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The reason for this is, I suspect, that human history demonstrates over an over again that human nature tends toward accumulation, of power and of money, and that eventually, those who are doing the accumulating tend to consolidate those gains for posterity, and in so doing, are willing (and in fact, they sometimes relish) subjecting fellow men and women to oppression, poverty, insecurity of person and death.
Keynesian theory is all very well, and as a time piece which was the mid-20th century and its attendent crises (note plural, the Great Depression was but one of them) of Capitalism, it served a purpose to extend the interests of Capital in America and in Western Europe by softening the harsh impact of what had heretofore been described as the benevolent invisible hand but which was now shown to be anything but. And if I were to assume a theodiciean perspective on the matter, and ignore human nature, I would likely be inclined to buy this third way which you, and Bill Clinton, and Tony Blair, have been pitching.
Alas, that's not the way the truly Wealthy, those who have inordinate control over allocation of capital, operate. They refuse to pay all but a pittance of their share of taxes and the externalities of their activities. (And why should they? The noblesse levies taxes, they don't pay them.) When the occasion arises (and they lobby much so that it does) they pry open the door of public coffers so as to ensure the public wealth is allocated on projects which further their inordinate share of productive capacity. They demand the right to transmit their wealth, unfettered, to their offspring, as if the right to allocate capital were a Divine right. They minimze the rights and securities of the lower classes by any number of policies (or lack thereof) so as to more efficiently mobilize and motivate tax-disadvantaged labor and thereby increase their tax-advantaged rents. Fear of unemployment, fear of poverty, fear of loss of access to health care, fear of loss of access to upward mobility for one's children via education - all great motivators. Add fear of starvation for those folks in the "South" whose livelihoods your multinational corporations are destroying, then see them migrate "North" and further feed the merciless circle of insecurity for the poor in the "North". And if you've a middle-class person still posing a principle-agent problem for your labor efficiency paradise whose returns accrue not to laborers, but shareholders, there's always debt to get 'em on the hook, not to mention screwing with the pensions so as to simulate, for them, that your interests are effectively theirs.
That's the nature of the system which Keynesian policies seek to tweak around the edges, and if you're living in America, we've seen now for 30 years what it really means. In my relatively affluent city, despite the wonders of the Clintonian economy which liberal myth describes as a tide which lifted all boats, there are three times more homeless people than in 1980.
I respectfully submit that we forget about the tweaking, throw the whole damn thing out.
One last note - Friedman's work, as others, on what sorts of combinations of stimuli, both monetary of fiscal, might have cushioned the unnecessarily harsh blow of the economic crises of the 1920's and 1930's, are well taken to heart, for it is true that monetary policy in particular was horrendously bad in the aftermath of the crash.
This being said, let's not forget two things. First, while disasterous, at least as far as the US experience show (France having a bit different a history), industrialists, in large part via the supreme court their political clients had installed, fought what little stimulus was attempted tooth and nail. Why? Because that is the way such classes tend to define their interests, and this hasn't changed. And second, we are always prepared for the crisis which last took place, but rarely do the next ones, those momentous enough to knock the shit out of the political systems of numerous countries simulatenously, look the same as the previous ones.
Whether the welfare system can survive in Europe, on the other hand, is an entirely different question. It most certainly can. Whether it will, on the other hand, depends on whether the continent has the balls that the English have shown themselves, via Blair, so sorely lacking. One thing's for sure - the neo-liberal drift in many parts of the continent do not bode well for its prospects.
The Hun is always either at your throat or at your feet.
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