Abstract

Are Keynesian policies doomed? The experience of both Chirac and Mauroy might make one think so. Yet too severe a judgment would overlook an important counter-example: the actual economic recovery in the United States. As happened under the Kennedy-Johnson administration 20 years ago, the United States is experiencing a recovery that follows the textbook precepts of Keynesianism: an increase in military spending and a decrease in taxes, all of which is accompanied by (as predicted by the theory) an increase in the interest rate and the deficit. Yet, the 20-year gap that separates these two prime examples of American Keynesianism reveals an essential difference. At the beginning of the 1960s, Keynesianism was the dominant theory to which the Democratic administration referred. Now, in the mid-1980s, Keynesian theory is hidden