Keynesian policies are inflicting untold damage on the U.S. and global economies today. Things did not have to be this way; Keynes did not have to be misread. His antidote for slow economic growth and high unemployment – massive doses of government spending – was appropriate in midst of the 2007-8 financial crisis, just as it was sensible during the 1930s global depression that Keynes was experiencing while he was writing The General Theory. In end of world scenarios, government spending is the last resort. But once the economy stabilizes – even at a diminished rate of growth - Keynesian medicine will cripple the patient if it is not withdrawn and replaced with a healthy fiscal regimen. Unfortunately, policymakers – in particular the current and past Chairmen of the Federal Reserve – have shown themselves to be either unwilling or incapable of making the transition from crisis management to post-crisis management of monetary policy. As a result, today’s Federal Reserve is missing the second great lesson of Keynes’ work, the “paradox of thrift.”

WASHINGTON — A rift has emerged within the Democratic Party between liberal economists, who generally view the 2009 stimulus package as a success and say that Keynesian economics should remain the heart of the party’s economic policy, and elected officials, who in growing numbers have shunned affiliation with the $787 billion effort and are expressing doubts about the effectiveness of fiscal intervention.

Three factors caused the recent near-collapse of global finance, Skidelsky suggests: “banks mutated from utilities into casinos”, there was an intellectual failure of mainstream economics and a moral failure of worshipping growth for its own sake.

Whenever there is a serious economic crisis, as there obviously is at the moment, and the ruling class responds, as it always does, with vicious cuts and mass unemployment, the working class movement faces a choice.

Part of the reason for the continued influence of Keynesian ideas is that his followers managed to establish an iron grip on academia that remains to this day. One only has to look through the standard economics course syllabi and associated textbooks to see this: students are taught a \"Cowboys and Indians\" Keynes vs Friedman debate that is, in essence, still strongly Keynesian in its underlying assumptions.

The third and final volume of Robert Skidelsky\'s celebrated Keynes biography, John Maynard Keynes: Fighting for Britain, 1937-1946 (New York: Viking Press, 2001) has just been published, to rave reviews. Like its predecessors, this volume makes no mention of Keynes\'s uncritical praise of Stalinist Russia in 1936.

Once one sees Keynes\'s underlying premise, his system loses its plausibility. He, like many critics of the market, has constructed for himself a utopia \"that never was, on sea or land,\" and has used this to find capitalism deficient. Judged by ordinary standards, capitalism has not been shown to stand in danger of \"unemployment equilibrium.\" Only on the basis of his unsupported claim that a radically better economic system is in the offing does his indictment of the free market make sense. Small wonder that Mises mocked Keynes\'s pretensions to perform the miracle of turning stones into bread.