What does the collaspe of the Soviet Union's economy tell us about Keynes's philosophy?

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pohnpei397 eNotes educator| Certified Educator

In your previous questions, you were asking about Keynes and Hayek so I will answer this question in that context.  The collapse of the Soviet Union can be used to argue that Hayek's arguments are correct and those of Keynes are not.

Keynes believed that government planning of the economy could work.  He believed that the government could, for example, use fiscal policy to get its economy out of recessions.  Other Keynesians expanded on this and concluded that government planning such as was being done in the Soviet Union was practical and sustainable.

By contrast, Hayek did not believe that government planning could ever work.  He felt that it would inevitably lead to a collapse of the economy.  The Soviet economy fell apart because the government was not able to run it efficiently enough to keep up with the US in both military and consumer goods at the same time.  This can be seen as proof that Hayek was correct and that Keynes was wrong.

From this point of view, the collapse of the Soviet Union tells us that Keynes's ideas were wrong.

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