john maynard keynes -- 10/12/22

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Today's selection -- from The Worldly Philosophers: The Lives, Times And Ideas Of The Great Economic Thinkers by Robert L. Heilbroner. John Maynard Keynes (1883-1946) was a British economist whose ideas have been highly influential in policy and macroeconomics since the publication of his book The Economic Consequences of the Peace in 1919:

"Keynes was called to the [British] Treasury [in 1915] and assigned to work on Britain's overseas finances. He must have been something of a phe­nomenon there, too. An anecdote in point was later re­counted by an old associate: 'There was an urgent need for Spanish pesetas. With difficulty, a smallish sum was raked up. Keynes duly reported this to a relieved Secretary to the Trea­sury, who remarked that at any rate for a short time we had a supply of pesetas. "Oh no!" said Keynes. "What!" said his horri­fied chief. "I've sold them all; I'm going to break the market." And he did.' 

"He was soon a key figure in the Treasury. His first biog­rapher and fellow economist, Roy Harrod, tells us that men of ripe judgment have declared that Keynes contributed more to winning the war than any other person in civil life. Be that as it may, he managed to find time for other things. On a financial mission to France he was seized with the idea that it would help balance the French accounts with the British if they sold some of their pictures to the National Gallery. He thus casually acquired a hundred thousand dol­lars' worth of Corot, Delacroix, Forain, Gauguin, Ingres, and Manet for the British, and managed to get a Cézanne for himself: Big Bertha was shelling Paris and prices were pleas­antly depressed. Back in London he attended the ballet; Lydia Lopokova was dancing the part of the beauty in 'The Good-Humored Ladies,' and she was the rage. The Sitwells had her to a party, where she and Keynes met. One can imagine Keynes with his classic English and Lydia with her classic struggles with English -- 'I dislike being in the country in August,' she said, 'because my legs get so bitten by barris­ters.' 

"But all this was tangential to the main thing -- the settle­ment of Europe after the war. Keynes was now an important personage -- one of those unidentified men one sees standing behind the chair of a head of state ready to whisper a guiding word. He went to Paris as Deputy for the Chancellor of the Exchequer on the Supreme Economic Council with full power to make decisions and as representative of the Trea­sury at the Peace Conference itself. But he was only second echelon; he had a grandstand seat but no power to interfere directly in the game. It must have been an agony of frustra­tion and impotence, for at close quarters he watched while Wilson was outmaneuvered by Clemenceau and the ambi­tion of a humane peace replaced by the achievement of a vin­dictive one.

"'It must be weeks since I've written anyone,' he wrote to his mother in 1919, 'but I've been utterly worn out, partly by work, partly by depression at the evil around me. I've never been so miserable as for the last two or three weeks; the Peace is outrageous and impossible and can bring nothing but misfortune behind it.' 

"He dragged himself from the sickbed to protest against what he called the 'murder of Vienna,' but he could not stop the tide. The peace was to be a Carthaginian one, and Ger­many was to pay a sum of reparations so huge that it would force her into the most vicious practices of international trade in order to earn the pounds and francs and dollars. This was not the popular opinion, of course, but Keynes saw that in the Versailles Treaty lay the unwitting goad for an even more formidable resurgence of German autarchy and mili­tarism.

The Lord Keynes

"He resigned in despair; then three days before the treaty was signed he began his polemic against it. He called it The Economic Consequences of the Peace; when it ap­peared that December (he wrote it at top speed and fury), it made his name.

"It was brilliantly written and crushing. Keynes had seen the protagonists at work, and his descriptions of them com­bined the skill of a novelist with the cutting insight of a Bloomsbury critic. He wrote of Clemenceau that 'He had only one illusion -- France, and one disillusion -- mankind, in­cluding his own colleagues not least'; and of Wilson,' ... like Odysseus, he looked wiser when seated.' But while his por­traits sparkled, it was his analysis of the harm that had been done that was unforgettable. For Keynes saw the Conference as a reckless settlement of political grudge in utter disregard of the pressing problem of the moment -- the resuscitation of Europe into an integrating and functioning whole:

"The Council of Four paid no attention to these issues, being preoccupied with others, -- Clemenceau to crush the economic life of his enemy, Lloyd George to do a deal and bring home something that would pass muster for a week, the President to do nothing that was not just and right. It is an extraordinary fact that the fundamental problems of a Europe starving and disintegrating before their eyes, was the one question in which it was impossi­ble to arouse the interest of the Four. Reparation was their main excursion into the economic field, and they settled it as a problem of theology, of politics, of elec­toral chicane, from every point of view except that of the economic future of the States whose destiny they were handling.

"And he went on to deliver this solemn warning:

The danger confronting us, therefore, is the rapid de­pression of the standard of life of the European popula­tions to a point which will mean actual starvation for some (a point already reached in Russia and approxi­mately reached in Austria). Men will not always die qui­etly. For starvation, which brings to some lethargy and a helpless despair, drives other temperaments to the ner­vous instability of hysteria and to a mad despair. And these in their distress may overturn the remnants of or­ganization, and submerge civilization itself in their at­tempts to satisfy desperately the overwhelming needs of the individual. This is the danger against which all our resources and courage and idealism must now cooperate.

"The book was an immense success. The unworkability of the treaty was manifest almost from the moment of its sign­ing, but Keynes was the first to see it, to say it, and to suggest an outright revision. He became known as an economist of extraordinary foresight, and when the Dawes Plan in 1924 began the long process of undoing the impasse of 1919, his gift for prophecy was confirmed." 

author:	Robert L. Heilbroner
title:	The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers
publisher:	Touchstone
date:	Copyright 1987, 1989, 1995 by Robert L. Heilbroner
pages:	257-259