Government Intervention: A Time and A Place The twentieth century has been the age for the most varied experiments in political policies that the world has ever seen. Governments are continually trying to improve and create the best system of regulation for their citizens. Two of the best examples of this occurred in the United States. Keynesian economics and Reaganomics were both introduced in a time of economic slumps.
These two policies are on the opposite sides of the political spectrum, thus giving us an idea of what works best in what situation. John Maynard Keynes, the man behind Keynesian economics, introduced this policy during the 1930’s, a time known as the “dirty thirties.” The United State’s stock market had just crashed and the country was experiencing serious repercussions. Keyne’s proposed that the government should intervene and create growth by decreasing taxes and increasing government spending. His theory was that by putting money into the economy and creating employment, the economy would gradually recover.
His ideals were successful and the United States went well on the way to recovery. On the other hand, Reaganomics stresses the supply of goods and services. It supports higher taxes and less government spending to help economy. However, the theory was applied too extensively during a period in which it was not entirely needed. Reaganomics was installed during the 1980’s, when the country was experiencing a slight recession, and government increased sales and excise taxes were initiated. These taxes affected both the consumer and businessperson, resulting in higher prices.
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People were also reluctant to invest money into savings accounts or the stock market because the profits would be highly taxed. The government became too extensive in their protection of the private sector, which was extremely inefficient. The one thing the theory did succeed in was reinforcing inflation. Thes two theories are both perfectly capable of proving effective, but the circumstances and surroundings need to be fitting. Governments have a role in every country but the extent of their influence needs to be customized to what best suits their country and people at that time. The economic factors need to be weighed carefully to provide a balance that will not ruin an economy rather than help it.
The two economic theories of Reaganomics and Demand Side economics are well thought out policies and could prove effective, if used in the proper situation. The Supply Side theory was used after a long period of prosperity, and although seeming to be a helpful adjustment to a recession, was used in excess. The success of these and any other economic theory is grounded on the time and place in which it is executed.