John Maynard Keynes was one of the most humane and brilliant minds of the
last century. At the Versailles Conference after the First World War and
Germany's defeat, President Clemenceau of France was adamant that millions
of German civilians should be allowed to starve to death. It was Keynes
(then a Treasury official) who persuaded Prime Minister Lloyd George to
oppose Clemenceau's plans and make sure that emergency food was sent.
Unfortunately Keynes was less successful when trying to persuade Lloyd
George and Clemcnceau not to punish Germany's economy too fiercely. It was
then that he wrote one of his most famous books, "The Economic Consequences
of the Peace" (1919) when he forecast the German instability that would
follow France's vengeance. Thus the subsequent Weimar hyperinflation of the
1920s, the Great Depression which followed and the subsequent outbreak of
the Second World War did not surprise him.
Brilliant though Keynes was, he was also someone who could never quite make
up his mind on other issues for most of his life. For some years he had a
homosexual relationship with a young man, Sebastian Sprott at the same time
as one with Lydia Lopokova, a leading ballerina of the 1920s. It became an
effort of will to finally plump for Lydia, whom he married in 1925 (and a
happy marriage ensued).
He was equally vacillating about his economic ideas and the book for which
he is best known, his "General Theory", is self-contradictory in places --
which he acknowledged himself later. His main fault is that he said (most
of the time anyway) that money was the prime motivator of consumer goods
consumption and that if governments showered money on people in bad times
then they would start buying goods and the economy would recover. But money
is only a transient intermediary. It's the attractiveness of the goods
themselves which causes people to work hard, save money and buy them.
In fact, when Friedrich Hayek opposed Keynes' ideas in his book, "The Road
to Serfdom" (1944) -- as leading to Soviet-style totalitarianism -- Keynes
finally acknowledge that his own main idea had been wrong. He wrote to
Hayek: "In my opinion it is a grand book ... Morally and philosophically I
find myself in agreement with virtually the whole of it: and not only in
agreement with it, but in deeply moved agreement."
Furthermore, only ten days before he died of a heart attack in 1946 he told
Henry Clay at a Bank of England lunch that he was finally a convert to Adam
Smith's primary idea of the invisible hand. He said: "I find myself more
and more relying for a solution of our problems on the invisible hand which
I tried to eject from economic thinking twenty years ago."
Keynes was brilliant enough to be able to change his mind -- and not to be
ashamed when he did so. Unfortunately, that cannot be said of some public
economists who are certainly clever but nowhere near as brilliant as Keynes
or -- dare I say it? -- Hayek.
Incidentally, the other great economist of the last century who also argued
forcefully against Keynes' earlier ideas was Joseph Schumpeter, someone
whose ideas of "creative destruction" are largely ignored because they're
uncomfortable. But as we're living in uncomfortable times perhaps some of
our public economists ought to do some reading of him also.
Keith
Keith Hudson, Saltford, England
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