keynes believed that price level has to be stabled in order to have a stabled economy, and that is only possible if interest rates go down when prices rise. He also believed that the market forces alone will not deliver full employment but boosting government spending (main force of the economy in Keynes theory) will aim in his theory full employment or close to that. He believes by Governments intervening and spending will finally stop recession, unemployment and most importantly depression. For spending will increase the aggregate demand of the economy.
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My research of Classical Economics and Keynesian Economics has given me the opportunity to form an opinion on this greatly debated topic in economics. After researching this topic in great lengths, I have determined the Keynesian Economics far exceeds greatness for America compared to that of Classical Economics. I will begin my paper by first addressing my understanding of both economic theories, I will then compare and contrast both theories, and end my paper with my opinions on why I believe Keynesian Economics is what is best for America.
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When the new Chinese Government was set up in 1949, the new government faced a lot of problems. First on their agenda was how to re-build the country. As Communist Party of China (CPC) is a socialist party, their policies at the time were similar to that of the Soviet Union’s. Consequently, the CPC used a centrally planned strategy as its economic strategy when it first began. For a long time, the Chinese economy was a centrally planned economy in which none other than the state owned all companies. In fact, there were absolutely no entrepreneurs. As time went on, the problems of a centrally planned economy started to appear, such as low productivity, which was the key reason for restricting the development of China. With the population growing, the limitations of the centrally planned economy were clear. In 1978 China started its economic reform whose goal was to generate sufficient surplus value to finance the modernization of the Chinese economy. In the beginning, in the late 1970s and early 19...
Finally, the United States political system has a strong structural structure but in China their people always work together to be the best and stand out in the world. It is predicted that China will one day be the largest economy-growing country in the world. They continually grow and rebalance their world to be the best. The growth of the economy will depend on the Chinese government's comprehensive economic reforms that more quickly accelerate China's transition to a free market economy. Consumer demand, rather than exporting, is the main engine of economic growth; boost productivity and innovation; address growing income disparities; and enhance environmental protection.
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For the forecast, the PBC will adapt to the dynamic economic environment, to ensure the policies continuity and stability, maintain the prudent monetary policy and continuing a moderate elastic scope (China Monetary Policy Report 2015). In addition, Chinese government will remain a more proactive fiscal policy. They will moderately increase the financial deficit and preparing to make the biggest reform in the policy and avoiding the fiscal cliff, especially focus on the tax system and expand the effectiveness of government’s expenditure (Cevik and Carolina-Caro 2015). Meanwhile, China will strengthen the coordinate of monetary and fiscal policies, which stabilizing the Chinese economic