Conclusion
Turn of the Century
John Maynard Keynes
At the turn of the 19th century, economists continued to argue what economic theories were correct. Europe was experiencing an overload of wealth due to the overwhelming wealth generated by their mercantalist policies; countries such as Great Britain were able to sell their manufactured goods to their own colonies and reap a profit, while at the same time taking their colonies' various resources. However, many new economic theories were beginning to take hold. The advent of the 19th century saw the rise of the Progressive movement in the U.S.. Political figures, such as such as President Theodore Roosevelt, adopted economic policies that went against trusts, such as the Standard Oil company. As such, companies were not allowed to run massive monopolies on industries anymore, thereby stifling competition. The lasting effect of these economic policies can been seen today by the U.S. government's refusal to let AT&T buy T-Mobile. However, this was only the beginning of the change in standard economic policy around the world.
Keynesian Economics
While movements such as the Progressive movement were significant changes from previous standard economic policies, many of the bigger changes in economic policies came after the Great Depression. After the laissez-faire policies of the 1920's in the U.S. (where the government regulated economic activity very minimally) ended with the Great Depression, the 1930's saw a great expansion of government regulation. Under extreme economic circumstances FDR used Keynesian economics (developed by British economist John Maynard Keynes), an economic theory which has had long lasting implications well into modern day. The idea was to use government spending to fuel demand and pull the U.S. out of the depression. While, there is contentious argument around how effective Keynesian economics was in pulling the U.S. out of the Great Depression, Keynesian economics burst onto the world stage, rapidly gaining popularity. Even today, governments continue to use Keynesian economics. Both the U.S. and Chinese governments utilized government spending during the 2008 in attempts to jump start their economies.
While the standard economic policies of governments around the world have evolved, possibly no economic theory has been more influential in modern history than Keynesian economics. Even today, countries' continue to utilize its ideas in their economic policies. However, while popular, Keynesian economics has also spurred the creation of alternative economic policies. During the early 1980's the U.S. experienced a recession, primarily due to out of control inflation. In order to counter this recession, President Ronald Regan advocated what came to be known as "supply-side economics". The Republican party adopted many of the ideas of supply-side economics as an alternative to Keynesian economics (to which they were opposed). The U.S. was successful in pulling itself out of the recession, but once again economists, and politicians, continued to debate whether this was due to the economic policies of Regan or the inflation cutting policies of the Federal Reserve.
While the standard economic policies of governments around the world have evolved, possibly no economic theory has been more influential in modern history than Keynesian economics. Even today, countries' continue to utilize its ideas in their economic policies. However, while popular, Keynesian economics has also spurred the creation of alternative economic policies. During the early 1980's the U.S. experienced a recession, primarily due to out of control inflation. In order to counter this recession, President Ronald Regan advocated what came to be known as "supply-side economics". The Republican party adopted many of the ideas of supply-side economics as an alternative to Keynesian economics (to which they were opposed). The U.S. was successful in pulling itself out of the recession, but once again economists, and politicians, continued to debate whether this was due to the economic policies of Regan or the inflation cutting policies of the Federal Reserve.
Monetarist Policy
The Federal Reserve is the central bank of the U.S.. However, there are central banks in a variety of countries around the world. Around the 1980's monetarist policy was an extremely heated issue. One side, the monetarists, believed that central banks, such as the Federal Reserve, should have control over the money supply and should target the growth rate of the money supply to influence price levels and national outputs, while opponents believed otherwise. Ultimately, monetarists were successful in their argument, and they utilized the Fed's success during the 1980's recession to justify their argument.
Present Day
Ultimately, politicians, economists and history have not made a conclusion as to which economic policy is the best. Again, looking at the 2008 recession, monetarist policy was brought into question. In the U.S., the Federal Reserve's massive purchases of the private sector's toxic assets have brought its role into question, fueling the flames of politicians such as Ron Paul who advocate a return to the gold standard. Keynesian economics has been the dominant force for much of the 20th century and even the 21st century. Some people even claim that Regan's response to the 1980's recession was perfectly in line with Keynesian policy. However, current events in the modern world are pointing out potential problems caused by the government debt incurred by massive government spending. Countries such as Greece and Japan which have extremely high government debt loads have shown that there is a price to pay for large amounts of government debt. In Greece a large government debt has resulted in forced austerity measures which have led to social discontent and riots. In Japan, a massive debt load has led to the apparent stagnation of the economy. As even bigger economies, such as the U.S., have begun to reach massive debt loads, the debate has just begun on Keynesian economics and monetary policy.