It’s the 1930’s, and mainstream economic circles are ringing with cries of “Humbug!” and “Balderdash!”, as monocles burst asunder from the faces of Neo-classicalist’s everywhere. The source of this orthodox outcry? John Maynard Keynes. The powerhouse of post-war policy. The monster of multiplicative effects. His intellect, passion, and unparalleled ability to apply theoretical concepts to the real world brought about a revolution in how governments tackle economic adversity, the ideology of which dominated the policies of capitalist governments around the world for most of the 20th century. However, too often in this post-GFC climate we merely associate the name Keynes with “recessions means spend, boom means save”, which is a gross oversimplification of the work of a man who fundamentally changed an entire field of study.
Firstly, I feel that it is important to address one issue. I know why you are all reading this. You have opened the article, with the simple pretense of reading the history of a man who made some of the most significant contributions to economics since Adam Smith. But I know the truth. You want to know who he hooked up with. Thus, I believe that if we get this out of our system early, we can progress to some serious discussion of economic history. As such, a list of some of his confirmed lovers is given below:
- Daniel Macmillan (brother of future British Prime Minister Harold Macmillan)
- Dilly Knox (a World War 1 code-breaker, who was instrumental in brining the US into the war by assisting in decrypting the Zimmerman Telegram)
- Arthur Hobhouse (the man largely responsible for the current National Park system in England and Wales)
- Duncan Grant (another member of the influential Bloomsbury Group, most famed for his post-impressionist artistic style)
- Ray Strachey (a prominent member of the women’s suffrage movement, and one of Keynes’s earliest heterosexual love interests)
- Lydia Lopokova (a Russian ballerina, whom Keynes married in 1925)
It should be noted that the above list is not comprehensive, and merely lists the most notable of his interests. Now that the trivialities have been covered, we can get on with what is truly interesting…economic history… right?
In his formative years, Keynes followed the educational structure of so many of the last centuries great intellectuals that it almost sounds cliché; born in Cambridge, schooled at Eton (on a scholarship, of course) and later attended Kings College. Aside from a brief stint in the now defunct India Office, he rose quickly from clerk, to member of a Royal Commission and then, in 1915, to the Treasury. His performance during the time he spent there garnered him international notice; for example, his decision to sell the limited supply of Spanish Pesetas he had worked so hard to obtain, instead handing them over to the British government (and thus risking the wrath of a vengeful Secretary of the Treasury) resulted in a sharp depreciation of a currency that up until that point, the Treasury had been struggling to find a continued source of.
Keynes’s actions (or rather, lack thereof) at the Versailles Peace Conference showed the man behind the mathematician, through his ardent opposition of reparation payments that were set to beggar the German people (those most prominently representing Britain during discussions were given the moniker of the Heavenly Twins, as the reparations they intended to demand from Germany were “astronomically high”). Keynes suggested writing down German debts, to the benefit of not only Germany but other impoverished European nations (through maintaining strong export demand and international trade). He was overshadowed however, largely due to extremely anti-German post-war sentiment, and the fact that the US was the largest creditor at the time. Keynes was disgusted by the outcome of the conference, going so far as to write that the resulting policies were “…reducing Germany to servitude”. Perhaps I am being too generous to Keynes; a harsh peace would surely deter future aggression? I can’t seem to recall any particular conflicts arising in Europe after World War 1…
In the years following the Versailles conference, Keynes continued to publish a number of influential works, notable among them A Treatise on Probability and Treatise on Money. It was The General Theory of Employment, Interest and Money, however, which would become his most famous work. Recall how, in opening this article, I expounded upon the offended sensibilities of Neo-Classicalists everywhere? This piece of work alone would be enough to have self-respecting neo-classicist calling for Menger to come and save them. A strong, theoretical justification for government intervention, and the absolutely radical suggestion that maybe, just maybe, workers will not reduce the price for which they will supply their labour until firms can employ them once again (price stickiness, which today appears perfectly acceptable, seemingly went against classical rationality assumptions).
Following his death in 1946, Keynes’s ideas continued to gain traction, dominating policy decision until it began to fall from favour during the 1970’s (due, in no small part, to the critiques of Milton Freidman). It was not until the GFC that his suggestions for expansionary policies were again embraced by the global community, in Australia particularly (as to their effectiveness, one could debate for hours). Though whether or not you agree with his economic and mathematical contributions, there’s no doubting that he’s been one of the most influential figures of the 20th century… Or if you’re not entirely academically inclined, you’ve got to agree that he was an absolute player.