THE GREAT KEYNES CON; A Family in 1930s Britain Inset: John Maynard Keynes

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Byline: Dominic Sandbrook

JOHN MAYNARD KEYNES put it best: 'Madmen in authority who hear voices in the air are distilling their frenzy from some academic scribbler of a few years back.' He could hardly have suspected that, 70 years later, that academic scribbler would be none other than Keynes himself. For as the global economic crisis continues to unfold, the economist's ideas of borrow-andspend government have come back into fashion with a vengeance.

And yet, in the rush to embrace the new Keynesianism, we are in danger of missing the point about the old version.

For Keynesianism did not, as is often imagined, put an end to the Great Depression. Indeed, the record of bigspending governments during hard times is not one to be proud of.

John Maynard Keynes was, at first glance, an unlikely candidate to become one of the great icons of Left-wing politics. Born in 1883 to a Cambridge economist and social reformer, he was brought up in an atmosphere of highminded privilege.

Eton and Cambridge, where he got top marks, gave him social gloss and academic distinction. He was no scholarly drudge, though, but a lover of beauty and pleasure. (Asked on his deathbed, in 1946, whether he had any regrets, he was said to have remarked: 'I should have drunk more champagne.') By 1925, Keynes was building a reputation as the most brilliant and controversial economist in the western world. After advising the Government during World War I, he seized attention in 1919 with an attack on the Treaty of Versailles, arguing (correctly, it turned out) that its punitive terms were bound to provoke a terrible German reaction.

And during the Twenties he cemented his image with a series of onslaughts on economic orthodoxy, chipping away at the three pillars of the old order the Treaty, the gold standard (the system whereby bank notes were literally exchangeable for gold) and laissez-faire government, the economic ideology which advocates minimal state intervention.

But one of the great myths about Keynes is that when the Wall Street Crash sent shockwaves through the world economy in 1929, politicians seized on his ideas as a solution to the Depression. They did nothing of the sort.

FOR although Keynes' brains were highly regarded, he remained a heretic. His trademark notions government borrowing and spending on public works to boost demand and alleviate recession were unpopular on both sides of the political divide.

Although Ramsay MacDonald's Labour government brought him on board in 1930, it did not take up his prescriptions.

For as a Whitehall joke at the time had it, if you asked five economists for their opinions, you would get six replies two of them from Keynes.

And when a major committee asked his advice on solutions to the Depression, he gave no fewer than seven different answers.

In fact, it was only at the margins of British politics than Keynesianism, as it eventually became called, really caught on.

Then, the most distinguished champion of government spending in hard times was the former Liberal Prime Minister David Lloyd George, one of the most dynamic and charismatic speakers in the country.

But Lloyd George was a political pariah, his image besmirched by a cash-for-peerages scandal and his private reputation damaged by a string of sexual misdemeanours.

Even many Liberals hated and despised him. 'The Goat', as he was called, was far from the ideal person to sell Keynes's radical economics to the political establishment.

Yet Keynes's biggest political admirer was even less salubrious.

During the Twenties, he had met a dashing young Labour politician, Sir Oswald Mosley, and it was he who made the most determined effort to introduce Keynes' ideas into British economic life.

As early as 1925, Mosley was arguing for nationalised banks, an economic council and centralised planning for full employment. …