ntrod     tion      1.7
     and wages are not flexible enough to provide        supplying some basic goods and services which
     employment to all. It means there will be some      are known as ‘public goods’. These goods basically
     people unemployed when the economy will be          intended to guarantee minimum level of nutrition
     at its full potential. Ultimately, a fall in demand to all, healthcare, sanitation, education, social
     will be imminent resulting in recession and if      security, etc. The expenditure on public goods
     unchecked, in depression which happened in          were incurred on the public exchequer even if it
     1929. Questioning the limitations of the market     required deficit financing. Starting from 1930s
     mechanism, Keynes suggested strong government       upto 1950s, almost 50 per cent of the GDP in
     intervention in the economy. To get the economy     the Euro-America was spent by the governments
     out of the depression, he suggested an increase     on public goods which also become popular as
     in government expenditures, discretionary fiscal    the social sector. The essential goods and services
     policy (fiscal deficit, lower interest rates, cheap which were till date being purchased by the people
     money supply, etc.) to boost the demand of goods    as ‘private goods’, were soon made available by
     and services as this was the reason behind the      the state ‘free-of-costs’, giving people more spare
     depression. As Keynesian policies were followed,    money to create demand for the goods and services
     the concerned economies were successfully pulled    which were part of the market.
     out of the Great Depression.                             The above instance has been cited here just to
          While Keynes was inquiring into the causes     show the process as to how capitalism redefined
     and cures of the Great Depression he questioned     itself by including some useful traits of the non-
     the capitalist economic system being practised      market economy, i.e., the state economy. The
     throughout Euro-America. He suggested the           mixed economy arrived in this way and the
     capitalistic order to assimilate the goals of the   classical capitalistic economy was challenged by it.
     socialistic economy (economic ideals of the
                                                              On the margins of these developments, it is
     socialists, i.e., the ex-USSR). In the capitalist
                                                         interesting to note the developments that occured
     economies of the time, all the basic goods and
                                                         in the state economies of the time. It was Oscar
     services were part of the market mechanism, i.e.,
                                                         Lange (1904–65), the Polish philosopher,
     being produced and supplied by the private sector.
                                                         who in 1950s suggested the same things for the
     It meant that almost everything the people required
                                                         socialist economy as Keynes had suggested for
     was supplied by the private enterprises via the
                                                         the capitalist economy. Lange praised the state
     market which was ultimately an undimensional
                                                         economy for many of its good things, but also
     movement of money and wealth (from the mass of
                                                         suggested inclusion of some of the good things
     people to the few who controlled the production
                                                         of the capitalistic economy.3 He advised the
     and supply chain) and the masses were going
                                                         state economies to adopt ‘market socialism’ (the
     through the process of pauperisation every day,
     thereby weakening their purchasing power. In the    term was coined by him). His suggestions were
     end, it affected overall demand and culminated in   outrightly rejected by the state economies as such
     the Great Depression.                               compromises in the socialistic economic order
                                                         were blasphemous at that time (this was taken as a
          As a follow up to the Keynesian advices, many
                                                         suggestion towards democracy from dictatorship).
     trendsetting economic policies were initiated
     throughout the capitalist economies. One very            As Keynes has suggested that the capitalist
     important initiative which came out was the         economy should move few steps towards socialistic
     government’s active role in the economy. The           3.   Galbraith, J.K., A History of Economics, Penguin
     governments of the time started producing and               Books, London, 1991, pp. 188–89.