John Maynard Keynes: The Economist as Saviour 1920-1937 
by Robert Skidelsky.
Macmillan, 731 pp., £20, November 1992, 0 333 37138 0
Show More
Maynard Keynes: An Economist’s Biography 
by D.E. Moggridge.
Routledge, 941 pp., £35, April 1992, 9780415051415
Show More
Show More

John Maynard Keynes is famous for his private life and associations with Bloomsbury and famous, too, as the economist who campaigned for public works between the wars, and revolutionised economics with his General Theory. A biographer of Keynes has to straddle two very different worlds, and it is one measure of Robert Skidelsky’s achievement that he writes with equal authority of both in this deeply researched and densely textured book. But what marks out his work as truly masterly is his portrayal of the interplay between the private and the public in Keynes, the tensions between the two, and the dynamism released by the growing fusion between the two halves of his nature.

There was a phase of his youth, before the First World War, in which Keynes gave himself over to love, learning and the arts. These early passions were never abandoned, but gradually they were subsumed into the life of an economic statesman. By 1920, the date at which Skidelsky begins the second volume of his Life, Keynes was in a state of transition. His wartime experience as a Treasury official had given him the entrée to Whitehall and the City, and whetted his appetite for power and influence. Though he returned to Cambridge to resume his fellowship at King’s, he was often to be seen, with his bowler-hat and brief-case, hurrying off to London for a board meeting or an appointment with the Chancellor of the Exchequer.

The passionate, and of necessity highly secret, homosexuality of the pre-war days was fading. His last male love was the Cambridge undergraduate Sebastian Sprott, who competed for a time with the rival attractions of the Russian ballerina Lydia Lopokova. But the affair with Sprott appears to have been somewhat tepid. The relationship with Lydia was passionate and any suspicion that his marriage was an arrangement of convenience is swept away by Skidelsky. Though Bloomsbury disapproved of Lydia’s somewhat limited range of conversation and sweetly disordered use of English, she won the love of the frustrated artist in Keynes, and bowled him over with sheer physical affection. ‘I gobble you my dear Maynard,’ she wrote. ‘I retain infinitely your warm wet kisses.’ Nor was Lydia without political judgment. During the General Election of 1931, when MacDonald and Baldwin joined forces in the National Government, she wrote: ‘I have rolled my eyes on the manifestos of Ramsey and Stanley, but they close instantaneously with dreariness.’

Through his marriage to Lydia, Keynes broke with the more neurotic aspects of Bloomsbury. But in another sense his marriage was a testimony to the aesthetic and Bloomsbury side of his nature. So enamoured was Keynes of Lydia that he organised a ballet company, the Camargo, to provide her with a stage; and later, when she turned to acting, the Cambridge Arts Theatre. More generally, however, his love of the arts was one of the mainsprings of his public life. Keynes believed that the liberal arts could not survive in the long run without external protection. They were the spiritual core of the liberal civilisation in which he had been raised. But the secure foundations on which that civilisation had rested up to 1914 had been severely damaged by the Great War. Bolshevism and barbarism were all around and henceforth it would be necessary to preserve by artifice and ingenuity what had previously been taken for granted. Without economic stability no liberal society could exist: but economic stability would have to be organised by economists. This explains Keynes’s great polemic against the Versailles Treaty and its authors: The Economic Consequences of the Peace.

That Keynes would fly high was already clear in 1920. But it was not at all apparent that he would become the author of a revolution in economics and the saviour, or would-be saviour, of the capitalist system. Nor did he conceive the main principles of the General Theory until 1932. Keynes, of course, was a brilliant man. He probably never met anyone who was obviously cleverer than himself, with the possible exception of Wittgenstein, whose tortuous monologues drove him to distraction. But his transformation into a great man was a consequence, Skidelsky maintains, of his ability to draw on a diversity of knowledge and experience, much of which came from outside economics. He pressed into service his early philosophical studies of probability, his experience of speculation in the currency and commodity markets, and even his knowledge of poetry, drama and myth: his understanding of the role of money in the economy was coloured by the legend of King Midas.

In his impressive study of the origins of the Keynesian revolution, Peter Clarke argued that Keynes was driven throughout the Twenties by policy and politics. He opposed the restoration of the Gold Standard on the grounds that the pound would be overvalued relative to other currencies. He called for public works to compensate for the loss of private investment caused by the high rates of interest resulting from the Gold Standard. But in all his policy prescriptions he worked within the framework of classical economics, in which it was assumed that market forces were self-regulating, and reached a point of equilibrium at full employment. His one major theoretical work, A Treatise on Money (1930), was an attempt to find a loophole, within the classical system, that would justify a job-creation programme of public works.

Why, then, did Keynes turn against the classical doctrines? According to Clarke, it was because politics failed him. From 1926 to 1929 he campaigned with Lloyd George and the Liberal Party for a programme of public works and wrote with Hubert Henderson the Liberal manifesto, ‘We can conquer unemployment’. When the Liberals went down to defeat and Labour took office, Keynes continued to press for changes in policy in his evidence to the Macmillan Committee. But the Labour Government collapsed before any action could be taken and Keynes was confronted by a National Government which ignored his advice. His response was to retire to Cambridge and compose, with a circle of young disciples, a theoretical work that would overturn classical theory by demonstrating that an economy could reach the point of equilibrium – and stay there indefinitely – with a high level of unemployment.

Skidelsky sees much force in Clarke’s analysis but he paints a somewhat different picture. First of all he raises up the Treatise on Money as a work of equal importance to the General Theory. ‘It is always wrong,’ he writes, ‘to concentrate on one part of a thinker’s thought to the exclusion of others.’ From the point of view of employment policy, which claims the attention of most students of Keynes, the Treatise was of little significance compared with the General Theory. But the two books were concerned with different problems: the Theory with economic stagnation, and the Treatise with fluctuations in prices and output. Since these have continued since 1945, alongside the problem of employment policy, the Treatise has proved no less relevant than the Theory: ‘To read off “Keynesian” policy prescriptions from a single book can give, and has given, rise to systematic errors in applying his ideas.’

Skidelsky also sees more continuity than Clarke between Keynes’s thinking before and after the Slump. Keynes once said in a lecture that we all have in our heads, ‘grey, fuzzy, woolly monsters’. By this he meant that ideas start to form in the mind in a cloudy and intuitive way long before they can be given a precise and rational character. Keynes himself was famously intuitive and Skidelsky traces the woolly monster at the heart of the General Theory back to the impact of the First World War. Keynes believed that the war had disrupted for ever the rules of harmony and progress which had obtained in the 19th century. There was, therefore, a disjunction after 1918 between conventional ideas of the social order and the reality. Keynesian theory developed out of his attempts to discover the sources of discord and restore the harmony.

More specifically, Skidelsky marks out two features of the Treatise as discreetly but decidedly heretical. First Keynes argued that the supply of savings did not automatically equate, as had previously been assumed, with the demand for investment: supply and demand would only be harmonised if the bank rate were fixed at the appropriate level, and that was a matter of policy. Secondly he argued that the Victorian belief that abstinence and thrift made for the accumulation of capital, and hence for prosperity, was misplaced: enterprise, not thrift, was the engine of prosperity.

Whatever the subterranean links between Keynes’s thought at different periods, the General Theory was almost universally recognised, on its publication in 1936, as a fundamental assault on the traditional concept of a self-regulating business cycle. Keynes had created a theory of output and employment in which the main determinant of the level of activity was the level of demand. The traditional response to a slump had been to cut back on wages and public expenditure. But on Keynes’s theory, such measures were bound to exacerbate the situation by reducing demand. The proper remedy was for the government to undertake its own investment programme, thereby encouraging businessmen to invest and consumers to go out and spend. ‘Whenever you save five shillings,’ Keynes told housewives in a broadcast, ‘you put a man out of work for a day.’ Underlying this approach was another touch of Bloomsbury: a rejection of Victorian puritanism in favour of hedonism and self-expression.

As Skidelsky emphasises, Keynes was at all times a political economist: ‘He invented theory to justify what he wanted to do. He understood that theory had to be usable for politicians and administrators.’ But if so, what were Keynes’s political objectives and how radical was he? The ultimate objective of the General Theory was to save the capitalist system from the two intolerable alternatives of Communism and Fascism. It was addressed to the world, or at any rate to the United States, but Keynes also had in mind the situation at home. In party politics Keynes was a Liberal: but whether he was a Left-Liberal who sympathised more with Labour, or a Liberal of the Right who might ultimately have found a home in the Conservative Party of Butler and Macleod, is more contentious.

The most radical episode in Keynes’s career was his opposition, covert though it was, to the First World War. The Economic Consequences of the Peace, a passionate expression of the indignation and guilt which he had bottled up while the war was in progress, was much acclaimed by the Labour Party. In later years, he was seldom in step with the Left but he did become, as a consequence of his investments in the City, a wealthy man with a fortune, in 1936, of £13m in today’s money. Skidelsky observes that as Keynes became more radical in economic theory he tended to become socially more conservative, setting himself up as the squire of Tilton, the house and farm he rented in Sussex.

Keynes wrote for the New Statesman, voted Labour in 1935, and kept in touch with the rising generation of Marxists in Cambridge. But while he praised their idealism he remained completely dismissive of Marxism and regarded the class struggle, even in the mild version propagated by the Labour Party, as futile and irrelevant. When Hitler came to power, Labour and many Liberals opposed rearmament, but Keynes was all for it. He may, perhaps, have had an ulterior motive, and welcomed rearmament as a camouflaged form of public works. But generally speaking he did not echo the anti-fascist line of the Left; if he was enraged by the activities of Mussolini and Franco, there is little evidence of the fact in Skidelsky’s account. Another striking feature of his inter-war career was the absence from his mind of the Left-Liberal preoccupation with poverty, the social services and the redistribution of wealth. In employment policy he was of course a collectivist, but only in a strictly limited sense which did not commend itself to Labour. The role of government in a Keynesian world was restricted to the management of monetary and fiscal policy, and counter-cyclical public works. There was no hint here of corporatism or economic planning, let alone of socialism. There was, however, much emphasis on the need for governments to stimulate business confidence, and the significance of uncertainty in economic life: the economy was not a machine in which predictable consequences ensued when a government pulled the lever.

Skidelsky is at pains to distinguish Keynes from the Keynesians, and especially from the more collectivist Keynesians of the Sixties who believed that governments could engineer economic growth. His Keynes is a prophet of abundance who sought to release the consumer and the entrepreneur from the stagnation to which (he imagined) they were condemned by laissez-faire economics. He deplored unemployment, but he was equally if not more hostile to inflation, and how he would have behaved in a world in which he was forced to trade off one against the other can only be guessed.

Was Keynes indeed the saviour of capitalism, or is there an irony in Skidelsky’s subtitle? Though Skidelsky makes no secret of his deep admiration for Keynes, he retains his critical detachment and places several question-marks over the ideas and assumptions of his hero. Keynes, he writes, was ‘spectacularly wrong’ in his belief that economies would simply stagnate under laissez-faire. It is not certain, either, that Keynesian policies would have accelerated Britain’s recovery from the Slump. Like others before him, Skidelsky also detects in Keynes an alarming chunk of political naivety. Keynes believed that Britain was governed by an élite of rational policy-makers whose muddles and mistakes were simply the result of stupidity. Once instructed by irrefutable arguments in the error of their ways, they would change course, and the muddle disappear. One of the main problems with this analysis, as Keynes half-recognised, was the nature of the party system. The Conservatives, in his view, were the stupid party. Labour, on the other hand, were the silly party. Despite this Keynes was always optimistic: hopeful of catching the Prime Minister’s ear, or converting the rising young men on either side of the House. And even if the politicians were recalcitrant, he expected his old friends, the Treasury officials, to ensure in the end that the right course was adopted.

In the event, the arts of persuasion failed him and it was not until he returned to the Treasury himself, in 1940, that Keynes was in a position to ensure a partial conversion of Whitehall to his doctrines. For a comprehensive assessment of this climactic phase of his career we must await the third and final volume of this great biography of a man who was, perhaps, ultimately a failure. Keynes, in alliance with Beveridge, engineered during the Second World War a last great revival of Liberalism. But the post-war state did not conform to either of their expectations.

Though Skidelsky’s Life is not yet complete, Professor Donald Moggridge, an economist who spent twenty years editing Keynes’s writings and papers, published earlier this year a comprehensive biography concentrating on his professional career. Unlike Skidelsky, who introduces many layers of history into his work, Moggridge adheres more strictly to the rules of biography and ends the book, surprisingly, without a conclusion. But this is a highly accomplished work in which Moggridge gives his readers a lucid, compact and critical discussion of the whole of Keynes’s philosophy and economic thinking, rounded out with a vivid outline of his social and private life.

Send Letters To:

The Editor
London Review of Books,
28 Little Russell Street
London, WC1A 2HN

Please include name, address, and a telephone number.

Read anywhere with the London Review of Books app, available now from the App Store for Apple devices, Google Play for Android devices and Amazon for your Kindle Fire.

Sign up to our newsletter

For highlights from the latest issue, our archive and the blog, as well as news, events and exclusive promotions.

Newsletter Preferences