Analyzing the Keneysian Principles of Deficit and Balanced Budgets

Introduction

Today, many leaders of industrialized or developed countries claim to hold to one of the most basic Keynesian principles; that a country should only run deficits in troubling economic times and at all other times try to maintain a balanced budget (Keynes 1997). This paper will explore whether or not this basic principle is truly being upheld by examining a cross-section of countries during both times of “normal economic times” and “troubled economic times”. Since The Great Recession of 2008 there have been renewed calls within developed countries for austerity in the face of crippling debt and sluggish global economic growth, in defiance of regular Keynesian economics (Ivanovitch 2013). This paper will compare the deficits and/or surpluses in various developed countries during both “troubling economic times” and “normal economic times” to see if the basic Keynesian principle of only running deficits in troubling economic times holds true.

Hypothesis

Despite many leaders from across the political spectrum claiming that they hold to the basic Keynesian principle of only running deficits in troubling economic times I hypothesis that those claims are false. John Maynard Keynes argued that government spending boosted growth by injecting purchasing power into the economy and this could reverse economic downturns by pumping money back into the economy (Keynes 1997). By looking at an array of countries throughout the world and comparing their deficits, in relation to their Gross Domestic Product (GDP) during both “troubled economic times” and “normal economic times” it will become evident that many countries are not in reality practicing Keynesian economics. It is important to note that the use of deficit/GDP indicator in ...

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...of any individual being studied rather the unit of analysis is a nation state and thus impossible to inflict physical or mental harm to the subject. Moreover, anonymity is a key aspect of this ethical principle and this research paper too meets this criterion again due to the transparency of the evidence.

The third and final ethical principle is justice, meaning treating all subjects fairly and equitably. Again the evidence used in this paper is gathered using the same international indicators and national statistic bureaus. The statistics regarding GDP, deficits, and surpluses are all standardized across the world to ensure easy comparison; furthermore the GDP and deficit figures are standardized by converting all currencies into US dollars.

Consequentially, it is difficult to foresee anyone raising any ethical considerations that have not already been addressed.