The Warrior Economist ; While Britain Fought Hitler, Keynes Struggled with the US

Article excerpt

Anyone with the wherewithal to suffer through Economics 101 has encountered John Maynard Keynes, the 20th-century British economist who transformed his profession with his 1936 work "General Theory of Employment, Interest, and Money."

The book helped spark the Keynesian revolution, which put forth the seemingly radical notion that activist government policies - particularly fiscal policy - were appropriate to "manage" a country's economy and promote full employment.

For this and other contributions, Keynes is considered the father of modern macroeconomics, and stands alongside Adam Smith and David Ricardo as history's greatest economic thinkers. But Robert Skidelsky, a University of Warwick historian and author of a massive three-volume biography of Keynes, finds such accolades wanting. In the concluding volume "Fighting for Freedom," which covers the last decade of the economist's life (1937-1946), Skidelsky provides a masterly chronicle of Keynes's legacy as a statesman, an orator, and a patriot for Britain.

Against the backdrop of World War II, Keynes fought a parallel war in which the key strategists were not generals, but economists battling for postwar economic supremacy. His foe: the United States, then an upstart economic superpower.

Much of the book is devoted to Keynes's five "missions" to the United States, during which he negotiated American economic assistance to Britain and, together with US Treasury official Harry Dexter White, helped shape the rules of the postwar global economy.

Already a world-renowned economist, Keynes made for a peculiar government envoy. His reputation made him something of a hero to the young New Deal economists in Washington, but his intellectual condescension grated on US negotiators. Moreover, despite their support for Britain against Germany, the Americans viewed the British imperial tradition with deep misgivings and, according to Skidelsky, were determined that "the United States, not Britain, would be the leader of the postwar free world." In this context, the Americans were wary of Keynes, who "with his subtle intelligence epitomised the traps which a declining civilization could set for a rising one."

Ultimately, even Keynes's intellectual firepower was insufficient to overcome stark geopolitical realities. With Britain weakened and bankrupt by war, the United States held all the trump cards. The British ultimately obtained a loan from the United States (not a grant, as Keynes first sought), and were forced to give up the right to discriminate against US imports.

In letters to friends and colleagues, a frustrated Keynes described the experience as "the most harassing and exhausting negotiation you can imagine.... [The Americans] mean us no harm - but their minds are so small, their prospect so restricted, their knowledge so inadequate, their obstinacy so boundless and their legal pedantries so infuriating."

Such recriminations miss Keynes's own tactical misfires. Keynes attached "enormous significance to the use of language as an element of power," explains Skidelsky, yet at times his eloquence backfired. …

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