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By Donald Marron

30-Second Economics

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The key idea was that governments have to intervene in the economy to ensure full employment; if the rate of unemployment was left to the free market, it would naturally run much higher. Government intervention took the form of public spending, tax cuts for workers, and transfer payments. 3-SECOND CRASH The government should spend and cut taxes to soften economic downturns. 3-MINUTE BOOM Keynesianism seemed to be the cure to capitalism’s problems. For 30 years, growth rates were high and most people had a job—in the West at least.

But then how is this system different from straightforward free market capitalism? If firms compete against each other on the marketplace and investment decisions are left to them, does it make a difference whether formally they belong to the state or not? They are still driven by profit making. RELATED THEORY FREE MARKET CAPITALISM 3-SECOND BIOGRAPHIES ENRICO BARONE 1859–1924 OSKAR R. LANGE 1904–1965 30-SECOND TEXT Christakis Georgiou “Planning and market forces are not the essential difference between socialism and capitalism.

Many critical economists, such as Ha-Joon Chang, use mercantilism to criticize globalization. He argues that globalization and the free market have “kicked away the ladder” of state intervention and protectionism that rich countries once used to develop strong economies from beneath the feet of today’s poor and developing countries. 3-SECOND CRASH Keep the foreigners out and your money in and make sure you always sell abroad more than you buy—it’s nationalism for the economy. 3-MINUTE BOOM To proponents of free trade, mercantilism just doesn’t add up.

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