The Keynesian revolution replaced the Classical view by the notion that the economy was inherently unstable but that its fluctuations could be reduced by destabilising the government’s budget to create deficits in recession and surpluses during inflation. This grafting of Keynesian economics onto political democracy fundamentally weakened the British fiscal constitution by removing its lynchpin: the balanced-budget rule.

The implicit assumption underlying the Keynesian fiscal revolution was that economic policy would be made by wise men, acting without regard to political pressures or opportunities, and guided by disinterested economic technocrats. The fundamental flaw was the unrealistic assumption about political, bureaucratic and electoral behaviour.

Download the Greek translation here.

Fullscreen Mode