John Maynard Keynes: Fighting for Freedom, 1937-1946
By Robert Skidelsky
Viking, 576 pages, $34.95
In the introduction to his 1931 collection, “Essays in Persuasion,” John Maynard Keynes offered a self-deprecating portrait of the economist as ineffectual gadfly. “Here are collected the croakings of twelve years’the croakings of a Cassandra who could never influence the course of events in time,” he wrote. “They were regarded at the time, many of them, as extreme and reckless utterances.”
Though Keynes was being a little mischievous (and just a tad disingenuous), his assessment of his career has some truth to it. His close ties to the sexual and aesthetic renegades of the Bloomsbury group’author Virginia Woolf, wit Lytton Strachey, painter Duncan Grant, art critic Clive Bell’set him at odds with his more traditional peers. So did his fierce, flashing intellect and oft-impassioned opinions.
As a young treasury official, Keynes made his name when he published a devastatingly trenchant broadside against the Treaty of Versailles, rebuking the Allies for the unjust terms visited on a defeated Germany in 1919. Keynes was a fearless journalist and polemicist. In the 1920s, he campaigned against the gold standard, pet economic cure-all of many a politician’among them Winston Churchill, who came in for some stinging blows from Keynes’ pen.
He tweaked captains of industry for their timidity and fusty ways. While hardly a revolutionary, Keynes could still write bracingly, “[the] devotees of Capitalism are often unduly conservative, and reject reforms in its technique, which might really strengthen and preserve it, for fear they may prove to be first steps away from Capitalism itself.”
If Keynes wasn’t exactly a prophet without honor in his country, he was to some exent a prophet without power. There was always something paradoxical about his situation: a man of Victorian comportment with a Victorian’s sense of duty to his country, who resided in the deep heart of the Establishment, yet who was often at odds with its figures, a man not reticent when it came to ruffling feathers and twitting the complacent. Yet Keynes was to become one of the most-influential economists of the century. How did he do it?
As biographer Robert Skidelsky puts it in “John Maynard Keynes: Fighting for Freedom, 1937-1946,” Keynes “was a rebel who entered the establishment, not by succumbing to it, but by shifting it towards his own ground.” With his landmark work, “The General Theory of Unemployment, Interest, and Money” (1935), Keynes did just that. At a time when capitalism’and liberal democracy’were under siege from quarters left and right, when unemployment was tearing at the fabric of Europe and the U.S., governments seemingly helpless to do anything, Keynes proposed reforms and techniques to strengthen capitalism, to slay the demon of unemployment that had tormented the Western democracies in the hard years of the slump. Keynes was at the same time keen to preserve political and economic liberties; he was no fan of central planning. He was a champion, Skidelsky says, of “the Middle Way.” What capitalism needed was stewardship, and enlightened managers; Keynes provided the blueprint.
Skidelsky’s second volume of his massive biography of Keynes, subtitled “The Economist as Savior, 1920-1937” and published 10 years ago, ended two years after the publication of “The General Theory.” Keynes’ allies and antagonists were clashing over his theories, the dark shadows of war and fascism were lengthening across Europe, and Keynes lay stricken, suffering from a debilitating heart condition that would ultimately kill him.
With the publication of this third and final volume in his masterful life of the economist, Skidelsky has brought to a close one of the giant projects of contemporary biography. Though his grasp of economic theory is formidable, Skidelsky writes as a historian, not as an economist, and his approach opens many vistas onto Keynes’ life and the history of Britain at war. Keynes was a central actor in the war effort, the “Churchill of war finance and post-war planning,” as Skidelsky calls him, as important to the war effort as any general or infantryman.
Though Keynes would be relentlessly plagued by his heart condition in the last years of his life that Skidelsky covers in this volume, the book is, if anything, a portrait of a workaholic. University administrator and lecturer at Cambridge, patron of the arts, journalist, sometime farmer, treasury adviser, Keynes never slowed down. Lovingly tended to by his wife, ballet dancer and actress Lydia Lopokova, he held his illness at bay and tried to influence his times. In the years covered in this volume, he was “the impresario of his own Revolution,” Skidelsky writes. He actively promoted his opinions on demand management and fiscal policy in Establishment organs like the Times of London, in speeches, in meetings with politicians. We see Keynes wheedle, cajole, provoke, persuade.
Still, not everyone was ready to accept his ideas. One of the strengths of Skidelsky’s book is his deft, supremely lucid accounts of the interaction between Keynes, his policies and the politicians of the day, particularly in the first year of World War II. With the British economy cranked up, factories making arms, Britons employed, money coursing through the veins of the British economy, the question was how to control inflation and finance the war effort. Keynes swung into action, publishing his tract “How to Pay for the War” (1940), which amply displayed his theories on fiscal theory and demand management. Keynes advocated a compulsory-savings program for all individuals with an income over a certain minimum, paid into government accounts, thus filling the national coffers, reducing demand and slowing inflation. But the plan favored by most politicians involved rationing and price fixing. To Keynes, this smacked of totalitarianism: He was a liberal, and he defended consumer choice. As he wrote in a letter to The Times, “[I]f the community’s aggregate rate can be regulated, the way in which personal incomes are spent can be safely left free and individual.” Keynes did not prevail; other policies won the day. But Skidelsky says his plan was “the quintessence of Keynes’s achievement”:
“It engaged all the qualities of his complex nature. The union of theory and practice, the linking of economic doctrine to political philosophy here achieved its most compelling artistic expression. At the core of his vision was his understanding that modern society would no longer stand ‘Nature’s cures’ of inflation and unemployment for the malfunctioning of the market system.”
Keynes’ defeat was only temporary. The worsening of the war changed his fate for the better. Brought on as an unpaid adviser to Britain’s treasury, he exerted great influence and subtly steered the British economy. He would also be Britain’s top negotiator with the U.S. on war finance. Skidelsky’s account of these years is meticulous, an extraordinary portrait of administrators and technocrats at war, on both sides of the Atlantic.
Keynes made four extended journeys to Washington, D.C. His reception among Roosevelt’s New Dealers was mixed. Some, like Treasury Secretary Henry Morgenthau, thought him a heretic; others, like left-leaning economic adviser Harry Dexter White, thought him a giant. Keynes’ personality didn’t endear him to everyone: He could be a splenetic but tough negotiator. And the stakes were high: Britain needed U.S. supplies to fight the war, and Roosevelt’s lend-lease program, which guaranteed Britain nearly limitless supplies (but at a cost), was Britain’s lifeline.
Though Churchill called lend-lease “the most unsordid act in the history of any nation,” its terms eventually proved grievously damaging to the British economy. The U.S. forced Britain to pay its debts and open its markets (and its empire) to American trade demands. Keynes was unable to negotiate favorable terms for Britain, outmaneuvered by the wily Americans, whose country was by war’s end a gigantic economic power: Britain’s victory was a rather hollow one. For Keynes, Britain was owed a moral debt because it fought first against the Nazis and held them at bay. But the Americans were having none if it: Britain was to pay the obligations it incurred during the war.
By 1945, Keynes was nearly worn out. Not only had he been tied up with the detailed, intricate back-and-forth over Britain’s war debts, he was also a prime mover in the Allies’ plans for currency agreements and postwar financial settlement hashed out at meetings in 1944 and afterward, from which the International Monetary Fund and World Bank emerged. Today, those organizations have been criticized by the left, but for Keynes and his colleagues, haunted by the fraught decades of the ’20s and ’30s, there was a need for institutions to steady the hand of capitalism, to open trade, to ensure stable currencies.
Keynes died in 1946 and received a fulsome tribute at Westminster Abbey. Shortly after he died, the chancellor of the exchequer wrote movingly to Keynes’ widow, “He taught us to unite Reason with Hope.”
What are we to make of Keynes today? One British historian has written that “he was a liberal survivor in an illiberal world.” Reading Skidelsky’s final volume also reminds one how fundamentally decent Keynes was. Perhaps this is no better exemplified than in his generous praise of Friedrich Hayek, his great foe, a thinker who worried, like those timid champions of the free market Keynes once scolded, that imaginative reforms of capitalism “may prove to be the first steps away from Capitalism itself.” Of course, Hayek’s rather ungenerous disciples in Margaret Thatcher’s England and Ronald Reagan’s America did much to discredit Keynesian economics. Still, Skidelsky, who has spent so many years chronicling the great economist, is surely right when he says, “We still live in the shadow of Keynes, not because his legacy has been assimilated, but because it is still disputed.”
