Investment and Public Policy in a Globalized Economy

Abstract

At the heart of Keynes’s remedy for the deep fluctuations in the capitalist economy was a large and continuing role for state investment. In the General Theory of Employment, Interest and Money, he wrote:

I expect to see the State … taking an ever greater responsibility for directly organizing investment [and] I conceive, therefore, that a somewhat comprehensive socialization of investment will prove the only means of securing an approximation to full employment.¹

These were the two definite policy proposals of the book. The General Theory was not about policy. It aimed to provide an explanation, in terms of fundamental theory, of persisting underuse of potential resources, especially labor. The role Keynes gave the state in investment was a consequence of his “general theory” of employment. It stood or fell by the validity of the theory.