Following in the footsteps of John Maynard Keynes, most economists hold that one cannot have complete trust in a market economy, which is seen as inherently unstable. If left free, the market economy could lead to self-destruction. Hence, there is the need for the government and central bank to manage the economy. Successful management, in the Keynesian framework, is done by influencing overall spending.
According to this framework, it is spending that generates income. Spending by one individual becomes the income of another individual. Hence, the more that is spent, the greater the overall societal income is going to be. Spending, therefore, drives the economy. If, during a recession, consumers fail to spend enough, then it is the role of the government to step in and boost overall spending in order to grow the economy.
Funding and Economic Growth
What is missing in the Keynesian story is the subject matter of funding. Where does the funding originally come from? For instance, a baker produces ten loaves of bread out of which he consumes two loaves. The saved eight loaves of bread he exchanges for a pair of shoes with a shoemaker. In this case, the baker funds the purchase of shoes by means of the saved eight loaves of bread. The funding of his consumption has to be produced first.
The author concludes, along with other Austrians, that you have to produce before you consume and the government does nothing to produce anything, at all. He is also saying that recessions and depressions clear out most Malinvestment from the economy generated by the government fiddling with money supply. He concludes that a recession would, if treated correctly, set the economy on the right path again.