A couple of years ago, I made the fateful decision to write a play about John Maynard Keynes and a night he spent on a college chapel roof with F. A. Hayek. Two of the greatest economists in history in a small, limited, theatre-friendly setting; sounded fun. The problem: I didn’t know anything about economics. Plus, economics is about math. Yikes. Words are your friends; numbers are the enemy–I found the prospect of research, uh, daunting. I did have a son who majored in economics, and he lent me his macro-economics textbook–that was a good place to start. And I read a whole bunch of books. Really, a boat-load of books. And I think now, finally, I’ve kind of gotten my head around the subject. Some. A bit.
One of the books I had to/got to read was Robert Skidelsky’s monumental 3 volume biography of Keynes. Each volume was some 700 pages, which means the three books together had to add up to, uh, (shoot, uh, 3 X 700, carry the 4)
3600 1278 a whole bunch of pages. But it was worth it–a great read about a great subject. So imagine my feelings when, couple days ago, my wife went to the library, and found a new Keynes biography, just published. Only way shorter, and tons more readable. Keynes, by Peter Clarke, Professor Emeritus of Modern British History at Cambridge. It’s quite splendid. It clocks in at a brisk 180 pages, and took a day, instead of the weeks it took me to wade through Skidelsky. Don’t get me wrong–I don’t in any sense resent the time I spent with Skidelsky’s 5478 many pages. But man, do I wish I’d read this first.
There have been three Keynes biographies that I know of, plus Nicholas Wapshot’s book on Keynes and Hayek, which is the one that got me started on the project. The first Keynes bio was by Roy Harrod, who was a friend of Keynes and wrote not long after his death. I found it pretty hagiographic, plus it chose to ignore Keynes’ homosexuality–gentlemen didn’t talk about that sort of thing when Harrod was writing. Skidelsky’s brilliant, but he presumes a readership with a basic knowledge of the period and history. I found I had to read it with my computer open to Wikipedia–spent a lot of time going ‘okay, who was Lord Halifax again?’ That’s one reason I like Clarke–he takes the time to give you a few sentences orienting you on major figures. Love that.
But the main reason I love Clarke is this: he’s not so much interested in writing a biography of Maynard Keynes, as in Keynes’ economics.
‘Cause here’s the thing; we’re in a Keynesian moment right now. Our economy remains struggling, not quite in full recession, but stagnating and with completely unacceptable levels of unemployment. Exactly the situation Keynes faced in the ’30s in the US and Britain. But the idea of a Keynesian stimulus has also been politicized. There are tremendous misconceptions about who Keynes was, what he taught and believed, and how relevant those ideas are to us, today. Those are the issues Clarke takes on. He’s primarily interested in the relevance of the Keynes legacy on public policy in the early 21st century.
So, some myths. The first is, that Keynes was ideologically inconsistent; the second, paradoxically, that he insisted on a rigid doctrinaire program to be followed without deviation. The reality is that Keynes was the very antithesis of the unworldly ivory tower academic. He managed to arrange his teaching schedule at Cambridge so he could spend most of his time dealing with huge responsibilities at the Ministry of the Treasury. He had a wide correspondence in the US, and frequently traveled there to meet with government officials. He may not have been architect of the New Deal, but he was consulted by the people who were its architects. He was also a director of the Bank of England. And a trustee of both Cambridge and Eton. And director of the Cambridge Art Theatre, a trustee of the National Gallery, a ballet impresario. And an astute and successful investor. And so on.
In other words, Keynes did not just write about economics, he practiced both economics and politics at a very high level. And he did so during the Great Depression and the two World Wars. Although his ideas were radical, he had to make them practically achievable. And Clarke shows exactly how he did it, how he would work within a committee and ministry structure to influence policy. He knew how to trim his sails to the wind. So if you accuse him of inconsistency, he also understood that any economic theory is worthless unless it can be actively implemented as policy.
So to apply Clarke’s insights to current events. President Obama’s response to massive unemployment was a Keynesian stimulus. And it’s axiomatic on the right that the Obama stimulus didn’t work, that it did not pull the US out of recession. So stimulus is a failed policy. So Keynes was wrong, and Obama wrong to believe in Keynesian economics.
But the stimulus did work. There’s just not a valid case that can be made for it not working. It slowed unemployment to a halt, and it reversed the job-loss trend. It just wasn’t large enough to do the job completely. Every major neo-Keynesian economist–Paul Krugman, Brad DeLong, Greg Mankiw–all called for a much larger stimulus. But Keynes would have appreciated the fact that a larger stimulus was simply not politically possible. President Obama had to do what he could with the money Congress would agree to authorize. Half-measures, sure. But Keynes knew all about half-measures. He spent the Great Depression urging the Roosevelt administration to triple what it was spending on New Deal programs. It was tricky though–Roosevelt had won election by accusing Republicans of fiscal profligacy. A larger New Deal wasn’t politically feasible. And Keynes knew that as well.
That’s the thing about Keynes–he was the ultimate realist. But my gosh, it’s interesting to see the parallels between his work in the 30s and today.
I think one of the objections to Keynes is, essentially, moral. We’ve all been raised to consider ‘thrift’ a virtue. Keynes thought thrift was destructive. Budget deficits are often described in moral terms, as ‘piling debt on the next generation.’ Keynes did not actually favor budget deficits, but he didn’t mind them, in national emergencies. Keynes even described himself as an ‘immoralist.’ So conservatives didn’t like him then and don’t like him today.
But above all, Keynes was an optimist. He believed in the positive power of good government, and he believed in it as an insider, as someone who spent most of his life working closely with government ministers. He believed in the creativity of common, ordinary people. He liked Roosevelt, in part because he too believed that the only thing we had to fear was, in fact, fear.
Here’s the Keynes I love:
The Conservative philosophy says, you must not try to employ everyone, because that will cause inflation. You must not invest, because how will you know if it will pay? You must not do anything, because this will only mean that you cannot do something else.
But we are not tottering to our graves. We are healthy children. We need the breath of life. There is nothing to be afraid of. On the contrary. The future holds in store for us far more wealth and economic freedom and possibilities of personal life than the past has ever offered.”
I love Hayek too, for other reasons. But right now is not the time for pessimism. I voted for a man who promised hope and change. Keynes would have liked him, I think.