This essay will outline key differences in economic policy between Keynesian and Neoliberal theory, examined by their effect on social policies in Australia. The scope of the essay is comparison between Keynesian Australia, particularly in years following the Great Depression, and Neoliberal Australia post 1975. In the years after the Second World War, successive governments adopted the Keynesian theory that the economy will not natural stabilise but requires government intervention to maintain sufficient prosperity. Similarly, government social policy considered unemployment and individual welfare as the responsibility of the government. In contrast, Neoliberal governments took the approach that the economy will naturally maintain its peak over time, adopting social policies which prioritised privatisation and individual responsibility in the form of ‘mutual obligation’.
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Keynesian economic theory dictates that in times of recession the economy may not naturally return to a state of full employment and the government must step in and utilise fiscal policy to stimulate economic growth and thus employment (Sheehan 2009, p.239). This is demonstrated in the 1945 government White Paper on Employment which states “When employment tends to decline, resources can be usefully employed to embark on developmental work and to improve the collective capital equipment of the community”(Gollan 1969, p.183). Macintyre (1999, p.109) explains that this meant the state accepted increasing responsibility and involvement in “the regulation and oversight of the economic structures”. This is demonstrated by the introduction of the Snowy Mountains Scheme which generated large scale employment by damming rivers to create hydroelectric plants. As Carson and Kerr (2013, p.55) explain this scheme ran for 5 years and employed thousands of
Keynesian economic theory dictates that in times of recession the economy may not naturally return to a state of full employment and the government must step in and utilise fiscal policy to stimulate economic growth and thus employment (Sheehan 2009, p.239). This is demonstrated in the 1945 government White Paper on Employment which states “When employment tends to decline, resources can be usefully employed to embark on developmental work and to improve the collective capital equipment of the community”(Gollan 1969, p.183). Macintyre (1999, p.109) explains that this meant the state accepted increasing responsibility and involvement in “the regulation and oversight of the economic structures”. This is demonstrated by the introduction of the Snowy Mountains Scheme which generated large scale employment by damming rivers to create hydroelectric plants. As Carson and Kerr (2013, p.55) explain this scheme ran for 5 years and employed thousands of