Keynes’s Last Stand

The third and last volume of Robert Skidelsky’s wonderful, engrossing biography of John Maynard Keynes is a triumph over its raw material. It covers the last decade of Keynes’s life—1937 to 1946. By 1937, Keynes, who was born in 1883, was a very sick man. The heart infection which was to kill him in 1946 was well established, and incurable. The backdrop against which the events of this last volume are played out is one of remorseless physical decline; mentally, he remained as sharply imaginative as ever until a few months before his death. Indeed, ill as he was, the ministrations of his wife and doctor ensured that even in the narrowest physical sense he survived the stresses of wartime better than most of his colleagues at the Treasury and the Bank of England. But his achievements were the achievements of a dying man.

During these years, Keynes set his hand to four great enterprises. He met defeat in all four—though the defeats were partial, and sometimes prepared the way for something better. He had a vision of how Britain might fight World War II without rationing, and without a totalitarian planning system. The little book in which he argued for the control of wartime inflation through compulsory savings—How to Pay for the War—was a high point of Keynesian economic argument. It was also a last gasp of Edwardian liberalism. Keynes did not win the subsequent debate, and government policy did not achieve what Keynes wanted; but Britain did avoid the inflation and the industrial strife of World War I.

His second defeat was in the negotiations with the United States for the economic assistance without which Britain could not have resisted Germany in late 1940 and 1941. Lend-Lease enabled Britain to devote all its energies to fighting the war, without undue anxiety about paying its bills as it went; but its terms were not what Keynes hoped the United States would agree to, and they became a heavy burden on the British economy. The third was over his plan for a Clearing Union. Keynes wanted to do more than restore the pre-1939—or the pre-1914—system of international finance. With his eye on the depression of the 1930s, and on the shortage of gold and hard currency reserves that inhibited international trade, he wanted something more radical: a true international bank, an institution which, like a national bank, would take in deposits and advance credit, and ensure that international trade was never restricted by a shortage of liquidity. Keynes’s plan was thus very different from the compromises of Bretton Woods, which set up the International Monetary Fund and the World Bank. To establish these institutions was no small achievement; but Keynes was not a willing architect of what emerged from Bretton Woods. It can be argued that he secured as much by way of international economic cooperation as was humanly possible, but he continued to fight for something better until a few weeks before his death in the spring of 1946.

He had become exhausted when he led Britain’s negotiations with the United States during the last few months of 1945 over the replacement for the Lend-Lease agreement. Keynes hoped for a generous settlement; instead, he secured a grudging and inadequate loan that neither met the needs of the British government nor assuaged the anxieties of the American government. The Marshall Plan of 1948 implemented a scheme that Keynes had sketched just as World War II began, and it achieved what he had hoped to negotiate in 1945. By then he had been dead for two years.

Robert Skidelsky’s triumph is two-fold. He gives the reader an astonishingly clear account of financial and commercial negotiations whose intricacy and difficulty reduced public servants on both sides of the Atlantic to puzzlement and despair. In doing so he conjures up the excitements of diplomacy at the highest level. It is hard to imagine a reader who knows no economics finding Fighting for Freedom easy going, but equally hard to imagine a reader who will not want to struggle through the thickets.

Secondly, Skidelsky keeps the personality of Keynes in the center of the story. For light relief, there is the constant presence of his wife, the former Russian ballet dancer Lydia Lopokova, with her fractured English, her taste for mischief, and her absolute devotion to Maynard’s welfare. But squarely in the middle of the picture is the charm, the intelligence, the extraordinary social and economic imagination of Keynes himself. Asked by an interviewer whether he would have liked Keynes, Robert Skidelsky gave exactly the right answer. “Yes,” said Skidelsky, “as long as he had liked me.” The pleasures of his approval are obvious, but it was no fun at all to be disliked by him. His contempt for sloppy thinking or failure of imagination was withering; he could and did reduce future Nobel Laureates to tears. Keynes’s savagery is much in evidence in these pages.

1.

Fighting for Freedom appeared in Britain a year ago. A British reader will be struck by the change of subtitle for the US market. Fighting For Britain was the subtitle in the United Kingdom: it is Fighting for Freedom for American readers. Does Robert Skidelsky or his publisher think that two hundred and twenty-five years after the Revolution, Americans are—or were during the Second World War—slow to associate the defense of Britain and the defense of freedom? Or does he fear to alienate the sympathies of his American readers by suggesting that Keynes was fighting for Britain and against the United States?

The answer to both questions is broadly speaking “yes,” though Skidelsky is rather cagey about it. He says in a new preface that the changed title better reflects the fact that the United States and Britain were allies, fighting together for freedom and democracy and against dictatorship and militarism. That is true, though it understates the role of the country that suffered by far the largest number of human casualties—under Stalin’s Soviet dictatorship. More crucially, it obscures the issue that dominates Fighting for Freedom, as Skidelsky admits as early as the second paragraph of his preface: allies may fight as allies on the battlefield in a common cause, but there is nothing surprising about their fighting one another behind the scenes when it comes to paying the bills for the struggle.

The new title also obscures a theme that the book tackles with great verve: Britain and the United States—that is to say, the leading public servants and politicians on both sides—held many preconceived opinions about each other. These often went so deep that they were never discussed, even though they determined how the negotiations went and what the outcome was. And each side could be strikingly ignorant about each other’s political systems. Michael Ignatieff reports Isaiah Berlin’s reaction to Keynes in the summer of 1944 when the Bretton Woods agreements were being negotiated. By this time, Berlin had been in New York and Washington for three years and was shocked by Keynes’s lack of feel for American politics:

He seemed to think that the despatch of some appropriate London Times editorial to the office of a recalcitrant southern senator would bring him round to appropriately enlightened views. “Would this make a difference?” he would ask [Berlin]. “None whatever,” [Berlin] replied.¹

The British title does better justice to the tone of the book and to its shape. Keynes, as Skidelsky has eloquently said, fought his own war. Churchill led the literal, physical, blood-and-bullets war against Germany; Keynes led a financial and diplomatic struggle, a war of ideas. Against whom? In part, against his own masters in the Treasury and in government, but mostly against the US, Britain’s banker, grain store, and supplier of military materiel. Keynes’s war was less important than Churchill’s, and fought with different weapons; it is hard to imagine Britain surviving 1940 without Churchill. It is easy to imagine Britain winning the war without Keynes’s help—though impossible to imagine the postwar economic scene without his influence. In the practice of diplomacy Keynes alternated the silky and the sarcastic, and relied for his effect on sheer intellectual authority. Sadly for Britain, his weapons were less effective in Washington than in London. In Washington, they fueled the old American suspicion that the sophisticated British had come to take their American cousins for a ride. In the case of the postwar negotiations, Keynes’s success with the British government was the most acute source of his weakness in Washington.

It would be wrong to exaggerate the reluctance of American politicians and administrators to help the British war effort and equally wrong to exaggerate the narrowness of Keynes’s aims. Keynes’s reputation as an economist was as high in the United States as it was in Britain. In both countries, younger economists rushed to embrace the heresies of the General Theory; and Keynes’s American critics—Jacob Viner and Joseph Schumpeter in particular—were as distinguished as Friedrich von Hayek at the London School of Economics. And Keynes’s practical recipes, such as his emphasis on public works and an unconcern with balancing the budget in times of depression, chimed well with the policies of the New Deal even where his direct influence on the architects of the New Deal is hard to trace. The attitude of the US Treasury was at worst that of a banker who fears that an immensely plausible customer is telling him something less than the whole truth, and his American interlocutors never doubted that Keynes, after the Depression and the war, was eager to put the economy of the whole world back on the rails, rather than that of Britain alone. Keynes’s case for American generosity toward Britain was part of the case for generosity on the part of creditor nations toward debtor nations generally.

But it would also be wrong to underestimate the strength of Keynes’s patriotism. Bertrand Russell once remarked that love of England was just about his own strongest emotion. This might seem a strange reaction for someone who fought so passionately against British involvement in World War I, but Russell’s patriotism was not unlike Keynes’s. Keynes served in the Treasury during that war as he did in World War II, but he was very much of one mind with Russell. Keynes subscribed to the secular religion that he and his Bloomsbury friends extracted from G.E. Moore’s Principia Ethica. Beauty and personal friendship were the only two things in the world absolutely good in themselves; the environment in which those goods could most successfully be pursued was that of liberal Edwardian England—Cambridge, Bloomsbury, the Sussex of Charleston and Tilton.

In the two years before the outbreak of war, Keynes was very ill indeed. He had a bad heart attack in May 1937, when he was fifty-four, and as soon as he was well enough to travel confided himself to the care of a private clinic located at Ruthin Castle in Wales. The first step was to discover exactly what was wrong with him. The diagnosis, Skidelsky writes, was provided by “the magnificent Sir Edmund Spriggs, KCVO, who had been consulting physician to Edward VII…; he was assisted by the resident physician, Sydney Wentworth Patterson, a bacteriologist.” What they discovered was subacute bacterial endocarditis, caused by streptococcus viridans, green bacteria that lodge in and attack the valves of the heart. Lydia referred to these bacteria as “vegetables,” and gave friends vivid reports on the struggle against them.

With no antibiotics, Keynes was given a regime of bed rest. After three months of this, he went home to his country house at Tilton in Sussex; and for the next eighteen months he led the life of an invalid. It was only in the early spring of 1939 that he discovered—nobody knows how—an extraordinary Hungarian doctor named Janos Plesch. Keynes regarded him as “something between a genius and a quack,” but found him a kindred spirit. His first step was to give Keynes one of the new sulfa drugs; this cured the streptococcal infection in his throat but could not cure the infection in his heart. All the same, the effect was immediate; with the lesser evil cured, Keynes was no longer fighting infections in his throat and chest, and could function for as long as his heart held out. With care he could live and work for another decade. As he recovered his strength, the British went to war with Nazi Germany.

2.

Keynes was neither a pacifist nor an appeaser. But as the author of The Economic Consequences of the Peace, he was a world-famous critic of the Versailles settlement after World War I. He had hoped that if Germany’s real grievances against the postwar settlement were met, peace could be preserved in Europe. Hitler, on the other hand, presented a distinctive problem; negotiation was impossible. He would not keep agreements, and regarded any attempt to make agreements with him as a sign of weakness. Neville Chamberlain’s wish for something clear-cut was the last thing needed in 1938; Keynes favored the line pursued by Anthony Eden—to make friends with the Soviet Union and the US, while keeping the German and Italian dictators guessing. It was a faint hope. In a letter of July 1937 to Kingsley Martin, the editor of the New Statesman, Keynes argued that a natural sympathy between dictators made it easy for Hitler and Stalin to become allies, and he predicted the Nazi–Soviet pact.

Keynes’s overriding thought was that no government should sacrifice its own people unless they were actively in support of war. He would not have gone to war just to save Poland or Czechoslovakia; but once public sentiment was clear that Nazi Germany had to be stopped from swallowing Europe piecemeal, Keynes was for war. “Some sort of die had been cast,” Skidelsky writes. “It was not one he would have cast. Britain had gone to war for an object he did not think worth fighting for—and without the United States. But he accepted the conflict as inevitable. The British people had forced the hand of their rulers. Keynes’s most important test for going to war had been met.”

Keynes’s war work now began. From the British declaration of war on September 3, 1939, until the American entry into the war two years and three months later, he was engrossed in financing the war. His first contribution was a series of articles that were worked up into a pamphlet, How to Pay for the War, which Samuel Brittan recently described as a high point of Keynesian thought, and relevant once more in a world where the United States will be spending vast sums on war and preparations for war.² Robert Skidelsky agrees about the merits of How to Pay for the War: “It engaged all the qualities of his complex nature. The union of theory and practice, the linking of economic doctrine to political philosophy here achieved its most compelling artistic expression.” It was a dazzling theoretical performance, and the economic imagination it displayed was extraordinary. It also displayed Keynes’s attachment to the liberalism of his Edwardian youth quite strikingly.

Keynes wanted the war to be fought without totalitarian controls over everyday life in Britain. This was a lost cause, partly for practical reasons but also because Churchill—probably rightly—thought that anything less than total mobilization would have been unintelligible to the British people. British society was closer to being completely mobilized than any other belligerent, and content to be so. On the question of how to fight a war without economic disaster, Keynes had more success. Everyone agreed that in wartime, civilian consumption was a “residual,” whatever could be afforded after the war had been paid for. And economists agreed that the great danger was inflation. War would cure the unemployment of the pre-war years, but the problem in war was excess, not inadequate, demand. The question was how to divert the necessary resources into war and away from consumption. In World War I, Britain had done this by inflation. In the seven years between 1913 and 1920, the price level rose two and a half times, while working-class wages lagged behind prices. The “hard-faced men” did well out of the war, since profits and dividends were buoyant; their employees suffered. The burden of paying for the war had been unequally borne by the least well-off members of society, and it could not safely be done a second time.

The argument lay between “fiscal” and “totalitarian” planning. Keynes liked fiscal planning because it used the price mechanism in flexible ways and avoided the creation of a despotic bureaucracy. Keynes’s favored device was a system of compulsory savings, taking away the extra incomes generated by the wartime economy for the duration of the war and returning them afterward. Meanwhile the money would be available to finance the war. The government shrank from this as much as from the inflation-driven devices of World War I, and feared that compulsory savings would erode the interest paid for voluntary savings of those who had something to save. Sir John Simon, the chancellor of the exchequer, turned Keynes’s scheme down in his budget for 1940, though he had grace enough to write that Keynes’s plan was the best of all solutions, but politically impossible. The budget of April 1940 was followed within three weeks by the German invasion of the Low Countries and France, and the arrival of Winston Churchill as prime minister.

The dire straits into which Britain was plunged by the fall of France meant that Keynes was brought back into the Treasury to play a central part in thinking through the taxation and borrowing needs of a wartime government, and then in securing the overseas finance needed to pay for imports. Keynes got some of his ideas through and failed with others. As better national income statistics were compiled, the tax authorities became reconciled to treating a small part of income tax as a withholding tax to be repaid in due course. Once he saw that the Labour Party could not be budged from their support for a system of subsidies for the necessities of the working class, he settled down to devise one. The visible egalitarianism implied in a comprehensive rationing system was the price of political unity.

Keynes reentered the Treasury in installments, beginning in August 1940. First set to work on exchange controls, he soon began to prepare memoranda on the way the government could close the gap between its war expenditure and the funds it had available, and in the same vein, on what, by means of taxation, it must withdraw from consumption to control inflation. Between the autumn of 1940 and the spring of 1941, Keynes worked for thirteen hours a day trying to get plausible estimates of the size of the problem and trying to persuade his skeptical critics in the Treasury, the Revenue, and the Bank of England that some version of his compulsory savings surcharge was a workable option. In the process, he provoked other people to provide for the first time accurate estimates of national income and expenditure.

What was Keynes’s impact? On the one hand, he had to swallow the truth that his most imaginative ideas were politically unacceptable; but the broad shape of wartime taxation—with the top rate of income tax set at 97.5 percent—owed almost everything to him. In the long term, the government’s failure to appreciate Keynes’s favorite ideas was bad for postwar Britain. Compulsory savings meant a wartime surcharge to be returned in installments after the war, and implied a return to a low-tax regime after the war. Instead, the top rate of income tax stayed above 80 percent for thirty-five years, which was good news for the creators of the British welfare state but bad news for growth and innovation. The game of “what would Keynes have thought?” is irresistible but unfruitful.

3.

Keynes assumed from the beginning of the war that Britain would have to fight the war with the help of the United States. This was not a universal view. Indeed, there was no universal view, since nobody knew quite what to expect. In November 1939 Keynes composed a letter to Roosevelt that he (probably wisely) never sent. In it he urged Roosevelt to extend war credits to Allied governments, and use the postwar repayments for a fund for the reconstruction of Europe in order to save it from communism. He described what amounted to a premature Marshall Plan as an indemnity “paid by the victor to the vanquished.” But Keynes had no more insight than anyone else in the British political elite into what American policy in fact would be. Skidelsky comments wisely that

Like most liberal Englishmen, Keynes overestimated support for Britain in the United States. British expectations of assistance concentrated on the President, ignored Congress and assumed that the (largely Republican) east-coast WASP elite represented US public opinion.

In particular, he never understood that Roosevelt actively loathed the British Empire, disliked British aristocrats, and thought the pre-war Foreign Office had been pro-fascist in its sympathies. As to wider public opinion, it was not obvious to Americans that the British were entitled to hang on to India by force but that Germany was not entitled to march into the Rhineland or the Sudetenland, or unite Germany and Austria in the 1938 Anschluss. At a less principled level, Americans had less at stake in Europe than many Europeans assumed. This fact dictated relations in the immediate aftermath of the war, too. Only when the specter of a Soviet takeover of Europe seized the American imagination did that change.

As to the pre-1939 economic conduct of the British, Americans had plenty to complain about—whether justly or not. The British had repudiated government debts incurred in World War I; they had devalued the pound when the American economy was in recession; and the system of Imperial Preference shut American goods out of markets that American manufacturers wanted to enter. Fighting the war together improved relations; but even after Pearl Harbor, the American attitude to Britain combined admiration for British resistance to Hitler with skepticism about nearly everything else.

Keynes’s interest lay in the fate of Britain’s foreign currency reserves. The problem was simple enough. Anyone who had the chance to convert sterling into dollars had every reason to do it; the United States had no intention of getting into the war, was a huge creditor, and was in no danger of devaluing its currency. Britain ran an elaborate system of exchange controls to stop sterling leaking into dollars, but it had many holes in it. Nonresidents could sell sterling-denominated securities for dollars; and the licensing system allowed nonessential dollar imports to come into Britain.

The war largely destroyed Britain’s export trade, so a fully mobilized Britain fighting a full-scale war world-wide would inevitably run down reserves and pile up debts. There were other possibilities, such as fighting a more defensive war, abandoning large parts of the Empire to the enemy, and trying to win a war of attrition. None of the alternatives was palatable, and all involved risks as great as assembling the resources to fight a global war. There was, however, only one place to look for help, and that was the United States.

The complications were innumerable. When war started, the United States was still governed by the Neutrality Acts of 1935 to 1937, which forbade the sale of arms and war material to belligerents and forbade the making of government loans. Private loans were ruled out by the Debt Default Act of 1934, which banned private loans to any country “delinquent in its war obligations.” An amendment to the Neutrality Acts, pushed through Congress in November 1939, saved Britain from disaster. This invented “cash and carry,” which allowed belligerents to buy what they could purchase in cash and import in their own vessels. For the next eighteen months, American help to Britain was given on this strictly commercial basis.

It could not go on. The British could only pay for their purchases by selling gold or dollar securities—and could only transport gold one way and their supplies the other for as long as there were enough ships for the purchase. The German submarine war eroded the supply of ships, and the gold and dollar reserve was good for at most two years; by the fall of 1940, the hemorrhage was such that British reserves were worth $400 million against debts of $1 billion. The system might have survived a short war, but once Hitler had conquered most of Europe in the summer of 1940, a short war was not in prospect. Something else was badly needed.

What was negotiated was Lend-Lease, under which the United States supplied Britain with anything Britain needed, and shipped in American vessels, and provided a loan of $7 billion to pay for the goods. Roosevelt defended it to Congress with the observation that when your neighbor’s barn is on fire you lend him your hose and discuss what he owes you for it afterward. But negotiations on the terms of the loan and on what the United States would accept as a quid pro quo were long and difficult. Keynes was not a good negotiator. His opposite numbers, now and until the end of the war, were Henry Morgenthau and Harry Dexter White. The former disliked Keynes’s cleverness, and the latter was, if not an active Soviet agent, closely in touch with Soviet intelligence and more interested in the welfare of the Soviet Union than in that of Great Britain. Morgenthau was willing to work for a generous settlement, so long as it only aimed to defeat Germany and not to preserve Britain as a great power. White admired Keynes as an economist, but was more interested in ensuring that American policy served Soviet needs.

The outline of the conflict between the United States and Britain is not difficult to perceive. The reason why it was impossible to resolve remains obscure. The American view was that Britain was a supplicant, that the British must spend whatever they could before they were entitled to assistance, must commit themselves to a level playing field for commerce after the war, and must during the war avoid using in their export trade anything originating in the Lend-Lease program.

The British—Keynes in particular—had their eye on the need to preserve something for the postwar years. Keynes could not bring himself to beg for help, and almost none of the British negotiators could do so. Pearl Harbor meant that there could be no further suggestion that the United States might simply stop Lend-Lease; but it did not reduce the suspicions of the US Treasury and State Department that the British were not being frank about their economic condition, or the outrage of the British that their American allies could not understand the disproportionate burden being shouldered by the British.

It was under these shadows that Keynes began to put together the schemes for a postwar world that led thirty months later to Bretton Woods and—eventually—to the IMF and the World Bank. Once more, the basic conflicts are simple to discern, their resolution appallingly complicated to describe; since we are living with the aftermath, it is also a history about which complete neutrality is hard to maintain. The aim of Keynes’s scheme for what he described as a Clearing Union was to ensure that world trade did not collapse after the war: it was—to summarize brutally—a scheme for ensuring that there would be no deflation, no depression, no shortage of liquid funds in the international banking system. It was a debtor’s scheme, since it was intended to get funds out of the hands of countries that hoarded their assets—France and the United States being the two pre-war villains of this story.

It was also an assault on the nineteenth century. Keynes’s anxieties about a shortage of international liquidity led him away from any return to a gold standard. They also led him into head-on conflict with the American view of the world. The United States owned most of the world’s gold reserves, and as the world’s largest creditor nation, it was not in the country’s interest to put its reserves at the disposal of whatever hard-up country needed them. Since foreign trade was still a small proportion of American economic activity, it took some time for the US to recognize that it could not easily trade with countries who had neither exports to sell to the United States nor reserves with which to purchase imports. Harry White was a good-enough Keynesian to take the point unhesitatingly. Indeed, it is hard to imagine that there could have been a “White Plan”—and therefore an IMF—at all, unless he and Keynes had been of one mind most of the time. The political constraints imposed by Congress and its staunchly non-Keynesian paymasters and lobbyists were another matter.

The Bretton Woods conference, held in New Hampshire in the summer of 1944, was high drama in more than one sense. The fact that the representatives of so many Allied nations were sitting down to plan the postwar economic order marked, among other things, the certainty of an Allied victory in the near future. But the conference was also, as Skidelsky’s account makes clear, something of a charade. The outline of what came to be known as the Bretton Woods system had been fought out between Keynes on the one side and Harry White on the other long before the delegates showed up. The detailed discussions during the conference were exhausting, but the United States had the votes to win any argument, and they came down to what concessions Keynes could extract.

What emerged was the IMF and the parent of the World Bank—the Bank for Reconstruction and Development—described by Keynes as a bank which is called a fund and a fund which is called a bank. What the United States insisted on building into the IMF’s constitution was exactly what Keynes wanted to avoid; this was the insistence that debtor countries had to seek the agreement of the IMF before they could devalue their currencies. In the intervening fifty-five years, of course, there have been many periods when Keynes’s anxiety about a shortage of international liquidity seemed absurd. It was the hemorrhage of gold and dollars out of the United States that seemed alarming to many. But the fundamental problem has always been that the IMF was an organization controlled by the United States, run out of Washington, and most of the time committed to the conventional wisdom of domestic central bankers. The Argentine government is nearly bankrupt after following conventional advice to firmly link its currency to the dollar. Whether Keynes would have anything useful to say to the Argentine government today is another of those questions that are irresistible but futile and unanswerable. Still, it is plain enough that he would almost always have advised a country against tying its currency to the dollar without, at least, some escape route in an emergency.

4.

After Bretton Woods, it was time for Keynes to return to the vexed question of how Britain was to survive after the war. Ideally, the British would have wanted the war in Europe to finish in 1944 and the war in the Pacific to finish at the end of 1945. This would have allowed time to pick up the pieces of British export trade, rebuild currency reserves, negotiate transitional arrangements with countries in the Empire—notably Egypt and India—that had enormous sterling balances that they could not convert into any other currency, and negotiate with the United States over what kind of regime would follow the end of Lend-Lease.

Instead, everything that could go wrong did go wrong. The war in Europe dragged on six months too long, and Japan surrendered four months too early. When Roosevelt died, the special relationship between Roosevelt and Churchill died with him. To the dismay of the British, the American reaction to the end of the war was simply to turn off the tap of Lend-Lease and assume that Britain would carry on as if it was 1939 and no war had happened. This was, as Skidelsky points out, almost unintelligible to Keynes. Keynes assumed that it was as obvious to Americans as it was to the British that the British had fought a much harder war than they had; a million British civilians had been killed by German air raids, while the British had fought for nearly six years and the Americans for less than four.

Keynes went to Washington in the autumn of 1945 looking for what he had—with fatal confidence—charmed the new Labour government into believing he could deliver, namely “Justice.” Justice, in Keynes’s view, required the United States to make Britain a gift of sufficient credit to restart overseas trade, and rebuild British credit. Many on the left were both less optimistic than he and less interested in preserving relations with the United States. They would have settled for what they called “austerity,” and Keynes called “Starvation Corner.” Essentially, this would have involved a near-Soviet degree of planning at home, managed trade on a bilateral basis, and many years of belt-tightening by an already exhausted population.

Keynes understood the degree of distrust with which the American government approached all such discussions no better than he had four years earlier. Negotiations were made harder by the hangovers from the Lend-Lease negotiations. The British had agreed to trade liberalization after the war, and their American creditors now wanted to see them deliver on the promise. The ins and outs of the negotiations are hard going even with Skidelsky as one’s guide; but once again, the basic issue is simple enough. The United States was willing to lend Britain a good deal of money but wanted convertibility of the two currencies; the British were fearful that convertibility would simply open the floodgates and drain Britain’s dollar reserves, with or without an American loan to bolster them. Faced with an ultimatum, the British accepted the American terms, and their fears were soon proved to be justified. But by the time the British had run through the loan and had been forced to abandon convertibility and devalue, Keynes himself was dead.

This final struggle left Keynes completely exhausted. He had also had enough of the Labour government and its leaders felt the same about him. The chancellor of the exchequer, Hugh Dalton, had known Keynes at King’s College, Cambridge, some forty years before and neither liked the other. And Keynes was not a natural ally of the Attlee government. He had lost his political credit not so much by charming the Labour leaders with the vision of a postwar settlement in which American aid would support their mildly socialist plans as by having to disenchant them with the cold truth that no such aid would be forthcoming. He had to make it clear that the nationalization of the railways, the coal industry, iron and steel, and shipbuilding was not a project to appeal to an American government.

In retrospect, the astonishing thing is that Keynes died regarded as a hero. When his heart failed him, in April 1946, it was universally agreed that he died on active service, and had killed himself struggling to rescue an essentially bankrupt undertaking. Robert Skidelsky is cautious about this hero-worship. It might, he thinks, have been better if Britain had never looked for American help at the end of the war and had passed the ruinous cost of behaving like a great power over to the United States by just walking away from southeast Europe and the Middle East. Many thoughts in the same vein must occur to anyone contemplating the cost of hanging on to the remnants of the Empire.

But Keynes defies such criticism. For one thing he never saw himself as setting the wider political agenda; economists he thought were a sort of technician—perhaps like a doctor who cannot teach his patient how to live a decent and worthwhile life, but can keep him alive to do it. Economists were neither the cream of civilization nor a threat to it; they might usefully help to make civilization possible by freeing humanity from the curses of overwork and unemployment. Nor did he think of himself as providing a fixed and timeless truth about the functioning of the economy; fellow economists who complained that he dressed up policy advice as pure theory were quite right, but even more importantly wrong. His sense of the vulnerability of the national and international economy to unpredictable historical mutations meant that he fashioned tools for thinking on the move. The tools might be useful indefinitely, but the situations to which they applied would hardly ever recur twice.

If there had been no World War II, Keynes would still have done his country good service. Even in the middle of the war, he put together what became the Arts Council and carried on the fight for a home for ballet and opera—just before he died he attended the opening of Covent Garden. If he had not been fighting for Britain by inducing the United States to act as banker to the free world, he would have been fighting for Britain by inducing his pragmatic and philistine countrymen to put their hands in their pockets for the sake of a higher culture. The presence of this other Keynes, allowed by circumstances to appear only intermittently in this story of the economics of total war, is not the least of the pleasures of Robert Skidelsky’s memorable and moving account. For those who have not the stamina for the trilogy, Skidelsky says he is now writing a one-volume account of the whole life. It was on just that one-volume work that he embarked in 1972; and in view of his great accomplishment since, the prospect of his presenting a relatively short, unified account of Keynes’s life and work arouses high expectations.