Keynes Explains Why Government Intervention in Economy Preserves Individualism

"For if effective demand is deficient, not only is the public scandal of wasted resources intolerable, but the individual enterpriser who seeks to bring these resources into action is operating with the odds loaded against him. The game of hazard which he plays is furnished with many zeros, so that the players as a whole will lose if they have the energy and hope to deal all the cards Hitherto the increment of the world's wealth has fallen short of the aggregate of positive individual savings; and the difference has been made up by the losses of those whose courage and initiative have not been supplemented by exceptional skill or unusual good fortune. But if effective demand is adequate, average skill and average good fortune will be enough.
The authoritarian state systems of to-day seem to solve the problem of unemployment at the expense of efficiency and of freedom.... [T]he world will not much longer tolerate the unemployment... associated with present-day capitalistic individualism. But it may be possible by a right analysis of the problem to cure the disease whilst preserving efficiency and freedom..."

In this paragraph Keynes positions Capitalism, supplemented by government intervention during recession, as the way to preserve the efficiency and individualism of capitalism without resorting to state controlled economies. In his view, the portion of income that is saved rather than spent, must be invested by business in order to have a full-employment economy. A depression wastes human resources and capital resources when they are unused. Moreover, business investment is risky in a period of weak aggregate demand. It requires great business skill to make a profitable investment in a recession. When there is adequate aggregate demand, profitable investments can be made with average skill. Keynes's solution to the problem of recession is to have government absorb the uninvested savings by borrowing the savings and investing them in public goods.

When the the Democrats are in power the GOP plays the role of fiscal cop in recessions. They raise concerns about waste in government, high taxes, and the specter of socialism as the opposition party. When they are in power they tell a different story. They run budget deficits to stimulate the economy even when there is no recession. They give tax cuts to their real base and they pay for the tax cuts by borrowing instead of by cutting spending. That is what happened under Reagan and in the Bush administration. Keynes, of course, only argued for budget deficits in recession.