Page 22 - Azerbaijan State University of Economics

Noralv Veggeland: New Keynesian political economic policies

The reasons for this are many, but one sure reason is that Norwegian social
democracy still lacks a basic economical alternative to the anti-statist [Veggeland,
N. 2015] neo-classical economic theory and policy, ideology manifests itself as what
is called neoliberalism. Against this theory and policy is today a theory and policy
approach referred to as neo-Keynesian. For social democracy, this policy approaches
as an option. As the name suggests, it builds on the economist Keynes's momentous
theory from 70 years back
One of the main elements of John Maynard Keynes' major theory, "General
Theory of Employment, Interest and Money" in 1936 in response to the inter-war
depression and employment crisis, the need for States in times of crisis to "fill the
hole" in the lack of overall demand rising, in particular demand for labor. In the
thirties was 1/3 of the workforce available in Norway. Keynes' theory formed the
basis for Norwegian Keynesian policy in the postwar years with the goal of full
employment, which we got. Keynes pointed out that effective demand must be
achieved by the government as it spends more money than what comes in through
tax revenues. Bringing the public deficit in a period without provisions but the
damaging effect of this is surpassed as the employment rate increases with
increasing value creation as a consequence.
A new Keynesianism, based on the classic Keynesian theory, stressing the
need for increased governmental, institutional and economic interventions as
unemployment rises and the recession occurring nationally and internationally.
While the classic variant designed for national policy is neo-Keynesianism besides
targeting international crisis measures [Binder, A.S. 2014 ], such as an action under
the auspices of the EU and its Central Bank (ECB)
Under the classic Keynesian models is the government intervention intended
to spur long-term changes resulting from a national stagnation period. They are
intended in an economic recession to create a macroeconomic balance between
supply and demand with the government‟s help. Keynes focused the large cyclical
fluctuations of capitalism, not the microeconomic fluctuations in institusjonell- and
enterprise level, such approach emphasizes neo-Keynesianism. Inspired by neo-
Keynesian thinking was the government countercyclical policy adopted in the
United States. When the financial crisis came in 2007 with rising unemployment to
more than ten percent as a consequence, granted the federal government the
staggering sum of $ 800-trillion dollar stimulus and demand measures. The goal was
to create macro- and microeconomics demand to reverse the trend back toward
normal economic growth. In 2016, unemployment as a result of this governmental
intervention just over five percent.

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