In a state of full employment, combined demand and combined supply are brought into equality through the movement of prices relative to prime costs, for example the relativity of prices to wages. The Keynesian model gave rise to the welfare state which meant that the government had to have a social development policy where the government was responsible for providing education, housing, a proper health care system and social security for poor people. Although this model focused on the social welfare system, it also embraced the expansionary fiscal policy through taxation.
Keynes argued that regimes should resolve problems in the short run rather than postpone until the market forces fixes things over the …show more content…
He therefore debates that the now more economically developed countries have not developed as a result of the similar policies neoliberalism currently commends to the LEDC’s. State is viewed as a root of lack of development according to neoliberalism in society because it prevents competition and economic growth. Neoliberals also maintain that when governments get too large, they curb the freedom of self-motivated individuals who drive development forward. Neoliberals present evidence for their arguments, Marxist governments in Eastern Europe for example, although these regimes forced through industrialisation, they would not allow people enough freedom to bring about the kind of user based culture based on individual freedom of choice and expression that emerged in Western Europe in the 1960s, so development declined in those countries because of regimes having too much