John Maynard Keynes, writing in his General Theory, claims that his theory was
“adequate to explain the outstanding feature of our actual experience; namely, that we oscillate, avoiding the gravest extremes of fluctuation in employment and prices in both directions, round an intermediate position appreciably below full employment and appreciably above the minimum employment a decline below which would endanger life …[and that] we must not conclude that the mean position thus determined by ‘natural’ tendencies, namely by those tendencies which are likely to persist, failing measures expressly designed to correct them, is, therefore, established by laws of necessity. The unimpeded rule of the above conditions is a fact of observation concerning the world as it is or has been, and not a necessary principle which cannot be changed (1936, p254).”
Thus he outlined the potential for his theory of effective demand to lead to policies which could improve the operation of capitalism and lead to persistently higher levels of employment. I read his General Theory twenty years ago as a student, and was for a while inspired by his writing to believe that capitalism could be managed to achieve a more harmonious society.
However, the history of the capitalist world since the 1930s leads me to be somewhat pessimistic about the ability of either state intervention or laissez-faire to achieve and maintain full employment, however that is defined.
The ‘Golden Age of Capitalism’ in the 1950s and 60s saw full employment and rising, widely shared prosperity across many countries, and seemed to lend support to Keynes’ general thesis. However, since the 1970s, while prosperity has risen for many, it has stagnated or fallen for many others, amidst increased instability and uneven development across the world. It seems that Keynes’ vision has not been fulfilled. I continue to believe that we can do better, but accept that there will tend to be good and bad periods for the majority living through the ongoing social transformation of a capitalist society.