What can Keynes Tell Us about Policies to Reduce Unemployment and Financial Instability in a Globalised International Economy?

Abstract

Although Keynes’ General Theory has no discussion of trade and capital flows, almost all of Keynes’ writing prior to the General Theory deal with these issues. Indeed, almost all of Keynes’ writing prior to the General Theory deal with the appropriate exchange rate, the impact of external competition on domestic conditions, and the role of international investment. These contributions provided the basis for his proposals for a new international financial architecture that eventually created the Bretton Woods System. This paper seeks to use Keynes’ early discussion of these issues and his proposals for policies to ensure financial stability as a basis for full employment policies to argue that they still provide a basis for policies to support full employment both domestically and at the global level. His proposals for reform of the international financial system are also discussed as a background for a reform of the international financial architecture that has as its objectives increased financial stability and support of policies to establish full employment.