The warrior economist
While Britain fought Hitler, Keynes struggled with the US
Anyone with the wherewithal to suffer through Economics 101 has encountered John Maynard Keynes, the 20th-century British economist who transformed his profession with his 1936 work "General Theory of Employment, Interest, and Money."
The book helped spark the Keynesian revolution, which put forth the seemingly radical notion that activist government policies - particularly fiscal policy - were appropriate to "manage" a country's economy and promote full employment.
For this and other contributions, Keynes is considered the father of modern macroeconomics, and stands alongside Adam Smith and David Ricardo as history's greatest economic thinkers. But Robert Skidelsky, a University of Warwick historian and author of a massive three-volume biography of Keynes, finds such accolades wanting. In the concluding volume "Fighting for Freedom," which covers the last decade of the economist's life (1937-1946), Skidelsky provides a masterly chronicle of Keynes's legacy as a statesman, an orator, and a patriot for Britain.
Against the backdrop of World War II, Keynes fought a parallel war in which the key strategists were not generals, but economists battling for postwar economic supremacy. His foe: the United States, then an upstart economic superpower.
Much of the book is devoted to Keynes's five "missions" to the United States, during which he negotiated American economic assistance to Britain and, together with US Treasury official Harry Dexter White, helped shape the rules of the postwar global economy.
Already a world-renowned economist, Keynes made for a peculiar government envoy. His reputation made him something of a hero to the young New Deal economists in Washington, but his intellectual condescension grated on US negotiators. Moreover, despite their support for Britain against Germany, the Americans viewed the British imperial tradition with deep misgivings and, according to Skidelsky, were determined that "the United States, not Britain, would be the leader of the postwar free world." In this context, the Americans were wary of Keynes, who "with his subtle intelligence epitomised the traps which a declining civilization could set for a rising one."
Ultimately, even Keynes's intellectual firepower was insufficient to overcome stark geopolitical realities. With Britain weakened and bankrupt by war, the United States held all the trump cards. The British ultimately obtained a loan from the United States (not a grant, as Keynes first sought), and were forced to give up the right to discriminate against US imports.
In letters to friends and colleagues, a frustrated Keynes described the experience as "the most harassing and exhausting negotiation you can imagine.... [The Americans] mean us no harm - but their minds are so small, their prospect so restricted, their knowledge so inadequate, their obstinacy so boundless and their legal pedantries so infuriating."
Such recriminations miss Keynes's own tactical misfires. Keynes attached "enormous significance to the use of language as an element of power," explains Skidelsky, yet at times his eloquence backfired. In an impassioned speech to his own Labour government, Keynes convinced Britain's leaders that "justice" would only be served if the United States offered the British government a massive grant to compensate for Britain's wartime sacrifices.
Later, when Keynes sought to compromise and move toward a loan in the face of a tough American negotiating team, he found his own government - still enamoured with the "sweet breath of justice" Keynes had promised - unwilling to budge. As he put it, Keynes found himself fighting "a war on two fronts."
Keynes experienced additional frustrations at the landmark Bretton Woods conference of 1944, which brought together 44 countries to establish rules for the global monetary system and create the International Monetary Fund (IMF) and the World Bank. Harry Dexter White skillfully stage-managed the conference, marginalizing Keynes from key decisions.
The Americans controlled the allocation of voting rights in the IMF and established the US dollar as the key currency in the new global system. At the inaugural meeting of the IMF and World Bank - held in Savannah, Ga., in 1946 - Keynes presciently warned that putting the institutions in Washington would leave them vulnerable to US political domination. But again he was overruled.
"I came to Savannah to meet the world," Keynes later complained bitterly, "and all I met was a tyrant." Ultimately, Bretton Woods solidified the new balance of power in the global economy, with the United States displacing Britain.
"Like any human bridge between eras," writes Skidelsky, "Keynes found himself in the position of being denounced as a revolutionary by the old while being accused of betraying the revolution by the young."
Indeed, the economist's frequent compromises in his official duties left some of his followers wondering if the strong-willed economist had discarded his old principles. But whether real or perceived, Keynes's inconsistencies can best be understood in light of his unwavering devotion to Britain, for which he was willing to make any intellectual or even personal sacrifice.
Weakened by longtime ailments, Keynes worked far longer than he should have, often dictating from bed during his final years. He died on Easter Sunday in 1946 - barely two months after the Savannah meeting. As close friend and fellow British economist Lionel Robbins wrote to Keynes's widow Lydia, "Maynard [gave] his life for his country, as surely as if he had fallen on the field of battle."
In the introduction, Skidelsky explains the motive behind his massive study: "If this biography has rescued Keynes from the economists, and placed him in the world of history where he properly belongs, it will have achieved its aim." By any measure, Skidelsky has succeeded.
Carlos Lozada is the associate editor of Foreign Policy magazine.
John Maynard Keynes: Fighting for Freedom, 1937-1946
By Robert Skidelsky
580 pp., $34.95