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- Harry Mount, the London Telegraph


April 1994

The genius of capitalism

by David Frum

A review of John Maynard Keynes: The Economist by Robert Skidelsky.

During the writing of his biography of Mountbatten, Philip Ziegler posted a little reminder to himself above his desk: “Despite everything, he was a great man.” Unfortunately for the anecdote, in Mountbatten’s case the reminder was untrue. It would have made for a much better story had the note been written by Lord Robert Skidelsky to guide him as he chronicled the life of John Maynard Keynes.

Keynes was one of the most influential thinkers of our century, and his influence has been almost entirely bad. Since time immemorial, governments have debased their currency, misappropriated their people’s wealth, and diverted the proceeds from productive investment to garish monuments to themselves. It was Keynes who supplied governments with arguments—and since Keynes was Keynes, brilliant arguments—to justify this outrageous conduct. If John Maynard Keynes had never lived, the Western world might still be the overtaxed, inflationary, statist mess that it is, but at least the people responsible for the mess would have to pretend to be embarrassed about it.

Instead, Keynes’s fertile and subtle mind manufactured a huge armory of clever defenses of bad public policy. Since the publication of his 1936 masterwork, The General Theory of Employment, Interest, and Money, opponents of profligacy in government and state manipulation of the economy have had to contend not merely with the usual selfishness and cowardice of politicians but also with the subversive power of Keynes’s mordant and glittering mind.

Keynes did for economics what Nietzsche did for morals: he demonstrated that the absolute moral truths that earlier generations believed in were merely intellectual constructs, and constructs that could do with a great deal of improvement. Pre-Keynesian economics saw economies as naturally self-adjusting. Whatever dislocations and disturbances might flare up from time to time, over the long run an economy would perform as well as the skill, effort, and accumulated capital of the community permitted. This was the complacent theorem that provoked Keynes’s famous jeer that “in the long run we are all dead.”

Keynes argued that economies could underperform their potential for worryingly long periods of time, and that their tendency toward underperformance had grown worse since 1914. The problem was money: in the frightening postwar world, wealth-owners too often held their wealth in cash, handy in case of emergency. According to pre-Keynesian orthodoxy, this was no problem: if the owners of wealth did not invest it, the banks in which they stored it would lend to someone who would. If large numbers of wealth-owners succumbed to the jitters, the amount of cash in banks would grow; with cash plentiful, interest rates would fall; and falling interest rates would encourage entrepreneurs to borrow and get the economy moving again. Keynes argued that this happy cycle need not occur—at any rate, it could not always be relied on to occur. A pound saved was, he contended, not automatically and by necessity a pound invested; it was potentially a pound stolen from productive purposes, a pound buried in the dark and denied to those who could put it to use.

Keynes prescribed two principal policies to set capital to work in a stagnant economy. First, interest rates must as a general rule be kept low, so as to minimize the temptation to hoard. (The “euthanasia of the rentier.”) Second, governments must be prepared to invest directly in the economy to make up for the faintheartedness of private businessmen. Keynes astutely foresaw that cheap money and lavish government expenditure could lead to trouble—inflation, depreciation of the currency, and so on. He was more than willing to sanction extraordinary interventions in economic life, including protective tariffs, in order to head those troubles off.

Some of the more conservative admirers of Keynes—dazzled by his vaulting imagination, his many valid insights, and his gorgeous literary style—have tried to salvage him for the cause of sound economics by insisting that his “general theory” was not really general at all. It was a special theory, adapted to the peculiar situation of Britain in the sluggish 1920s and grim 1930s. Just as Einstein conceded that Newtonian physics worked pretty well most of the time, only needing the help of the theory of relativity at very high speeds, so too, say conservative Keynesians, did Keynes accept the validity of classical market economics under normal conditions. But that’s not how Keynes himself saw things, according to Skidelsky. Keynes was a temperamental radical, who relished the thought that he had overturned and rendered obsolete the entire existing structure of economics.

Skidelsky’s first volume documented Keynes’s animosity to the Victorian order of things, not just in economics but in all aspects of life. Keynes never escaped the self-congratulatory world of Bloomsbury—a sanctuary from which Edwardian aesthetes, emancipated women, and homosexuals poured condescending scorn on the phil- istinism and stupidity they perceived to surround them. Skidelsky plainly finds Bloomsbury a great deal less appealing than its zillions of contemporary chroniclers, and in both volumes of the biography he approvingly quotes Keynes’s 1938 lecture “My Early Beliefs” as proof that the economist outgrew the callow ideas of the Cambridge Apostles and Gordon Square. “In retrospect,” Skidelsky wrote in Volume I,

Keynes felt that “his early beliefs” had brought him both gain and loss. The gain was that “we were amongst the first of our generation, perhaps alone amongst our generation[,] to escape from Benthamite tradition,” with its “over-valuation of the economic criterion.” This had protected “the whole lot of us from the final reductio ad absurdum of Benthamism known as Marxism.” The loss lay in a “disastrously mistaken” view of human nature. He and his friends, repudiating original sin, had believed that human beings were sufficiently rational to be “released from … inflexible rules of conduct, and left, from now onwards, to their own … reliable intuitions of the good.” This view ignored the fact that “civilisation was a thin and precarious crust erected by the personality and will of the few, and only maintained by rules and conventions skillfully put across and guilefully preserved.”

Unfortunately, it’s not clear that Keynes fully lived up to this more mature point of view. He went to his death caring more for the good opinion of Vanessa Bell and Lytton Strachey than that of anyone other than (just possibly) his wife. To the end he was a scoffer and a sneerer. Skidelsky does not deny this aspect of Keynes’s personality, but he offers the ingenious defense that Keynes “was not, after all, improbably cast as ‘the savior of capitalism.’ Social systems are never saved by true believers, the virtues appropriate to going down with the ship rarely being suitable for the arts of navigation.”

Of course, in one of history’s too-obvious ironies, Keynesianism in due time evolved into a social system as calcified as Victorian capitalism, and Keynes’s intellectual legacy came to be defended by true believers every bit as willing to go down with the ship as the hardfaced mid-nineteenth-century disciples of David Ricardo. Without being too fan- ciful, one can even say that Skidelsky’s two volumes about Keynes eerily parallel Keynes’s own writings. Keynes first important work, The Economic Consequences of the Peace, was published in 1920, while the world made by nineteenth-century capitalism lay shattered by the catastrophe of the First World War but before men’s minds had yet caught up. When Skidelsky’s first volume was published in 1983, the world made by Keynesian demand management and artificially cheap money was likewise a wreck, the victim of stagflation and the near-meltdown of the world banking system in August 1982. By the time Keynes’s General Theory was put out, nineteenth-century economics was as defunct intellectually as it had been practically sixteen years before. And equally, as Skidelsky’s second volume appears in the post–Berlin Wall era, Keynesianism has not only stopped working, it is nearly universally seen to have stopped working. The scoffer and sneerer is himself now scoffed at and sneered at.

Perhaps the most interesting thing about Skidelsky’s biography—and it’s packed with interesting things—is the way the author grapples with this movement of economic thought away from Keynes. The entry for Hayek in the index of Volume II is twice as long as the entry for Marx. It is the right-wing criticisms of Keynes that Skidelsky anticipates and attempts to answer. He is at pains to show that Keynes did indeed appreciate the dangers of inflation, that he welcomed entrepreneurship, that he opposed excessive taxation, and that he attached virtually no value to equality as an end in itself. As Skidelsky tells it, Keynes may have disliked Britain’s particular inequalities, which put a decadent landed class at the top, but he emphatically did not want to level individuals. In a particularly pungent mood Keynes declared, “I do not want to antagonize the successful, the exceptional. I believe that man for man the middle class and even the upper class is very much superior to the working class.” At times, Skidelsky’s Keynes sounds oddly like a contemporary neoconservative: if the economy of postwar Europe stuttered and stammered, it was—Skidelsky’s Keynes perceives—because the virtues that had made the nineteenth-century economy work had been blasted out of existence in 1914–18. Skidelsky’s Keynes believes that the Victorian economy worked not because it complied with the laws of economics but because Victorian personalities made it work. Post-Victorian personalities, which Skidelsky’s Keynes finds rather less admirable than some other Keyneses, had lost their forefathers’ virtues and needed a new kind of economy —a more authoritarian economy, one that allowed weaker characters less scope. Skidelsky quotes from Virginia Woolf’s diaries an account of a dinner in honor of T. S. Eliot in 1934. “I begin to see,” Keynes said to Woolf, “that our generation—yours & mine … owed a great deal to our father’s religion. And the young, like Julian [the son of her sister Vanessa Bell], who are brought up without it, will never get so much out of life. They’re trivial: like dogs in their lusts.”

For all its eloquence and impressive textual authority, for all its generous willingness to take seriously critics of Keynes whom Keynesians laughed at until little more than a decade ago, Skidelsky’s attempted rescue of Keynes’s economics founders on the single greatest practical deficiency of Keynesian policy: its blind faith in the wisdom, justice, and competence of civil servants. At some deep level, Keynes seems to have divided the world into two groups: people like himself and his Cambridge friends—intelligent, aesthetically sensitive, imbued with advanced opinions—and people like the despised “hearties” of his undergraduate days—athletic, stolid, conventional. In his mind, the first group was more naturally attracted to government, the second to business. And he had no doubt as to which group was more to be trusted. As scathing and funny as he could be about the investment decisions that businessmen might make with their own wealth, it never occurred to him to ponder with equal skepticism what clever art-loving grown-up undergraduates might do with other people’s wealth once put in charge of a state program of house- and road- building.

At some level, this great man—a man who dedicated himself to ruthless truth-telling, no matter what the consequences; a man who put workability and the evidence of experience at the very center of his personal thought—can fairly be convicted of the error that would have appalled him most: naïveté. Damningly, his naïveté was born not out of ignorance or gullibility but out of vanity. He was naïve about government, and the risk of governmental error, because he expected that the upper reaches of government would be staffed by men rather like himself, in sensibility if not in genius. Skidelsky calls Keynes the last of the great English liberals. In at least one sense, the accolade—if it is an accolade—is well deserved. Despite the condemnation of precisely this sort of error in “My Early Beliefs,” Keynes could never shake himself free of the prejudice that the world was governed by more or less reasonable chaps, and that no part of the world was more likely to be governed by reasonable chaps than one’s nation’s enemies.

As a senior Treasury official in the First World War, Keynes was an important organizer of British survival and the eventual Allied victory. But all through the war he held fast to the pacifist dogma that the military rulers of Germany wanted a compromise peace every bit as much as Bloomsbury did. “Indeed,” Skidelsky comments sadly, “a gross overestimate of the strength of the German moderates, as well as a misunderstanding of their aims, was characteristic of the whole British middle-class peace movement.” They projected their own image upon a hostile and dangerous world. If not naïveté, this was at least narcissism—an involvement with oneself so all-consuming that one could not absorb the information that other people held radically different opinions and behaved in entirely different ways. It is this weakness, more than any other trait of Keynes’s, that convinces the reader of this biography that, had Keynes somehow survived to a riper age, he would not, no matter what his more conservative admirers claim, ever have migrated rightward. A liberal Keynes was, a liberal he would have remained.

But give him credit for this: Keynes showed no such naïveté in the 1930s. He grasped the Nazi menace from the start, and shot the Labour Party’s arguments to pieces when it adopted fear of fiscal deficits as a reason to oppose British re-armament. Nor, aside from a brief flurry of over-optimism about the prospects for relatively rapid economic growth in Russia as a result of a visit there in 1925, was Keynes ever seduced by Communism. “Marxist socialism,” he wrote in 1924, “must always remain a portent to the historians of opinion—how a doctrine so illogical and so dull can have exercised so powerful and enduring influence over the minds of men and, through them, the course of history.” A decade later, he was warning Cambridge undergraduates that Marxism stood far below social credit as economic quackery, and mischievously wrote to George Bernard Shaw:

My feelings about Das Kapital are the same as my feelings about the Koran. I know that it is historically important and I know that many people, not all of whom are idiots, find it a sort of Rock of Ages and containing inspiration. Yet when I look into it, it is to me inexplicable that it can have this effect. Its dreary, out-of-date, academic controversialising seems so extraordinarily unsuitable as material for the purpose … How could either of these books carry fire and sword round half the world? It beats me.

Despite his mockery, Keynes well understood the attractions of Communism to the affluent young. “When Cambridge undergraduates take their inevitable trip to Bolshiedom, are they disillusioned when they find it all dreadfully uncomfortable? Of course not. That is what they are looking for.” In his liberal way, however, he found the conversion to Marxism comical rather than horrifying.

As Keynes’s funny but deadly animadversions on Marxism suggest, much of the impact of his ideas originated in his remarkable personal charm. In a small society like that of interwar England, personality counted. And Keynes’s was evidently delightful. He treated his Bloomsbury friends with extraordinary generosity, generosity that was seldom returned. Cambridge followed his ideas at least in part because it liked him so much. It makes one wonder whether the course of modern economic life would have been different had Ludwig von Mises not been such a pedantic and irascible old man, or if Hayek had been quicker with a joke.

To Skidelsky’s credit, much of Keynes’s charm is captured on the page, which one would think would be an almost impossible task. But then, Skidelsky accomplishes one impossible task right after another. His biography combines the telling of Keynes’s fascinating life with penetrating and surprisingly accessible analysis of his economic ideas, of his times, of the philosophy from which Keynes’s own work proceeded. (More technical discussions are appended to the ends of the appropriate chapters.) Along the way, Skidelsky pauses for some illuminating reflection on the biographer’s historiography.

An inescapable conundrum of biography is to know what allowance to make for the Zeitgeist in directing one’s subject’s thought and life. People are children of their times, as well as of their parents… . But the implicit biographical assumption is that for most explanatory purposes, the Zeitgeist can be held constant; that it changes more slowly than the individual life; and that, therefore, family, education and class are the main systematic external influences the biographer needs to consider… . The assumption … is that biographical subjects are much more frequently products of their backgrounds than of their times.

In Keynes’s case at least, Skidelsky maintains, the usual assumption is wrong.

Altogether, this is a very successful biography. Is it too long? Biographies nowadays nearly always are. I sometimes wonder whether excessively long biographies are not a side effect of the decline of public sculpture. The Victorians gave their heroes statues; we don’t know how to do that anymore, and so we build our monuments in bookshop windows. But long as it is, this is a book worth the time it consumes. The reader who works his way through it will emerge with a keener understanding not just of Keynes’s time, but of his own.


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  1. Robert Skidelsky’s John Maynard Keynes is a biography-in-progress. So far, two of a projected three volumes have appeared: Hopes Betrayed, 1883–1920 (1983) is now available as a Penguin paperback (447 pages, $15.95), and The Economist as Savior, 1920–1937 (1992) is just out in the U.S. from Allen Lane/The Penguin Press (731 pages, $37.50). Go back to the text.

David Frum was a speechwriter for President George W. Bush.

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This article originally appeared in The New Criterion, Volume 12 April 1994, on page 61

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