Keynes himself was closely related to Bloomsbury, London, and was intoxicated with the atmosphere that changed people's minds. It was this experience and the signing of the Treaty of Versailles that made him finally decide to break away from the traditional theory. 1920, he wrote the article "Economic Consequences of Peace", in which he not only expounded the overall economic consequences of the Treaty of Versailles in his view, but also established his position as an economist with practical political experience and able to influence national decision-making.
In 1930s, Keynes published a series of articles on the role of state power and the overall economic trend, and developed the theory that monetary policy is not just a fixed reference. He is more and more convinced that the economic system will not automatically follow a curve, which is the so-called optimal production level in economics. But he found neither evidence nor a way to express these ideas.
In the late 1930s, the global economic system began to impact Britain, which was at the center at that time. In order to take advantage of its competitive advantage, Britain imports food and other low-value goods from other places in accordance with the free trade policy, and uses the saved labor force to manufacture high-value goods for export. The application of Ricardo's comparative advantage theory made Britain reach the peak of its empire, controlling India, Egypt and the vast colonies, as well as Canada, Australia and other allies different from Britain economically and militarily.
With the collapse of German economy, the arrival of hyperinflation and the global production recession later known as the Great Depression, criticisms of the gold standard, the characteristics of automatic economic adjustment and the production-driven economic model began to surface. Dozens of different schools compete for novelty and beauty. It is in this situation that Keynes spread a simple view: The Great Depression was caused by a wave of speculation in the fields of production and investment in the 1930s, when factories and transportation networks far exceeded individuals' ability to pay. The emphasis on "insufficient demand" and the form he created to allow the government to regulate the key components of the economy made many young economists at that time accept his theory and methods.
There are also many economists who oppose his theory, arguing that the root cause of depression is not lack of demand, but lack of confidence in business; Therefore, the correct approach should be to cut government spending, so as to restore confidence in returning to the gold standard.
Under the background, Keynesian economics is the direct product of the Great Depression in 1930s and the inevitable product of state monopoly capitalism. The historical background of the rise of neo-liberal economics is that since the late 1960s, the western economy has entered the stage of stagnation and expansion from the prosperous stage in the early postwar period, which Keynesianism cannot explain.