The British economist whose General Theory of Employment, Interest and Money (1936) — written in response to the Great Depression — argued that market economies are not self-correcting and that governments must use fiscal policy to stabilize aggregate demand, thereby founding modern macroeconomics, justifying the postwar welfare state, and providing the intellectual framework for economic management in every advanced democracy.
Before Keynes, the conventional wisdom said governments should balance their budgets during recessions — that deficit spending would crowd out private investment and prolong the downturn. One in four Americans was unemployed and the conventional wisdom said: wait. Keynes said the conventional wisdom was wrong in precisely the conditions that made it most dangerous. His argument — that in a depression, government spending creates its own income, that the economy can be stuck in a bad equilibrium that only public action can break — changed how every democratic government thinks about its economic responsibilities.