In short, the success of macroeconomic activism, in both theory and practice, has made it possible for free market microeconomics to survive--again b… - Paul Krugman

The kind of economic trouble that Asia experienced a decade ago, and that we're all experiencing now, is precisely the sort of thing we thought we had learned to prevent. In the bad old days big, advanced economies with stable governments-like Britain in the 1920s-might have had no answer to prolonged periods of stagnation and deflation; but between John Maynard Keynes and Milton Friedman, we thought we knew enough to keep that from happening again.

The usual and basic Keynesian answer to recessions is a monetary expansion. But Keynes worried that even this might sometimes not be enough, particularly if a recession had been allowed to get out of hand and become a true depression. Once the economy is deeply depressed, households and especially firms may be unwilling to increase spending no matter how much cash they have, they may simply add any monetary expansion to their board. Such a situation, in which monetary policy has become ineffective, has come to be known as a ""; Keynes believed that the British and American economies had entered such a trap by the mid-1930s, and some economists believed that the United States was on the edge of such a trap in 1992.
The Keynesian answer to a liquidity trap is for the government to do what the private sector will not: spend. When monetary expansion is ineffective, fiscal expansion—such as public works programs financed by borrowing—must take its place. Such a fiscal expansion can break the vicious circle of low spending and low incomes, "priming the pump: and getting the economy moving again. But remember that this is not by any means an all-purpose policy recommendation; it is essentially a strategy of desperation, a dangerous drug to be prescribed only when the usual over-the-counter remedy of monetary policy has failed.

First, most of the speculation about the superiority of the communist system - including the popular view that Western economies could painlessly accelerate their own growth by borrowing some aspects of that system - was off base. Rapid growth was based entirely on one attribute: the willingness to save, to sacrifice current consumption for the sake of future production. The communist example offered no hint of a free lunch.
Second, the economic analysis of communist countries' growth implied some future limits to their industrial expansion - in other words, implied that a naive projection of their past growth rates into the future was likely to greatly overstate their real prospects. Economic growth that is based on expansion of inputs, rather than on growth in output per unit of input, is inevitably subject to diminishing returns. It was simply not possible for the Soviet economies to sustain the rates of growth of labor force participation, average education levels, and above all the physical capital stock that had prevailed in previous years. Communist growth would predictably slow down, perhaps drastically.