During the economic meltdown of 2008, when politicians and pundits were casting about for explanations, it was far from certain that the ideas of John Maynard Keynes would come roaring back into public discourse. Just a few years earlier, Keynes was hardly mentioned in discussions of economic policy. But then down goes Lehman and here comes Keynes, back in the headlines. Then comes government spending, then government debt, then fear of default and aggressive partisan politics, and then it’s back to bye bye for Keynes. ‘Twas but a quick return engagement, a cameo based in caricature, say Roger E. Backhouse and Bradley W. Bateman, authors of Capitalist Revolutionary: John Maynard Keynes. This most recent appearance was only one of many such returns, they argue, each of which seems to have been based on a different version of the multi-faceted economist. From Capitalist Revolutionary:
The Keynes who was recently and so suddenly resurrected is far from being the only Keynes to have appeared in public debate in the last half-century. He is not the same person who was famous in the middle of the twentieth century, during what was widely called “the age of Keynes.” Neither is he the Keynes who was rejected so decisively by economists and politicians in the 1970s. Keynes and Keynesianism have been reinterpreted time and time again, both by those who seek to claim his authority for positions they want to adopt and by those who denounce him, using him as a foil against which they can present their own ideas. This repeated reinterpretation should not be a surprise. We now see the world differently from the way people saw it in the 1940s, in the immediate aftermath of the Second World War; in the 1960s, when Kennedy and Johnson were trying to manage the economy; or even in the 1970s, when the current movements against “big government” and the welfare state were first getting under way.
One reason for seeing Keynes differently is that the world has changed. The trends that get swept into the category of “globalization” have transformed the world economy, just as the end of the Cold War and the end of Communism transformed the political climate. Present-day skepticism about whether politicians and businessmen can be trusted to do anything other than line their own pockets contrasts dramatically with the widespread confidence in government and planning found in the thirty years following the Second World War. These changes have had a profound effect on which Keynes people have been able to see. There is, however, another reason for seeing Keynes differently. Keynes and Keynesianism were multidimensional. Unusually, Keynes straddled the worlds of academia, journalism, government, and business, with the result that he cannot (or should not) be pigeonholed only as the designer of economic policies or just as an important economic theorist who sought the fundamental laws governing the operation of capitalist economies. He was both of these, and to leave out one or the other of them distorts our view of the whole. He was, moreover, also a philosopher who offered a moral critique of capitalism.
In the course of their bold, brief engagement with Keynes in Capitalist Revolutionary (shorter even than Keynes: A Very Short Introduction), Backhouse and Bateman draw a rough timeline of Keynes’s actual work and the public’s conception of it:
- 1936 – The General Theory of Employment, Interest, and Money is published, drawing on concepts developed and tested during the 1920s and ‘30s.
- 1940 – Keynesian ideas start to work their way into the policies of the Roosevelt administration.
- 1941 – Keynes’s theories are put to their first explicit use in British policymaking to address the new need for higher military spending during the war, drawing on a pamphlet called “How to Pay for the War” that he wrote in 1940.
- 1944 – Keynes helps design the Bretton-Woods system, which establishes the World Bank and the International Monetary Fund.
- 1945-1970 – Roughly “The Age of Keynes,” according to Backhouse and Bateman. Keynes’s ideas are considered the engine of economic growth that helped lead the US and Europe out of the Depression and through WWII. JFK brings leading Keynesian economists into the White House to help design his fiscal policy, helping to make1961-1968 the longest period of sustained peacetime economic growth in US history. Backhouse and Bateman quote the economist Robert Barro explaining that by 1970 Keynesian economics “seemed to be the only game in town.”
- 1971 – “We are all Keynesians now,” declares Richard Nixon when he takes the US off the gold standard.
- 1970s – Stagflation strikes, opening the door for an attack on Keynesianism. Milton Friedman’s ideas begin to appear an increasingly attractive alternative. Monetarism and laissez-faire economics become the dominant models.
- 1980s-1990s – Keynes who?
- September 2008 – Lehman Brothers collapses. Headlines everywhere declare the newfound relevance of Keynes.
- And now, with our political system’s fixation on cutting government spending, Keynes is once again a pejorative.
Backhouse and Bateman argue in Capitalist Revolutionary that the man and his work were far too subtle to be employed as the ideological catch phrases to which they’re often reduced. Hardly a proponent of class warfare, as today’s caricatures may suggest, Keynes was actually committed to capitalism as the most effective economic system, even while believing that it was inherently unstable and needed constantly to be saved from itself. We’d do well, Backhouse and Bateman say, to return to what Keynes actually said and did, rather than try to understand him in the narrow constraints through which today’s economists see the world. In fact, urge Backhouse and Bateman, we should not only return to Keynes’s particular ideas, but also to their breadth; they suggest that we need our economists to return to the sort of big-picture thinking that they’ve seemingly left behind. In Keynes, they see a model for the sort of worldly philosopher who could help us create a better world.
