Keynes’s Last Stand

John Maynard Keynes
John Maynard Keynes; drawing by David Levine

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,…

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