| John Maynard Keynes |
|---|
Keynes in 1933
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| Born | 5 June 1883
Cambridge, Cambridgeshire, England |
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| Died | 21 April 1946 (aged 62)
Tilton, near Firle, Sussex, England |
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| Ethnicity | English |
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| Institution | King's College, Cambridge |
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| Field |
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School or
tradition | Keynesian economics |
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| Alma mater |
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| Influences | Adam Smith, Thomas Malthus,Alfred Marshall, Arthur Pigou,Nicholas Johannsen, Knut Wicksell, Piero Sraffa, John Neville Keynes |
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| Influenced | John Kenneth Galbraith, Paul Samuelson, John Hicks,Nicholas Kaldor, Joan Robinson, Hyman Minsky,Amartya Sen, Abba Lerner,Franco Modigliani, James Tobin Robert Solow, Ha Joon Chang, Joseph Stiglitz, Steve Keen, Paul Krugman, Robert Shiller, George Akerlof, Brad DeLong, Thomas Piketty,Yanis Varoufakis, Robert Reich, Zhou Xiaochuan,Wolfgang Stützel, Mariana Mazzucato, Robin Hahnel,Axel Leijonhufvud, Manmohan Singh, New Keynesian economics, Post-Keynesian economics |
|---|
| Contributions |
|
|---|
John Maynard Keynes, 1st Baron Keynes,
[1] CB,
FBA (
kaynz; 5 June 1883 – 21 April 1946), was an
English economist whose ideas fundamentally changed the theory and practice of
macroeconomics and the economic policies of governments. He built on and greatly refined earlier work on the causes of
business cycles, and is widely considered to be one of the most influential economists of the 20th century and the founder of modern macroeconomics.
[2][3][4][5] His ideas are the basis for the
school of thoughtknown as
Keynesian economics and its various offshoots.
Following the outbreak of
World War II, Keynes's ideas concerning economic policy were adopted by leading Western economies. Keynes died in 1946; but, during the 1950s and 1960s, the success of Keynesian economics resulted in almost all
capitalistgovernments adopting its policy recommendations. Keynes's influence waned in the 1970s, partly as a result of problems with
inflation that began to afflict the
Anglo-American economies from the start of the decade and partly because of critiques from
Milton Friedman and other economists who were pessimistic about the ability of governments to regulate the business cycle with fiscal policy.
[7] However, the advent of the global
financial crisis of 2007–08 caused a
resurgence in Keynesian thought. Keynesian economics provided the theoretical underpinning for economic policies undertaken in response to the crisis by President
Barack Obama of the United States, Prime Minister
Gordon Brown of the United Kingdom, and other heads of governments.
[8]
Early life and education[edit]
King's College, Cambridge. Keynes's grandmother wrote to him saying that, since he was born in Cambridge, people will expect him to be clever.
According to the economist and biographer
Robert Skidelsky, Keynes's parents were loving and attentive. They remained in the same house throughout their lives, where the children were always welcome to return. Keynes would receive considerable support from his father, including expert coaching to help him pass his scholarship exams and financial help both as a young man and when his assets were nearly wiped out at the onset of
Great Depression in 1929. Keynes's mother made her children's interests her own, and according to Skidelsky, "because she could grow up with her children, they never outgrew home".
[12]
In January 1889, at the age of five and a half, Keynes started at the kindergarten of the
Perse School for Girls for five mornings a week. He quickly showed a talent for arithmetic, but his health was poor leading to several long absences. He was tutored at home by a governess, Beatrice Mackintosh, and his mother. In January 1892, at eight and a half, he started as a day pupil at
St Faith's preparatory school. By 1894, Keynes was top of his class and excelling at mathematics. In 1896, St Faith's headmaster, Ralph Goodchild, wrote that Keynes was "head and shoulders above all the other boys in the school" and was confident that Keynes could get a scholarship to Eton.
[12][13][14][15][16][17][18][19][20][21][22][23]
In 1897, Keynes won a scholarship to
Eton College, where he displayed talent in a wide range of subjects, particularly mathematics,
classics and history. At Eton, Keynes experienced the first "love of his life" in Dan Macmillan, older brother of the future Prime Minister
Harold Macmillan.
[24] Despite his middle-class background, Keynes mixed easily with upper-class pupils. In 1902 Keynes left Eton for
King's College, Cambridge, after receiving a scholarship for this also to read mathematics.
Alfred Marshall begged Keynes to become an economist,
[25] although Keynes's own inclinations drew him towards philosophy – especially the ethical system of
G. E. Moore. Keynes joined the
Pitt Club[26] and was an active member of the semi-secretive
Cambridge Apostles society, a debating club largely reserved for the brightest students. Like many members, Keynes retained a bond to the club after graduating and continued to attend occasional meetings throughout his life. Before leaving Cambridge, Keynes became the President of the
Cambridge Union Society and
Cambridge University Liberal Club. He was said to be an atheist.
[27][28]
In May 1904, he received a first class B.A. in mathematics. Aside from a few months spent on holidays with family and friends, Keynes continued to involve himself with the university over the next two years. He took part in debates, further studied philosophy and attended economics lectures informally as a graduate student for one term, which constituted his only formal education in the subject. He also studied for
Tripos in 1905 and, the following year took civil service exams.
The economist
Harry Johnson wrote that the optimism imparted by Keynes's early life is a key to understanding his later thinking.
[29] Keynes was always confident he could find a solution to whatever problem he turned his attention to, and retained a lasting faith in the ability of government officials to do good.
[30] Keynes's optimism was also cultural, in two senses: he was of the last generation raised by an empire still at the height of its power, and was also of the last generation who felt entitled to govern by culture, rather than by expertise. According to
Skidelsky, the sense of cultural unity current in Britain from the 19th century to the end of World War I provided a framework with which the well-educated could set various spheres of knowledge in relation to each other and to life, enabling them to confidently draw from different fields when addressing practical problems.
[12]
In October 1906, Keynes's
Civil Service career began as a clerk in the
India Office. He enjoyed his work at first, but by 1908 had become bored and resigned his position to return to Cambridge and work on
probability theory, at first privately funded only by two
dons at the university – his father and the economist
Arthur Pigou. By 1909 Keynes had published his first professional economics article in the
Economics Journal, about the effect of a recent global economic downturn on India.
[31] Also in 1909, Keynes accepted a lectureship in economics funded personally by
Alfred Marshall. Keynes's earnings rose further as he began to take on pupils for private tuition. On being elected a fellow in 1911 Keynes was made editor of
The Economic Journal. By 1913 he had published his first book,
Indian Currency and Finance.
[32] He was then appointed to the
Royal Commission on Indian Currency and Finance
[33] – the same topic as his book – where Keynes showed considerable talent at applying economic theory to practical problems. His written work was published under the name "J M Keynes", though to his family and friends he was known as Maynard.(His father, John Neville Keynes, was also always known by his middle name).
[34]
First World War[edit]
The British Government called on Keynes's expertise during the
First World War. While he did not formally re-join the civil service in 1914, Keynes travelled to London at the government's request a few days before hostilities started. Bankers had been pushing for the suspension of
specie payments – the
convertibility of
banknotes into gold – but with Keynes's help the
Chancellor of the Exchequer (then
Lloyd George) was persuaded that this would be a bad idea, as it would hurt the future reputation of the city if payments were suspended before absolutely necessary.
In January 1915, Keynes took up an official government position at the
Treasury. Among his responsibilities were the design of terms of credit between Britain and its continental allies during the war, and the acquisition of scarce currencies. According to economist
Robert Lekachman, Keynes's "nerve and mastery became legendary" because of his performance of these duties, as in the case where he managed to assemble – with difficulty – a small supply of Spanish
pesetas. The secretary of the Treasury was delighted to hear Keynes had amassed enough to provide a temporary solution for the British Government. But Keynes did not hand the pesetas over, choosing instead to sell them all to break the market: his boldness paid off, as pesetas then became much less scarce and expensive.
[35] In the 1917 King's
Birthday Honours, Keynes was appointed
Companion of the Order of the Bath for his wartime work,
[36] and his success led to the appointment that would have a huge effect on Keynes's life and career; Keynes was appointed financial representative for the Treasury to the 1919
Versailles peace conference. He was also appointed Officer of the Belgian
Order of Leopold.
[37]
Versailles peace conference[edit]
Keynes's colleague,
David Lloyd George. Keynes was initially wary of the "Welsh Wizard," preferring his rival
Asquith, but was impressed with Lloyd George at Versailles; this did not prevent Keynes from painting a scathing picture of the then-prime minister in his
Economic Consequences of the Peace.
Keynes's experience at
Versailles was influential in shaping his future outlook, yet it was not a successful one for him. Keynes's main interest had been in trying to prevent
Germany's compensation payments being set so high it would traumatise innocent German people, damage the nation's ability to pay and sharply limit her ability to buy exports from other countries – thus hurting not just Germany's own economy but that of the wider world. Unfortunately for Keynes, conservative powers in the coalition that emerged from the
1918 coupon election were able to ensure that both Keynes himself and the Treasury were largely excluded from formal high-level talks concerning reparations. Their place was taken by the
Heavenly Twins – the judge
Lord Sumner and the banker
Lord Cunliffe whose nickname derived from the "astronomically" high war compensation they wanted to demand from Germany. Keynes was forced to try to exert influence mostly from behind the scenes.
The three principal players at Versailles were Britain's Lloyd George, France's
Clemenceau and America's
President Wilson.
[38] It was only Lloyd George to whom Keynes had much direct access; until the 1918 election he had some sympathy with Keynes's view but while campaigning had found his speeches were only well received by the public if he promised to harshly punish Germany, and had therefore committed his delegation to extracting high payments. Lloyd George did however win some loyalty from Keynes with his actions at the Paris conference by intervening against the French to ensure the dispatch of much-needed food supplies to German civilians. Clemenceau also pushed for substantial reparations, though not as high as those proposed by the British, while on security grounds, France argued for an even more severe settlement than Britain. Wilson initially favoured relatively lenient treatment of Germany – he feared too harsh conditions could foment the rise of extremism, and wanted Germany to be left sufficient capital to pay for imports. To Keynes's dismay, Lloyd George and Clemenceau were able to pressure Wilson to agree to include pensions in the reparations bill. Towards the end of the conference, Keynes came up with a plan that he argued would not only help Germany and other impoverished central European powers but also be good for the world economy as a whole. It involved the radical writing down of war debts, which would have had the possible effect of increasing international trade all round, but at the same time thrown the entire cost of European reconstruction on the United States. Lloyd George agreed it might be acceptable to the British electorate. However, America was against the plan; the US was then the largest creditor, and by this time Wilson had started to believe in the merits of a harsh peace and thought that his country had already made excessive sacrifices. Hence despite his best efforts, the end result of the conference was a treaty which disgusted Keynes both on moral and economic grounds, and led to his resignation from the Treasury.
[39]
In June 1919 he turned down an offer to become chairman of the
British Bank of Northern Commerce, a job that promised a salary of £2000 in return for a morning per week of work.
Keynes's analysis on the predicted damaging effects of the treaty appeared in the highly influential book,
The Economic Consequences of the Peace, published in 1919.
[40] This work has been described as Keynes's best book, where he was able to bring all his gifts to bear – his passion as well as his skill as an economist. In addition to economic analysis, the book contained pleas to the reader's sense of
compassion:
I cannot leave this subject as though its just treatment wholly depended either on our own pledges or on economic facts. The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable, –abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilised life of Europe.
Also present was striking imagery such as "year by year Germany must be kept impoverished and her children starved and crippled" along with bold predictions which were later justified by events:
If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp. Nothing can then delay for very long that final war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing.
Keynes's followers assert that his predictions of disaster were borne out when the German economy suffered the
hyperinflation of 1923, and again by the collapse of the
Weimar Republic and the outbreak of World War II. However the historian
Ruth Henig claims that "most historians of the Paris peace conference now take the view that, in economic terms, the treaty was not unduly harsh on Germany and that, while obligations and damages were inevitably much stressed in the debates at Paris to satisfy electors reading the daily newspapers, the intention was quietly to give Germany substantial help towards paying her bills, and to meet many of the German objections by amendments to the way the reparations schedule was in practice carried out".
[41][42] Only a small fraction of reparations were ever paid. In fact, the historian Stephen Schuker demonstrates in
American 'Reparations' to Germany, 1919-33, that the capital inflow from American loans substantially exceeded German outpayments so that, on a net basis, Germany received support equal to four times the amount of the post-World War II Marshal Plan. Schuker also shows that, in the years after Versailles, Keynes became an informal reparations adviser to the German government, wrote one of the major German reparation notes, and actually supported the hyperinflation on political grounds. Nevertheless,
The Economic Consequences of the Peace gained Keynes international fame, even though it also caused him to be regarded as anti-establishment – it was not until after the outbreak of World War II that Keynes was offered a directorship of a major British Bank, or an acceptable offer to return to government with a formal job. However, Keynes was still able to influence government policy making through his network of contacts, his published works and by serving on government committees; this included attending high-level policy meetings as a consultant.
[39]
In the 1920s[edit]
Keynes had completed his
A Treatise on Probability before the war, but published it in 1921.
[39] The work was a notable contribution to the philosophical and mathematical underpinnings of
probability theory, championing the important view that
probabilities were no more or less than
truth values intermediate between simple truth and falsity. Keynes developed the first upper-lower probabilistic
interval approach to probability in chapters 15 and 17 of this book, as well as having developed the first decision weight approach with his conventional coefficient of risk and weight,
c, in chapter 26. In addition to his academic work, the 1920s saw Keynes active as a journalist selling his work internationally and working in London as a financial consultant. In 1924 Keynes wrote an obituary for his former tutor
Alfred Marshallwhich
Joseph Schumpeter called "the most brilliant life of a man of science I have ever read."
[43] Marshall's widow was "entranced" by the memorial, while
Lytton Strachey rated it as one of Keynes's "best works".
[39]
In 1922 Keynes continued to advocate reduction of German reparations with
A Revision of the Treaty.
[39] He attacked the post World War I deflation policies with
A Tract on Monetary Reform in 1923
[39] – a trenchant argument that countries should target stability of domestic prices, avoiding deflation even at the cost of allowing their currency to depreciate. Britain suffered from high unemployment through most of the 1920s, leading Keynes to recommend the depreciation of
sterling to boost jobs by making British exports more affordable. From 1924 he was also advocating a fiscal response, where the government could create jobs by spending on public works.
[39] During the 1920s Keynes's pro stimulus views had only limited effect on policy makers and mainstream academic opinion – according to
Hyman Minsky one reason was that at this time his theoretical justification was "muddled".
[31] The
Tract had also called for an end to the gold standard. Keynes advised it was no longer a net benefit for countries such as Britain to participate in the
gold standard, as it ran counter to the need for domestic policy autonomy. It could force countries to pursue deflationary policies at exactly the time when expansionary measures were called for to address rising unemployment. The Treasury and Bank of England were still in favour of the gold standard and in 1925 they were able to convince the then Chancellor
Winston Churchill to re-establish it, which had a depressing effect on British industry. Keynes responded by writing
The Economic Consequences of Mr. Churchill and continued to argue against the gold standard until Britain finally abandoned it in 1931.
[39]
During the Great Depression[edit]
Keynes had begun a theoretical work to examine the relationship between unemployment, money and prices back in the 1920s.
[44] The work,
Treatise on Money, was published in 1930 in two volumes. A central idea of the work was that if the amount of money being saved exceeds the amount being invested – which can happen if interest rates are too high – then unemployment will rise. This is in part a result of people not wanting to spend too high a proportion of what employers pay out, making it difficult, in aggregate, for employers to make a profit. Another key theme of the book is the unreliability of financial
indices for representing an accurate – or indeed meaningful – indication of general shifts in purchasing power of currencies over time. In particular he criticised the justification of Britain's return to the
gold standard in 1925 at pre-war valuation by reference to the
wholesale price index. He argued that the index understated the effects of changes in the costs of services and of labour.
Keynes was deeply critical of the British government's austerity measures during the
Great Depression. He believed that budget deficits were a good thing, a product of
recessions. He wrote, "For Government borrowing of one kind or another is nature's remedy, so to speak, for preventing business losses from being, in so severe a slump as to present one, so great as to bring production altogether to a standstill."
[45]
At the height of the Great Depression, in 1933, Keynes published
The Means to Prosperity, which contained specific policy recommendations for tackling unemployment in a global recession, chiefly counter-cyclical public spending.
The Means to Prosperitycontains one of the first mentions of the
multiplier effect. While it was addressed chiefly to the British Government, it also contained advice for other nations affected by the global recession. A copy was sent to the newly elected President
Franklin D. Roosevelt and other world leaders. The work was taken seriously by both the American and British governments, and according to
Robert Skidelsky, helped pave the way for the later acceptance of Keynesian ideas, though it had little immediate practical influence. In the 1933
London Economic Conference opinions remained too diverse for a unified course of action to be agreed upon.
[46]
Keynesian-like policies were adopted by Sweden and Germany, but Sweden was seen as too small to command much attention, and Keynes was deliberately silent about the
successful efforts of Germany as he was dismayed by their imperialist ambitions and their treatment of Jews.
[46] Apart from Great Britain, Keynes's attention was primarily focused on the United States. In 1931, he received considerable support for his views on counter-cyclical public spending in Chicago, then America's foremost centre for economic views alternative to the mainstream.
[31][46] However, orthodox economic opinion remained generally hostile regarding fiscal intervention to mitigate the
depression, until just before the
outbreak of war.
[31] In late 1933 Keynes was persuaded by
Felix Frankfurter to address President Roosevelt directly, which he did by letters and face to face in 1934, after which the two men spoke highly of each other.
[46] However, according to Skidelsky, the consensus is that Keynes's efforts only began to have a more than marginal influence on US economic policy after 1939.
[46]
Keynes's
magnum opus,
The General Theory of Employment, Interest and Money was published in 1936. It was researched and indexed by one of Keynes's favourite students, later the economist
David Bensusan-Butt.
[47] The work served as a theoretical justification for the
interventionist policies Keynes favoured for tackling a recession. The
General Theory challenged the earlier
neoclassical economic paradigm, which had held that provided it was unfettered by government interference, the market would naturally establish
full employment equilibrium. In doing so Keynes was partly setting himself against his former teachers Marshall and Pigou. Keynes believed the classical theory was a "special case" that applied only to the particular conditions present in the 19th century, his own theory being the general one. Classical economists had believed in
Say's law, which, simply put, states that "
supply creates its own demand", and that in a free market workers would always be willing to lower their wages to a level where employers could profitably offer them jobs. An innovation from Keynes was the concept of
price stickiness – the recognition that in reality workers often refuse to lower their wage demands even in cases where a classical economist might argue it is rational for them to do so. Due in part to price stickiness, it was established that the interaction of "
aggregate demand" and "
aggregate supply" may lead to stable unemployment equilibria – and in those cases, it is the state, not the market, that economies must depend on for their salvation.
The
General Theory argues that demand, not supply, is the key variable governing the overall level of economic activity. Aggregate demand, which equals total un-hoarded income in a society, is defined by the sum of consumption and investment. In a state of unemployment and unused production capacity, one can
only enhance employment and total income by
first increasing expenditures for either consumption or investment. Without government intervention to increase expenditure, an economy can remain trapped in a low employment equilibrium – the demonstration of this possibility has been described as the revolutionary formal achievement of the work.
[48]The book advocated activist economic policy by government to stimulate demand in times of high unemployment, for example by spending on
public works. "Let us be up and doing, using our idle resources to increase our wealth," he wrote in 1928. "With men and plants unemployed, it is ridiculous to say that we cannot afford these new developments. It is precisely with these plants and these men that we shall afford them."
[45]
The
General Theory is often viewed as the foundation of modern
macroeconomics. Few senior American economists agreed with Keynes through most of the 1930s.
[49] Yet his ideas were soon to achieve widespread acceptance, with eminent American professors such as
Alvin Hansen agreeing with the
General Theory before the outbreak of World War II.
[50][51] [52]
Keynes himself had only limited participation in the theoretical debates that followed the publication of the
General Theory as he suffered a heart attack in 1937, requiring him to take long periods of rest.
Hyman Minsky and other
post-Keynesian economists have argued that as result of this, Keynes's ideas were diluted by those keen to compromise with classical economists or to render his concepts with mathematical models like the
IS–LM model (which, they argue, distort Keynes's ideas).
[31][52] Keynes began to recover in 1939, but for the rest of his life his professional energies were largely directed towards the practical side of economics – the problems of ensuring optimum allocation of resources for the war efforts, post-war negotiations with America, and the new international financial order that was presented at the
Bretton Woods Conference.
In the
General Theory and later, Keynes responded to the socialists and left-wing liberals who argued, especially during the Great Depression of the 1930s, that capitalism caused war. He argued that if capitalism were managed domestically and internationally (with coordinated international Keynesian policies, an international monetary system that didn't pit the interests of countries against each other, and a high degree of freedom of trade), then this system of managed capitalism could promote peace rather than conflict between countries. His plans during World War II for post-war international economic institutions and policies (which contributed to the creation at Bretton Woods of the
International Monetary Fund and the
World Bank, and later to the creation of the
General Agreement on Tariffs and Trade and eventually the
World Trade Organization) were aimed to give effect to this vision.
[53]
Although Keynes has been widely criticised – especially by members of the
Chicago school of economics – for advocating irresponsible government spending financed by borrowing, in fact he was a firm believer in balanced budgets and regarded the proposals for programs of public works during the Great Depression as an exceptional measure to meet the needs of exceptional circumstances.
[54]
Second World War[edit]
During the
Second World War, Keynes argued in
How to Pay for the War, published in 1940, that the war effort should be largely financed by higher taxation and especially by compulsory saving (essentially workers lending money to the government), rather than
deficit spending, in order to avoid
inflation. Compulsory saving would act to dampen domestic demand, assist in channelling additional output towards the war efforts, would be fairer than punitive taxation and would have the advantage of helping to avoid a post war slump by boosting demand once workers were allowed to withdraw their savings. In September 1941 he was proposed to fill a vacancy in the Court of Directors of the
Bank of England, and subsequently carried out a full term from the following April.
[55] In June 1942, Keynes was rewarded for his service with a
hereditary peerage in the King's Birthday Honours.
[56] On 7 July his title was
gazetted as "
BARON KEYNES, of Tilton, in the County of Sussex" and he took his seat in the
House of Lords on the
Liberal Party benches.
[57]
As the
Allied victory began to look certain, Keynes was heavily involved, as leader of the British delegation and chairman of the
World Bank commission, in the mid-1944 negotiations that established the
Bretton Woods system. The Keynes-plan, concerning an international clearing-union, argued for a radical system for the management of currencies. He proposed the creation of a common world unit of currency, the
bancor, and new global institutions – a world
central bank and the
International Clearing Union. Keynes envisaged these institutions managing an international trade and payments system with strong incentives for countries to avoid substantial trade deficits or surpluses. The USA's greater negotiating strength, however, meant that the final outcomes accorded more closely to the more conservative plans of
Harry Dexter White. According to US economist
J. Bradford DeLong, on almost every point where he was overruled by the Americans, Keynes was later proved correct by events.
[58]
The two new institutions, later known as the World Bank and the
International Monetary Fund (IMF), were founded as a compromise that primarily reflected the American vision. There would be no incentives for states to avoid a large
trade surplus; instead, the burden for correcting a trade imbalance would continue to fall only on the
deficit countries, which Keynes had argued were least able to address the problem without inflicting economic hardship on their populations. Yet, Keynes was still pleased when accepting the final agreement, saying that if the institutions stayed true to their founding principles, "the brotherhood of man will have become more than a phrase."
[59][60]
Postwar[edit]
After the war, Keynes continued to represent the United Kingdom in international negotiations despite his deteriorating health. He succeeded in obtaining preferential terms from the United States for new and outstanding debts to facilitate the rebuilding of the British economy.
[61]
Just before his death in 1946, Keynes told Henry Clay, a professor of social economics and advisor to the
Bank of England[62] of his hopes that
Adam Smith's '
invisible hand' can help Britain out of the economic hole it is in: "I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago."
[63]
Keynesian ascendancy 1939–79[edit]
From the end of the Great Depression to the mid-1970s, Keynes provided the main inspiration for economic policy makers in Europe, America and much of the rest of the world.
[52] While economists and policy makers had become increasingly won over to Keynes's way of thinking in the mid and late 1930s, it was only after the outbreak of World War II that governments started to borrow money for spending on a scale sufficient to eliminate unemployment. According to the economist
John Kenneth Galbraith (then a US government official charged with controlling inflation), in the rebound of the economy from wartime spending, "one could not have had a better demonstration of the Keynesian ideas."
[64]
The
Keynesian Revolution was associated with the rise of
modern liberalism in the West during the post-war period.
[65] Keynesian ideas became so popular that some scholars point to Keynes as representing the ideals of modern liberalism, as Adam Smith represented the ideals of
classical liberalism.
[66] After the war,
Winston Churchill attempted to check the rise of Keynesian policy-making in the United Kingdom and used rhetoric critical of the
mixed economy in his
1945 election campaign. Despite his popularity as a war hero, Churchill suffered a landslide defeat to
Clement Attlee whose government's economic policy continued to be influenced by Keynes's ideas.
[64]
Neo-Keynesian economics[edit]
By the 1950s, Keynesian policies were adopted by almost the entire developed world and similar measures for a
mixed economy were used by many developing nations. By then, Keynes's views on the economy had become mainstream in the world's universities. Throughout the 1950s and 1960s, the developed and emerging free capitalist economies enjoyed exceptionally high growth and low unemployment.
[67][68] Professor Gordon Fletcher has written that the 1950s and 1960s, when Keynes's influence was at its peak, appear in retrospect as a
golden age of capitalism.
[52]
In late 1965
Time magazine ran a cover article with a title comment from
Milton Friedman (later echoed by U.S. President
Richard Nixon), "
We are all Keynesians now". The article described the exceptionally favourable economic conditions then prevailing, and reported that "Washington's economic managers scaled these heights by their adherence to Keynes's central theme: the modern capitalist economy does not automatically work at top efficiency, but can be raised to that level by the intervention and influence of the government." The article also states that Keynes was one of the three most important economists who ever lived, and that his
General Theory was more influential than the
magna opera of other famous economists, like
Adam Smith's
The Wealth of Nations.
[69]
Keynesian economics out of favour 1979–2007[edit]
Keynesian economics were officially discarded by the British Government in 1979, but forces had begun to gather against Keynes's ideas over 30 years earlier.
Friedrich Hayekhad formed the
Mont Pelerin Society in 1947, with the explicit intention of nurturing intellectual currents to one day displace Keynesianism and other similar influences. Its members included the
Austrian School economist
Ludwig von Mises along with the then young Milton Friedman. Initially the society had little impact on the wider world – according to Hayek it was as if Keynes had been raised to sainthood after his death and that people refused to allow his work to be questioned.
[70][71] Friedman however began to emerge as a formidable critic of Keynesian economics from the mid-1950s, and especially after his 1963 publication of
A Monetary History of the United States.
On the practical side of economic life, "
big government" had appeared to be firmly entrenched in the 1950s, but the balance began to shift towards the power of private interests in the 1960s. Keynes had written against the folly of allowing "decadent and selfish" speculators and financiers the kind of influence they had enjoyed after World War I. For two decades after World War II the public opinion was strongly against private speculators, the disparaging label "
Gnomes of Zürich" being typical of how they were described during this period. International speculation was severely restricted by the capital controls in place after Bretton Woods. According to the journalists
Larry Elliott and
Dan Atkinson, 1968 was the pivotal year when power shifted in favour of private agents such as currency speculators. As the key 1968 event Elliott and Atkinson picked out America's suspension of the conversion of the dollar into gold except on request of foreign governments, which they identified as the beginning of the breakdown of the Bretton Woods system.
[72]
Criticisms of Keynes's ideas had begun to gain significant acceptance by the early 1970s, as they were then able to make a credible case that Keynesian models no longer reflected economic reality. Keynes himself included few formulas and no explicit mathematical models in his
General Theory. For economists such as
Hyman Minsky, Keynes's limited use of mathematics was partly the result of his scepticism about whether phenomena as inherently uncertain as economic activity could ever be adequately captured by mathematical models. Nevertheless, many models were developed by Keynesian economists, with a famous example being the
Phillips curve which predicted an inverse relationship between unemployment and inflation. It implied that unemployment could be reduced by government stimulus with a calculable cost to inflation. In 1968 Milton Friedman published a paper arguing that the fixed relationship implied by the Philips curve did not exist.
[73] Friedman suggested that sustained Keynesian policies could lead to both unemployment and inflation rising at once – a phenomenon that soon became known as
stagflation. In the early 1970s stagflation appeared in both the US and Britain just as Friedman had predicted, with economic conditions deteriorating further after the
1973 oil crisis. Aided by the prestige gained from his successful forecast, Friedman led increasingly successful criticisms against the Keynesian consensus, convincing not only academics and politicians but also much of the general public with his radio and television broadcasts. The academic credibility of Keynesian economics was further undermined by additional criticism from other
monetarists trained in the
Chicago school of economics, by the
Lucas critique and by criticisms from Hayek's Austrian School.
[52] So successful were these criticisms that by 1980
Robert Lucas claimed economists would often take offence if described as Keynesians.
[74] Keynesian principles fared increasingly poorly on the practical side of economics – by 1979 they had been displaced by monetarism as the primary influence on Anglo-American economic policy.
[52] However, many officials on both sides of the Atlantic retained a preference for Keynes, and in 1984 the
Federal Reserveofficially discarded monetarism, after which Keynesian principles made a partial comeback as an influence on policy making.
[75] Not all academics accepted the criticism against Keynes – Minsky has argued that Keynesian economics had been debased by excessive mixing with neoclassical ideas from the 1950s, and that it was unfortunate that this branch of economics had even continued to be called "Keynesian".
[31] Writing in
The American Prospect,
Robert Kuttner argued it was not so much excessive Keynesian activism that caused the economic problems of the 1970s but the breakdown of the Bretton Woods system of
capital controls, which allowed
capital flight from regulated economies into unregulated economies in a fashion similar to
Gresham's law phenomenon (where weak currencies undermine strong currencies).
[76] Historian
Peter Pugh has stated that a key cause of the economic problems afflicting America in the 1970s was the refusal to raise taxes to finance the
Vietnam War, which was against Keynesian advice.
[77]
A more typical response was to accept some elements of the criticisms while refining Keynesian economic theories to defend them against arguments that would invalidate the whole Keynesian framework – the resulting body of work largely composing
New Keynesian economics. In 1992
Alan Blinder wrote about a "Keynesian Restoration", as work based on Keynes's ideas had to some extent become fashionable once again in academia, though in the mainstream it was highly synthesised with monetarism and other neoclassical thinking. In the world of policy making,
free market influences broadly sympathetic to monetarism have remained very strong at government level – in powerful normative institutions like the
World Bank, the
IMF and
US Treasury, and in prominent opinion-forming media such as the
Financial Times and
The Economist.
[78]
Keynesian resurgence 2008–09[edit]
A series of major
bailouts were pursued during the financial crisis, starting on 7 September with the announcement that the U.S. Government was to nationalise the two
government-sponsored enterprises which oversaw most of the U.S. subprime mortgage market –
Fannie Mae and
Freddie Mac. In October,
Alistair Darling, the British
Chancellor of the Exchequer, referred to Keynes as he announced plans for substantial
fiscal stimulusto head off the worst effects of recession, in accordance with Keynesian economic thought.
[94][95] Similar policies have been adopted by other governments worldwide.
[96][97] This is in stark contrast to the action imposed on
Indonesia during the
Asian financial crisis of 1997, when it was forced by the IMF to close 16 banks at the same time, prompting a
bank run.
[98] Much of the post-crisis discussion reflected Keynes's advocacy of international coordination of fiscal or monetary stimulus, and of international economic institutions such as the IMF and the World Bank, which many had argued should be reformed as a "new Bretton Woods", and should have been even before the crises broke out.
[99] The IMF and United Nations economists advocated a coordinated international approach to fiscal stimulus.
[100] Donald Markwell argued that in the absence of such an international approach, there would be a risk of worsening international relations and possibly even world war arising from economic factors similar to those present during the depression of the 1930s.
[92]
By the end of December 2008, the
Financial Times reported that "the sudden resurgence of Keynesian policy is a stunning reversal of the orthodoxy of the past several decades."
[101] In December 2008, Paul Krugman released his book
The Return of Depression Economics and the Crisis of 2008, arguing that economic conditions similar to what existed during the earlier part of the 20th century had returned, making Keynesian policy prescriptions more relevant than ever. In February 2009
Robert J. Shiller and
George Akerlof published
Animal Spirits, a book where they argue the current US stimulus package is too small as it does not take into account Keynes's insight on the importance of confidence and expectations in determining the future behaviour of
businesspeople and other economic agents.
In the March 2009 speech entitled
Reform the International Monetary System,
Zhou Xiaochuan, the governor of the
People's Bank of China, came out in favour of Keynes's idea of a centrally managed global reserve currency. Zhou argued that it was unfortunate that part of the reason for the Bretton Woods system breaking down was the failure to adopt Keynes's
bancor. Zhou proposed a gradual move towards increased use of IMF
special drawing rights (SDRs).
[102][103] Although Zhou's ideas had not been broadly accepted, leaders meeting in April at the
2009 G-20 London summit agreed to allow $250 billion of special drawing rights to be created by the IMF, to be distributed globally. Stimulus plans were credited for contributing to a better than expected economic outlook by both the
OECD[104] and the IMF,
[105][106] in reports published in June and July 2009. Both organisations warned global leaders that recovery was likely to be slow, so counter recessionary measures ought not be rolled back too early.
While the need for stimulus measures was broadly accepted among policy makers, there had been much debate over how to fund the spending. Some leaders and institutions, such as
Angela Merkel[107] and the
European Central Bank,
[108] expressed concern over the potential impact on inflation, national debt and the risk that a too large stimulus will create an unsustainable recovery.
Among professional economists the revival of Keynesian economics has been even more divisive. Although many economists, such as George Akerlof, Paul Krugman, Robert Shiller, and Joseph Stiglitz, supported Keynesian stimulus, others did not believe higher government spending would help the United States economy recover from the
Great Recession. Some economists, such as
Robert Lucas, questioned the theoretical basis for stimulus packages.
[109] Others, like
Robert Barro and
Gary Becker, say that
empirical evidence for beneficial effects from Keynesian stimulus does not exist.
[110] However, there is a growing academic literature that shows that fiscal expansion helps an economy grow in the near term, and that certain types of fiscal stimulus are particularly effective.
[111][112]
Reception and views[edit]
Keynes's economic thinking only began to achieve close to universal acceptance in the last few years of his life. On a personal level, Keynes's charm was such that he was generally well received wherever he went – even those who found themselves on the wrong side of his occasionally sharp tongue rarely bore a grudge.
[113] Keynes's speech at the closing of the Bretton Woods negotiations was received with a lasting standing ovation, rare in international relations, as the delegates acknowledged the scale of his achievements made despite poor health.
[30]
Austrian School economist
Friedrich Hayek was Keynes's most prominent contemporary critic, with sharply opposing views on the economy.
[48] Yet after Keynes's death he wrote:
[114]
He was the one really great man I ever knew, and for whom I had unbounded admiration. The world will be a very much poorer place without him.
Lionel Robbins, former head of the economics department at the
London School of Economics, who engaged in many heated debates with Keynes in the 1930s, had this to say after observing Keynes in early negotiations with the Americans while drawing up plans for Bretton Woods:
[48]
This went very well indeed. Keynes was in his most lucid and persuasive mood: and the effect was irresistible. At such moments, I often find myself thinking that Keynes must be one of the most remarkable men that have ever lived – the quick logic, the birdlike swoop of intuition, the vivid fancy, the wide vision, above all the incomparable sense of the fitness of words, all combine to make something several degrees beyond the limit of ordinary human achievement.
I am spellbound. This is the most beautiful creature I have ever listened to. Does he belong to our species? Or is he from some other order? There is something mythic and fabulous about him. I sense in him something massive and sphinx like, and yet also a hint of wings.
Keynes's intellect was the sharpest and clearest that I have ever known. When I argued with him, I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool.
There is the man himself – radiant, brilliant, effervescent, gay, full of impish jokes ... He was a humane man genuinely devoted to the cause of the common good.
Critiques[edit]
As a man of the centre described by some as having the greatest impact of any 20th-century economist,
[44] Keynes attracted considerable criticism from both sides of the political spectrum. In the 1920s, Keynes was seen as anti-establishment and was mainly attacked from the right. In the "red 1930s", many young economists favoured
Marxist views, even in Cambridge,
[31] and while Keynes was engaging principally with the right to try to persuade them of the merits of more progressive policy, the most vociferous criticism against him came from the left, who saw him as a supporter of capitalism. From the 1950s and onwards, most of the attacks against Keynes have again been from the right.
In 1931
Friedrich Hayek extensively critiqued Keynes's 1930
Treatise on Money.
[117] After reading Hayek's
The Road to Serfdom, Keynes wrote to Hayek
[118] "Morally and philosophically I find myself in agreement with virtually the whole of it", but concluded the letter with the recommendation:
What we need therefore, in my opinion, is not a change in our economic programmes, which would only lead in practice to disillusion with the results of your philosophy; but perhaps even the contrary, namely, an enlargement of them. Your greatest danger is the probable practical failure of the application of your philosophy in the United States.
On the pressing issue of the time, whether deficit spending could lift a country from depression, Keynes replied to Hayek's criticism
[119] in the following way:
I should... conclude rather differently. I should say that what we want is not no planning, or even less planning, indeed I should say we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers wholly share your own moral position. Moderate planning will be safe enough if those carrying it out are rightly oriented in their own minds and hearts to the moral issue.
Asked why Keynes expressed "moral and philosophical" agreement with Hayek's
Road to Serfdom, Hayek explained:
[120]
Because he believed that he was fundamentally still a classical English liberal and wasn't quite aware of how far he had moved away from it. His basic ideas were still those of individual freedom. He did not think systematically enough to see the conflicts. He was, in a sense, corrupted by political necessity.
According to some observers, Hayek felt that the post-World War II "Keynesian orthodoxy" gave too much power to the state and led toward socialism.
[121]
While
Milton Friedman described
The General Theory as "a great book", he argues that its implicit separation of
nominal from real magnitudes is neither possible nor desirable. Macroeconomic policy, Friedman argues, can reliably influence only the nominal.
[122] He and other monetarists have consequently argued that
Keynesian economics can result in
stagflation, the combination of low growth and high inflation that developed economies suffered in the early 1970s. More to Friedman's taste was the
Tract on Monetary Reform(1923), which he regarded as Keynes's best work because of its focus on maintaining domestic price stability.
[122]
Joseph Schumpeter was an economist of the same age as Keynes and one of his main rivals. He was among the first reviewers to argue that Keynes's
General Theory was not a general theory, but in fact a special case.
[123] He said the work expressed "the attitude of a decaying civilisation". After Keynes's death Schumpeter wrote a brief biographical piece
Keynes the Economist – on a personal level he was very positive about Keynes as a man, praising his pleasant nature, courtesy and kindness. He assessed some of Keynes's biographical and editorial work as among the best he'd ever seen. Yet Schumpeter remained critical about Keynes's economics, linking Keynes's childlessness to what Schumpeter saw as an essentially short term view. He considered Keynes to have a kind of unconscious patriotism that caused him to fail to understand the problems of other nations. For Schumpeter "Practical Keynesianism is a seedling which cannot be transplanted into foreign soil: it dies there and becomes poisonous as it dies."
[124]
Views on race[edit]
Keynes sometimes explained the mass murder that took place during the first years of
communist Russia on a racial basis, as part of the “Russian and Jewish nature”, rather than as a result of the communist rule. After a trip to Russia, he wrote in his
Short View of Russia that there is "beastliness on the Russian and Jewish natures when, as now, they are allied together". He also wrote that "out of the cruelty and stupidity of the Old Russia nothing could ever emerge, but (...) beneath the cruelty and stupidity of the New Russia a speck of the ideal may lie hid", which together with other comments may be construed as
anti-Russian and
antisemitic.
[125]
Some critics, including
Murray Rothbard, have sought to show that Keynes had sympathy with
Nazism, and a number of writers described him as antisemitic. Keynes's private letters contain portraits and descriptions, some of which can be characterized as antisemitic, others as
philosemitic.
[126][127] Scholars have suggested that these reflect clichés current at the time that he accepted uncritically, rather than any racism.
[128] On several occasions Keynes used his influence to help his Jewish friends, most notably when he successfully lobbied for
Ludwig Wittgenstein to be allowed residency in the United Kingdom, explicitly in order to rescue him from being deported to
Nazi-occupied Austria. Keynes was a supporter of
Zionism, serving on committees supporting the cause.
[128]
Allegations that he was racist or had totalitarian beliefs have been rejected by
Robert Skidelsky and other biographers.
[30] Professor Gordon Fletcher wrote that "the suggestion of a link between Keynes and any support of totalitarianism cannot be sustained".
[52] Once the aggressive tendencies of the Nazis towards Jews and other minorities had become apparent, Keynes made clear his loathing of Nazism. As a lifelong pacifist he had initially favoured peaceful containment of
Nazi Germany, yet he began to advocate a forceful resolution while many conservatives were still arguing for appeasement. After the war started he roundly criticised the Left for losing their nerve to confront
Hitler:
The intelligentsia of the Left were the loudest in demanding that the Nazi aggression should be resisted at all costs. When it comes to a showdown, scarce four weeks have passed before they remember that they are pacifists and write defeatist letters to your columns, leaving the defence of freedom and civilisation to Colonel Blimp and the Old School Tie, for whom Three Cheers.
[48]
Views on inflation[edit]
Keynes has been characterised as being indifferent or even positive about mild
inflation.
[129] He had indeed expressed a preference for inflation over
deflation, saying that if one has to choose between the two evils, it is "better to disappoint the rentier" than to inflict pain on
working class families.
[130] He also supported the German hyperinflation as a way to get free from reparations obligations. However, Keynes was also aware of the dangers of inflation.
[52] In
The Economic Consequences of the Peace, he wrote:
Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
[129]
Personal life[edit]
Relationships[edit]
Keynes's early romantic and sexual relationships were exclusively with men.
[131] Keynes had been in relationships while at Eton and Cambridge; significant among these early partners were
Dilly Knox and Daniel Macmillan.
[24][132] Keynes was open about his affairs, and from 1901 to 1915 kept separate diaries in which he tabulated his many sexual encounters.
[133][134] Keynes's relationship and later close friendship with Macmillan was to be fortunate, as
Macmillan's company first published his tract
Economic Consequences of the Peace.
[135]
Attitudes in the
Bloomsbury Group, in which Keynes was avidly involved, were relaxed about homosexuality. Keynes, together with writer
Lytton Strachey, had reshaped the
Victorian attitudes of the
Cambridge Apostles: "since [their] time, homosexual relations among the members were for a time common", wrote
Bertrand Russell.
[136] The artist
Duncan Grant, whom he met in 1908, was one of Keynes's great loves. Keynes was also involved with Lytton Strachey,
[131] though they were for the most part love rivals, not lovers. Keynes had won the affections of
Arthur Hobhouse,
[137] and as with Grant, fell out with a jealous Strachey for it.
[138] Strachey had previously found himself put off by Keynes, not least because of his manner of "treat[ing] his love affairs statistically".
[139]
Political opponents have used Keynes's sexuality to attack his academic work.
[140] One line of attack held that he was uninterested in the long term ramifications of his theories because he had no children.
[140]
Keynes's friends in the Bloomsbury Group were initially surprised when, in his later years, he began dating and pursuing affairs with women,
[141] demonstrating himself to be
bisexual.
[142] Ray Costelloe (who would later marry
Oliver Strachey) was an early heterosexual interest of Keynes.
[143] In 1906, Keynes had written of this infatuation that, "I seem to have fallen in love with Ray a little bit, but as she isn't male I haven't [been] able to think of any suitable steps to take."
[144]
Marriage[edit]
In 1921, Keynes wrote that he had fallen "very much in love" with
Lydia Lopokova, a well-known Russian
ballerina and one of the stars of
Sergei Diaghilev's
Ballets Russes.
[145] In the early years of his courtship, he maintained an affair with a younger man,
Sebastian Sprott, in tandem with Lopokova, but eventually chose Lopokova exclusively.
[146][147] They married in 1925, with Keynes's former lover
Duncan Grant as best man.
[115][131] "What a marriage of beauty and brains, the fair Lopokova and John Maynard Keynes" was said at the time. Keynes later commented to Strachey that beauty and intelligence were rarely found in the same person, and that only in Duncan Grant had he found the combination.
[148] The union was happy, with biographer Peter Clarke writing that the marriage gave Keynes "a new focus, a new emotional stability and a sheer delight of which he never wearied".
[34][149] Lydia became pregnant in 1927 but miscarried.
[34]Among Keynes's Bloomsbury friends, Lopokova was, at least initially, subjected to criticism for her manners, mode of conversation and supposedly humble social origins – the last of the ostensible causes being particularly noted in the letters of
Vanessa and
Clive Bell, and
Virginia Woolf.
[150][151] In her novel
Mrs Dalloway (1925), Woolf bases the character of Rezia Warren Smith on Lopokova.
[152] E. M. Forsterwould later write in contrition: "How we all used to underestimate her".
[150]
46
Gordon Square, where Keynes would often stay while in London. Following his marriage, Keynes took out an extended lease on
Tilton House, a farm in the countryside near
Brighton, which became the couple's main home when not in the capital.
[153]
Blue plaque, 46 Gordon Square
Support for the arts[edit]
Keynes thought that the pursuit of money for its own sake was a pathological condition, and that the proper aim of work is to provide leisure. He wanted shorter working hours and longer holidays for all.
[54]
Keynes was interested in literature in general and drama in particular and supported the
Cambridge Arts Theatre financially, which allowed the institution, at least for a while, to become a major British stage outside London.
[115]
Keynes's personal interest in classical opera and dance led him to support the
Royal Opera House at
Covent Garden and the Ballet Company at
Sadler's Wells. During
the war, as a member of CEMA (Council for the Encouragement of Music and the Arts), Keynes helped secure government funds to maintain both companies while their venues were shut. Following the war, Keynes was instrumental in establishing the
Arts Council of Great Britain and was its founding chairman in 1946. Unsurprisingly, from the start the two organisations that received the largest grants from the new body were the Royal Opera House and Sadler's Wells.
Like several other notable British authors of his time, Keynes was a member of the
Bloomsbury Group.
Virginia Woolf's biographer tells an anecdote on how Virginia Woolf, Keynes and
T. S. Eliot discussed religion at a dinner party, in the context of their struggle against
Victorian era morality.
[154] Keynes may have been
confirmed,
[155] but according to Cambridge University he was clearly an agnostic, which he remained until his death.
[156] According to one biographer, "he was never able to take religion seriously, regarding it as a strange aberration of the human mind."
[155]
Investments[edit]
Keynes was ultimately a successful investor, building up a private fortune. His assets were nearly wiped out following the
Wall Street Crash of 1929, which he did not foresee, but he soon recouped. At Keynes's death, in 1946, his net worth stood just short of £500,000 – equivalent to about £11 million ($16.5 million) in 2009. The sum had been amassed despite lavish support for various good causes and his personal ethic which made him reluctant to sell on a falling market, in cases where he saw such behaviour as likely to deepen a slump.
[157]
Keynes successfully managed the endowment of
King's College, Cambridge, with the active component of his portfolio outperforming a British equity index by an average of 8% a year over a quarter century, earning him favourable mention by later investors such as
Warren Buffett and
George Soros.
[159]
Political causes[edit]
Keynes was a lifelong member of the
Liberal Party, which until the 1920s had been one of the two main political parties in the United Kingdom, and as late as 1916 had often been the dominant power in government. Keynes had helped campaign for the Liberals at elections from about 1906, yet he always refused to run for office himself, despite being asked to do so on three separate occasions in 1920. From 1926, when Lloyd George became leader of the Liberals, Keynes took a major role in defining the party's economics policy, but by then the Liberals had been displaced into third party status by the
Labour Party.
[12]
In 1939 Keynes had the option to enter Parliament as an independent MP with the
University of Cambridge seat. A by-election for the seat was to be held due to the illness of an elderly
Tory, and the master of
Magdalene College had obtained agreement that none of the major parties would field a candidate if Keynes chose to stand. Keynes declined the invitation as he felt he would wield greater influence on events if he remained a free agent.
[34]
Keynes was a proponent of
eugenics. He served as director of the
British Eugenics Society from 1937 to 1944. As late as 1946, shortly before his death, Keynes declared eugenics to be "the most important, significant and, I would add, genuine branch of sociology which exists."
[160]
Keynes once remarked that "the youth had no religion save
communism and this was worse than nothing."
[154] Marxism "was founded upon nothing better than a misunderstanding of
Ricardo", and, given time, he (Keynes) "would deal thoroughly with the Marxists" and other economists to solve the economic problems their theories "threaten to cause".
[154]
In 1931 Keynes had the following to say on Marxism:
[161]
How can I accept the Communist doctrine, which sets up as its bible, above and beyond criticism, an
obsolete textbook which I know not only to be scientifically erroneous but without interest or application to the modern world? How can I adopt a creed which, preferring the mud to the fish, exalts the boorish
proletariat above the
bourgeoisie and the
intelligentsia, who with all their faults, are the quality of life and surely carry the seeds of all human achievement? Even if we need a religion, how can we find it in the turbid rubbish of the red bookshop? It is hard for an educated, decent, intelligent son of Western Europe to find his ideals here, unless he has first suffered some strange and horrid process of conversion which has changed all his values.
Throughout his life, Keynes worked energetically for the benefit both of the public and his friends; even when his health was poor, he laboured to sort out the finances of his old college.
[162] Helping to set up the
Bretton Woods system, he worked to institute an
international monetary system that would be beneficial for the
world economy. Keynes suffered a series of heart attacks, which ultimately proved fatal. They began during negotiations for the
Anglo-American loan in
Savannah, Georgia, where he was trying to secure favourable terms for the United Kingdom from the United States, a process he described as "absolute hell".
[44][163] A few weeks after returning from the United States, Keynes died of a heart attack at Tilton, his farmhouse home near
Firle,
East Sussex, England, on 21 April 1946, at the age of 62.
[12][164]
Publications[edit]
