Читать книгу Financial Cold War. A View of Sino-US Relations from the Financial Markets онлайн

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Keynes also explained that inflation and deflation, more than just a rise and fall in prices, were a means of wealth transfer between different groups and social classes within society. Classical economic theory held that, in a free market, wages would naturally adjust to a level at which there would be full employment. Keynes debunked this theory and showed that there was no natural tendency for full employment. For structural and even psychological reasons, wages do not necessarily adjust in line with falls in prices and profits. Further, since falling wages themselves removed economic demand, deflation could actually worsen unemployment. This meant that high unemployment could persist indefinitely unless governments intervened to boost consumption demand. Crucially, he argued that such government spending would have a ‘multiplier’ effect, since it would stimulate other economic activity. This therefore justified governments’ use of deficit spending at times of rising unemployment as a means of ‘pump priming’ the economy to induce a return to growth.