The General Theory of Employment Interest and Money

“The General Theory of Employment Interest and Money” is a treatise on economics authored by John Maynard Keynes – the famous English economist. Published in 1936 February, “The General Theory of Employment Interest and Money” basically deals with the development of the concept of contemporary macro-economics. Rather, through his writing, the author attempted to modify the notion of macro-economy to a large extent, in the light of money, rate of interest and employment. In an attempt to develop the macro-economic theory, John Maynard Keynes studied minutely, social situations like pervasive social sufferings at different strata and the problem of bulk unemployment, in order to suggest appropriate measures to improve such situations. This situation referred to as ‘Great Depression’ by a handful of politicians and socialists. However, from Keynes’ point of view, it was a minor and transitory issue arising out of some temporary technical difficulties. According to him, rather than sitting and worrying, one should try to bridge the gap resulting from lack of demand by introducing less-interfering expenditure policies on governmental levels, which will generate demand in the market. Moreover, this would also lead to smooth operation of the market economy. In fact, all through his writing, the author gave more stress on minimum state control over diverse means of production.

For the past 7 decades and more since middle of 1930, the general theory of employment, interest and money contributed a lot in shaping commercial, political and administrative views across the globe. The implementation of this theory found expression in policies like tax reduction. On the whole, this theory disputed the fact that the employment level in contemporary economy is calculated on the basis of three factors, namely the marginal capital efficiency, the marginal propensity of consumption and the interest rates.

The main lines of thought of the General Theory can be thus summarized:

• Every economy has an inherent tendency to improve its lack of demand, if present. Otherwise, is makes the economy suffer, leading to suppression of economic progress and undesirable increase in mass unemployment.
• Specially-formulated policies on governmental levels may tackle such a situation effectively and reduce the rate of unemployment to considerable extents.
• Planned handling of huge flow of investments requires interference of the government in most of the cases. Otherwise, there is a tendency for useless spending of money, which does not serve the real purpose at all.