The Evolution of Western Mainstream Economic Thought after World War II and Its Causes

After World War II, major developed economies fully implemented state intervention, and Keynesianism ushered in a golden age of 30 years of western economic growth. Keynesians also combined Keynesian theory with traditional classical economics to form a "neoclassical comprehensive school". Keynesian policy proposition saved the western economy in the great crisis, and its economic theory became the cornerstone of state intervention. However, the excessive implementation of interventionism expanded the national economic function, and the government was heavily in debt, which was hit by the oil crisis in the 1970s and 1980s. Capitalist countries are caught in stagflation and Keynesianism fails. The contradiction between theory and reality triggered the revolution of economics, and monetarism, rational expectation and other schools began to attack Keynesianism, which became the target of public criticism for a time.

With the decline of Keynesianism, the free market trend of thought has come back, and the monetarist school has reshaped the theory of "invisible hand" and formed neoliberalism. Reagan Administration and Thatcher Administration took neoliberalism as the theoretical cornerstone, pushed forward the wave of privatization, and completely broke the economic support framework of western countries after World War II, and Washington's insight pushed this trend to the peak.

The Great Depression declared the bankruptcy of traditional economic liberalism, and economic recovery began to resort to state intervention. The Great Depression provided a broad platform for the development of Keynesianism.