Overrated: John Maynard Keynes

The economist’s legacy has been mostly disastrous

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John Maynard Keynes: Held in awe by the wartime generation (illustration by Michael Daley)

For the wartime generation, Keynes seemed nothing less than the saviour of mankind. He was the knight errant who returned from Washington in 1945, having negotiated the terms of the American loan that kept Britain afloat. He was the wizard who created the monetary system that restored stability to the post-war global economy. It was his General Theory of Employment, Interest and Money that heralded “the end of boom and bust” (as his disciple Gordon Brown would later put it). For decades after he died prematurely, exhausted by the task of saving the world, the great man was held in awe by his contemporaries. “Maynard was the cleverest man I have ever met,” recalled his Bloomsbury friend Clive Bell. Even the less easily impressed Isaiah Berlin found him “intellectually awe-inspiring”.

Keynes has never ceased to be a name to conjure with, but his reputation was eclipsed, at least in the Anglosphere, during the Reagan-Thatcher era. Even at his nadir, however, his biographers were busy burnishing his credentials, above all the three-volume monument by Robert Skidelsky. Now Richard Davenport-Hines has produced a superb biography for the general reader: Universal Man: The Seven Lives of John Maynard Keynes (William Collins, £18.99).

Davenport-Hines does not treat Keynes primarily as a thinker, but, as his title suggests, concentrates on Keynes the private and public man. For him, Keynes was indeed “an inspiring example of an intellectual who was bold in his ideas and unselfish in the ways that he put them into action”. Even without Davenport-Hines’s brilliant advocacy, it is enough to read Keynes to appreciate his genius and admire his generosity.

But it is precisely because Keynes the man has been constantly invoked as “beyond emulation” that Keynes the economist was and still is overrated. The theories that came to be known as “Keynesian” were inconsistent, ephemeral or plain wrong. Whether Keynes was in fact a Keynesian was unclear in his lifetime and is still moot. What is not in dispute is the extent of his influence, which has been colossal and mostly disastrous.In 1940, for instance, he wrote that the Nazi “New Order” was “excellent and just what we ourselves ought to be thinking of doing.” While he claimed to believe in balanced budgets during “normal” times, his grandiose conception of macroeconomic management has provided a fig-leaf for big government ever since.

The economic crisis that broke in 2008 has predictably brought about a Keynesian renaissance, though he would surely have repudiated the demagogues who now take his name in vain. Keynes looms so large today because ideas long outlast the circumstances of their inception. After Churchill disregarded his advice and returned to the gold standard, Keynes wrote a devastating polemic, The Economic Consequences of Mr Churchill. Yet Churchill’s mistake was at worst a short-sighted policy that was unsustainable in the long term. Politicians rarely look beyond the electoral horizon; Keynes himself observed that in the long run we are all dead. But the economic consequences of Lord Keynes are still with us.

In his lifetime (1883-1946) the British were ruled by “the great and the good”. Keynes was one of the greatest and best of them. He loved the institutions that embraced and embodied this enlightened despotism: Oxbridge, the Treasury, the Bank of England, the BBC. The World Wars gave him opportunities to educate the taste of the masses. After the First, he persuaded Bonar Law to let him spend part of an American loan on modern French art for the National Gallery. After the Second, he perpetuated the wartime Committee for the Encouragement of Music and the Arts in the form of the Arts Council. His financial speculations made a fortune for his college; he saved Isaac Newton’s manuscripts for Cambridge. The Americans (rightly) were suspicious of the uses to which the British would put the loan that Keynes negotiated in 1945. It financed Attlee’s welfare socialism. Thanks to Keynes, it also paid for the Royal Opera House.

But Keynes was a man of his time and there was a strong whiff of intellectual snobbery about his generosity. Not all his listeners on the Home Service will have warmed to his battle-cry: “Death to Hollywood!” He was equally contemptuous of capitalists and workers (except for sailors), and thought both far too philistine to be entrusted with the arts or the universities. His respect for cultured Jewish friends did not preclude casual anti-Semitism. In 21st-century philanthropy, the entrepreneurial spirit of the City has supplanted Bloomsbury and its mandarin mentality. That is no bad thing. Nor is our more critical attitude to the welfare state that he made possible.

Observing him at the height of his powers and prestige during the 1944 Bretton Woods conference, the economist Lionel Robbins thought his “pure genius” comparable only to Churchill’s: “Keynes must be one of the most remarkable men who ever lived.” And so he was. But Robbins was seduced by his companion’s aura of omniscience. Even 70 years later, we should beware of it too.