Introduction:

The contribution by Barry Z. Cynamon and Steven M. Fazzari, "The Great Recession and perspectives on Keynesian policy", also places particular emphasis on the role of fiscal policy. The authors suggest that although there has been a shift toward Keynesian thinking, there are deeper lessons from the Great Recession that remain outside the mainstream. The authors argue that modern capitalism has yet to find a general solution to the problem of generating long-run demand growth adequate to fully employed supply-side resources. They develop the theme that demand growth in recent decades, at least in the U.S., came from a spending and borrowing binge of unprecedented magnitude. The Great Recession marks the end of this era. Events since late 2007 raise serious questions about where demand will come from to generate a robust recovery and renewed growth over the longer term. The authors conclude with a proposal for a "Keynesian New Deal" for the 21st century. This paradigm proposes a much more active role for national governments in creating demand growth. They also argue that modern governments, and the citizens they serve, need to adopt a much different perspective on fiscal deficits. This New Deal, however, should not be a blank check for any government project that a vote-seeking politician can dream up in the name of demand stimulus. Cynamon and Fazzari propose the need for a set of institutional structures to channel government activity in directions that shore up demand, enhance productivity, and promote a decent society worthy of the high material living standards achieved by modern capitalism.