Public spending – was Keynes right?

As we have seen, one can ask the question whether policies that followed the financial crisis were truly beneficial and well-oriented. After 2008, austerity has been on the lips of a large part of economic deciders. 8 years after, one cannot say that it has done miracles.

One can thus honestly ask whether mistakes were made. For a long time, public spending has been regarded as dangerous which might cause debt problems and lead the doom of a country’s economy. As it is however always more accepted among economists is that the crisis, notably in Europe, was not a sovereign debt-crisis. Given this, arguing that increases in spending would be extremely dangerous, as it would worsen the situation loses in relevance. There is moreover a growing mass of work that shows the positive effects of spending policies.

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