Comparison of Keynesianism and Neoliberalism

This paper seeks to explore the democratic experience by delving on two main political and economic ideologies’ that emanated between 17th Century and 18th Century, the Keynesian welfare state era and the neoliberalism era. The essay will pay attention to the characteristics and the concept of each ideology and examine how each concept fits the development of a country’s economy. Moreover, the analysis seeks to define the term ideology and provide the essential means of what needs to be done by governments while making decisions regarding public policies and provide relevant examples about the appropriate approaches a government can use in making such systems. Lastly, the paper will evaluate causes of falling public participation that has been affecting democracies and the process of liberal government, as well as using the Canadian case to assess the pros and cons of implementing electoral system reforms.

Comparing the Governing Ideologies of Keynesian Welfare State and Ideologies of Neoliberalism

 The Keynesian welfare state and neoliberalism theories are both economic and political ideologies that have shaped both economic and political development of almost all countries during and after World War I (Swyngedouw, 2005). The term ideology in this context refers to a set or system of ideas or concepts or ideas that form the fundamental basis of either an economic or political theory and policy (McBride " Shields, Dismantling a nation: the transition to corporate rule in Canada, 1997). The term refers to various understandings such as the doctrines, teaching, thesis, and theory among other synonyms. Besides, ideology can be termed as a set of opinions or beliefs represented by a particular group of people such as scholars or political class. For example, apart from the concept of Keynesian and neoliberalism, some of the conventional political and economic ideologies include the theories of capitalism, socialism, communism, and Marxism among others (McBride " Shields, Dismantling a nation: the transition to corporate rule in Canada, 1997). Therefore, in political science, ideologies are the basic foundation upon which an ideal idea that leads to a political or economic system originates from to shape policymaking.

            The Keynesianism concept is about the collection of sets of economic policies that were put in place by John Keynes to offset the then rising economic cycles of capitalism. According to the governing of the welfare state by Keynes, it was worth of economic and political understanding to promote the offsetting of economic cycles through the use of  deficit spending during the recessionary periods. John Keynes believed that during a recessionary period associated with the rise of capitalism, there is need to promote public works at the expense of corporate corporates to ensure that the country gains its employment stability (McBride " Shields, Dismantling a nation: the transition to corporate rule in Canada, 1997). In this context, John Keynes alluded that employment insurance was essential for a stable economy and political development, thus necessary to offset the economic cycle of capitalism during the recessionary periods. The welfare state ideology refers to the capitalist run society whereby state intervention to the economic activities was viewed as a viable role for the government to help in the creation of employment and financial stability.

Welfare state society or Keynesianism was committed to reforms by proposing for government to intervention via contributing to the development of the economy through engaging in the provision of social policies, standards, programs and regulations to mitigate the rising class conflict and provide solutions that can accommodate necessary social needs that triggers the conflict between the fighting class. According to this concept, the government must engage in delivering public goods to which the capitalists could not provide efficiently, or might not offer due to lack of direct profits or due to a massive amount of funds required such as roads (McBride, Paradigm shift: globalization and the Canadian state, 2005).  However, the concept of neoliberalism is a new idea that rose to oppose the Keynesianism. Neoliberalism is considered an antagonist of liberalism, in the concept of political and economic constraints. Economically, the idea is referred to as economic neoliberalism which emerges in the late 18th century, around the 1960s to modify the liberal political views regarding economic development. The central concept of neoliberalism was to reject the ideas of Keynesianism or the welfare state which proposed the need for decisive government intervention into economic activities (McBride " Shields, Dismantling a nation: the transition to corporate rule in Canada, 1997). The theory of neoliberalism focuses on the need to achieve progress and social justice through creation or embracing free-market methods, as well as fewer business restrictions and development. Specifically, the concept of neoliberalism was based on the notion that there is a need for embracing wealth trickle down theory.

Keynesianism and the welfare state believed on the role of government or specific government intervention; reforms trait, to economic development as opposed to pure capitalism context (McBride " Shields, Dismantling a nation: the transition to corporate rule in Canada, 1997). In the view of the welfare state, Keynes argued that there are various sources of resources besides the state activity that can be delivered differently to citizens. For example, it encourages policy making about resource allocation and distribution by alluding that the state can fund some of the resources and services delivered to citizens. In its applications, the welfare state ideology of government argues that the state's activities can be regarding cash benefits, healthcare, food, education, welfare services and provision of housing. Keynesianism was keen on the need for government intervention to reform or offset economic cycles associated with capitalism, and instead improve employment and insurance. While doing so, John Keynes believed that the government’s interventions should focus on improving living standards and reduce inequality which was causing the conflict of class, as well as eliminating cost explosion and dangerous behaviors due to adverse selection by capitalisms. In 1936, Keynes published the General Theory in which he argued that there should be control over investment and endorsed the idea that investors should be carried out by public or semi-public bodies such as the state parastatals to maintain an increased level of employment. According to the welfare state, the unemployment rate was the main problem and root of the evil of market economies.  For example, the concept of welfare state championed for full employment and price control, as well as wages to help act as correction measures to economic cycles that might face any country (McBride " Shields, Dismantling a nation: the transition to corporate rule in Canada, 1997). For instance, a state can use Keynes and Beveridge proposal for full employment and social security where John Keynes argued that government should ensure that there is freedom from an economic problem by transforming human nature, thus the society. In this context, the welfare state as put by Keynes pleads for the government's intervention by the conservative social theory that helps in attaining economic freedom.

In addition, Keynesianism and the welfare state support the principle of employment determination, and assumed that wages should depend on the amount and time of labor, and that one should pay what is worth which is a theory of wealth distribution championed significantly by the neoliberalism (McBride " Shields, Dismantling a nation: the transition to corporate rule in Canada, 1997). Further, the welfare state and the Keynesianism are based on the determination of economic activities using monetary policy such as management of interest rates and fiscal policy aiming at controlling government spending and taxes. Generally, the welfare state ideologies seek to promote collective economic actions as opposed to individualism economic management. To support the development of welfare state, Keynes proposed for the application of marginal product theory of income distribution to enable employees to earn what equivalent to their attributed value to a firm (McBride " Shields, 1997). In Keynes argument, he believed that downward price and nominal wage rigidity was the root cause of unemployment, in which lower nominal wage reduces costs, hence increasing the real volume of money holding that can stimulate consumer spending and aggregate demand. Moreover, he reiterated that lower prices contribute to increased money supply that lowers interest rate and encourages investment spending, thereby lower nominal wages aid to solve unemployment rate.

Conversely, the neoliberalism ideology was based on the theory of income distribution and the aggregate employment determination (McBride, Paradigm shift: globalization and the Canadian state, 2005). The governing liberalism era argued that income distribution depends on production factors such as labor and capital in which the factors get paid what they are worth. The neoliberalism era proposed the application of supply and demand process in which payment of factors of production depends on their scarcity and productivity. Concerning the determination of aggregate employment, this era posits that free markets do not allow valuable factors of production to go into waste, instead adjusts the demand to ensure that all valuable factors are employed. The neoliberalists argue that automatic adjustment of full employment and use of monetary and fiscal policy does not attribute to rising employment, but instead, fuels inflation.

Further, the neoliberalism era operates on the principles of economic and cultural factors in which it was dominated by the formation of trade unions and institutional policies that trigger prosperity at a commercial level. Besides, the cultural level was dominated by individualism and frontiersman image which manifested mostly in American societies.


the other hand, neoliberalism view on employment held that price adjustment creates an opportunity toward full employment. In this context, it was believed that promoting interventions policies to encourage employment will either raise inflation or increase unemployment through destabilization of market process (McBride, Paradigm shift: globalization and the Canadian state, 2005).  For example, the neoliberalism era championed for the abolition of the Keynesian need for activist demand control, but instead adopt policies discretion policy decisions that will let market forces correct the problem. This implies that state can allow the private sector to engage in economic development without putting a lot of restrictions while maintaining their legal role to promote economic growth. This theory was significantly characterized by classical neoliberalism traits that demand that the state's role should be too minimal in supporting an economy. The classical neoliberalism argued that there should be no government intervention or interference with economic activities. During this era, the central principle of the neoliberalism seeks to stabilize labor market deregulation and allow real value of minimum wage to go down while creating a labor market climate in which employment security can thrive.  This era was characterized by classical neoliberalism in which the liberalists believed that state intervention should be minimal or limited to some level.

The liberalists argued that state intervention should be limited to armed forces, law enforcement and provision of other public goods or non-excludable goods which cannot be provided by the private sector. This era was dominated by the principle of laissezz-faire economic policies which aimed at creating economic freedom and absolute democracy as a result of minimal state’s intervention into economic activities (McBride, Paradigm shift: globalization and the Canadian state, 2005). Moreover, correction of the economic cycle can be corrected by developing policies that promote the growth of the private sector to invest without such constraints. Because the unemployment issue remains a threat to current economies, the state can promote capitalism or the growth of unions to support the creation of employment. Therefore, the use of classical neoliberalism and modern liberalism can help in improving the employment rate to create economic freedom. It is true that poverty or the curse of unemployment and the role of private investors in economic development remains the fundamental contributions to economic growth (McBride " Shields, Dismantling a nation: the transition to corporate rule in Canada, 1997). In this context, any economic policy making should be done with consideration for the wellbeing of the citizens and the private investors.

Electoral Systems

The falling levels of participation in key institutions and process of democracy such as voter participation in an election have been one of the factors impeding the development of democracy in many countries before, during and after World War II (Rosenstone, 1982). Some of the factors that undermine voter participation in the election both in countries viewed as having matured democracy and those with/without stable democracy include: demographics, occupation, and level of education, partisanship to strong political parties, election laws, type of elections, electoral competitiveness and civil war among others. Most scholars argued that a combination of any of the above factors has contributed to the falling rate of election turnout globally. Steven J. Rosenstone's “Who Vote?” argued that personal voter traits such as level of education, demographics, socioeconomic status, occupation and partisanship to strong parties have affected voter turnout (Rosenstone, 1982). He alluded that demographic factors such race, gender, age, and economic or educational status has skewed voting participation where males and adults highly participate in voting than the old, females and youths due to lack of knowledge, and poor economic condition that cannot enable them to fund election participation.

 Also, the rise of loud parties that contributed to the development of complex election laws like voter registrations, private registration and other electoral processes that led to increased cost of participation attributes to declining in voter participation activities. According to various scholars, since 1960, there has been a decline in election participation that is characterized by the emergence of strong political parties. These political parties have significant influences on the political partisanship and electoral competitiveness that discourage other people from participating (Rosenstone, 1982). For instance, the issue of gender and race has been vital in the low turnout in electoral participation in America and other parts of the world such as Europe and Africa among others. Lastly, the rise in the civil war in some regions also undermines the electoral process, thus contributing to the dwindling democracy in such countries.

Concerning implementing electoral system reforms, there exist various pros and cons that come along the implementation of any electoral reforms. For instance, in the Canadian case of popularity, proportional representation and mixed popularity, the reforms will focus on issues related to the ballot, election procedures, the number of constituents and candidates, as well as the threshold of determining election winners. According to Trudeau, such reforms will be marked by some benefits and disadvantages related to democracy and the citizens’ wellbeing. Some of the pros include the ease of understanding electoral systems, transparency in the election process, the rise of single majority government to lead to legislative process and creation of strong geographic links with voters (Renwick, 2010). The mixed proportion helps Canada to obtain the number of seats based on the popularity of a party, hence abolishing the system in which a party maintains power due to a third of the popular vote. Also, it will lead to the extinction of the majority government's system and promote coalition to some extent as the caveat only focuses on party votes (Renwick, 2010). However, the cons of these reforms might include low voters’ participation in elections, promoting tactical voting that leads to distorted results and increased challenges relating to nomination process about gender and aboriginal people.

In conclusion, both Keynesianism and neoliberalism concepts have a great idea to develop the economy. However, despite the existence of their strengths and weaknesses about economic stabilization, they should be harmonized to work together. Both modern neoliberalism and Keynesianism provides the fundamental grounds for economic development; hence their applications will contribute to economic growth and creation of employment. Lastly, electoral reforms should only be pursued in a way that it solves the existing political crisis and foster the development of democracy.


McBride, S. (2005). Paradigm shift: globalization and the Canadian state. Halifax, NS: Fernwood.

McBride, S., " Shields, J. (1997). Dismantling a nation: the transition to corporate rule in Canada. Halifax, N.S: Fernwood Pub.

Renwick, A. (2010). The politics of electoral reform: Changing the rules of democracy. Cambridge University Press.

Rosenstone, S. J. (1982). Economic adversity and voter turnout. American Journal of Political Science, 25-46.

Swyngedouw, E. (2005). Governance innovation and the citizen: the Janus face of governance-beyond-the-state. Urban studies, 42(11), 1991-2006.

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