Page 24 - Azerbaijan State University of Economics

Noralv Veggeland: New Keynesian political economic policies

European social democrats, such as the Norwegian Labor Party, and realized the
successful policy of the first decades after World War II. The policy built in an
active state, the state institutional, and economic interventions, social cohesion and
increased public spending. For Keynes, this was necessary for a capitalist economy
in crisis to restore and preserve the long term an aggregate effective demand and
purchasing power with full employment as a goal. How could both unemployment
and inflation be established at a low and stable level? The development of the
Norwegian Keynesian welfare state in post-war years with universal rights,
politically led by social democracy by AP, was an important element in the policy of
maintaining stable effective demand in the economy as a whole. While social
democracy could realize their ideas about social and economic cohesion and justice
[Nyseter, T. 2015].
Before Keynes dominated neo-classical liberal economic policies with an
emphasis on public austerity, small government, and privatization. This should cure
between postwar economic depression. Therefore, Keynes with their theories of an
active state, in the beginning, gain a little attention, because he so disagrees with the
classical liberal economic theory of policy tightening and a retracted state. In our
time ruler also tightening and privatization policy in response to the EU / EEA area's
financial crisis (which Norway is a part) and Eurozone debt crisis. Most clearly, the
negative impact of this tightening and privatization policy in crisis-hit Greece and
other Mediterranean countries. In Norway, pushing the blue government neoliberal
approach to the problem of rising unemployment and migration crisis in direction;
public austerity and privatization. The blue government neoliberal ideological stance
and policy background for it.
In the international orthodox neo-classical setting is Stiglitz and Krugman as
little attention as Keynes was in the beginning. The practical reforms that logically
follows their neo-Keynesian ideas and theories have sometimes drastic
consequences, as seen in a neoliberal perspective. It would mean the liquidation of
the privatization program and the return of privatized physical infrastructure such as
railways, water, telecommunications, and social infrastructures such as
kindergartens, schools, care of the state as owner and operator. It will mean
extensive regulation of the financial sector, tax reforms, and financial transfers with
the aim of social cohesion for greater purchasing power and justice, and finally with
the possible increase in public spending as a consequence.
The primary disagreement between new classical liberal and neo-Keynesian
economists with Stiglitz and Krugman is, how quickly price and income (purchasing
power) aligns itself in the market? The neo-classical economists assume that this
happens in a flexible way, the supply and demand balances by themselves (invisible

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