NYTimes on Skidelsky's Keynes

["Ian Murray" <seamus2001@xxxxxxxxx>]

January 20, 2002
'John Maynard Keynes': A Man of Action as Well as Ideas
By SYLVIA NASAR

Winston Churchill, Britain's last lion, paid scant attention to how the war against Hitler would be
financed, and even less to postwar economic arrangements. That was the bailiwick of John Maynard
Keynes, the most influential economist since Adam Smith and Churchill's de facto chancellor of the
exchequer in World War II. When Keynes wrote his impassioned outburst against the Versailles Treaty
in 1919, he warned that ''vengeance, I dare predict, will not limp'' if the victors insisted on
impoverishing the vanquished. After he was tragically proved right, Keynes's ''one overriding aim''
was for the Allies ''to do better than last time.''

They did, and did so in no small measure because of Keynes's genius for persuasion. Like Churchill,
Keynes was one of the century's great communicators. ''Does he belong to our species?'' asked one
enchanted listener. ''There is something mythic and fabulous about him. I sense in him something
massive and sphinxlike, and yet also a hint of wings. One of the later and more elegant Greek
sphinxes, then, it must be.''

As it happens, the sphinx earned only a couple of brief references in the lion's six-volume memoir.
''Fighting for Freedom, 1937-1946,'' the third and final installment of Robert Skidelsky's
magisterial biography of Keynes, brilliantly rounds out the historical record by digging far deeper
than earlier biographies into treasury and diplomatic archives. In depicting Keynes's last decade,
from the publication of his revolutionary ''General Theory'' in 1936 to his death four months after
the Bretton Woods conference in 1946, Skidelsky shows how the onetime Bloomsbury aesthete, Cambridge
don, intellectual enfant terrible, art patron and stock speculator gave his all in Britain's
struggle for survival, and in the process left the world a better place. ''This is a story, above
all else,'' Skidelsky writes, ''about Keynes's patriotism.''

In the opening scene of this compelling drama about the power of fearless cerebration, the famous
author of a book warning that invalidism is the normal state of modern economies is himself an
invalid. Suffering from incurable heart disease, the 55-year-old Keynes has seemingly settled into
early retirement at his country estate, Tilton (where, incidentally his biographer now lives). Cared
for by his charmingly eccentric wife, the Russian ballerina Lydia Lopokova -- a ''fairy princess who
acquired the solid qualities of a nurse'' -- Keynes plays the landed squire. He watches his sheep
being sheared, frets about his dogs, spends hours in bed browsing rare book catalogs and firing off
letters to newspaper editors and instructions to his broker (''Don't hang on to the maize'').

Amazingly, a German miracle drug and Churchill's call to arms gave Keynes a new lease on life just
two years later. While he shared his generation's horror of war and was once called ''the 'spiritual
father' of appeasement,'' Keynes never, in fact, entertained the delusion that the ''brigand
powers'' could be pacified. As Skidelsky shows, ''he loathed the Nazi regime, never visited Germany
after 1933 and never drew attention to the success of Hitler's economic policies.'' Before long, the
rejuvenated Keynes was working 12- and 14-hour days without pay or portfolio in a room at the
treasury and, with Lydia on his arm, practicing shuttle diplomacy via steamship as Britain's chief
negotiator in Washington.

Keynes's first challenge was figuring out how to finance the war without eviscerating Britain's
market economy. Those who associate Keynesianism with the stagflation of the 1970's will be
surprised to learn that Keynes was an inflation hawk in World War II. His ''General Theory of Money,
Interest and Employment,'' a brief for tax cuts and public works during slumps, was inspired by the
Great Depression. But with the government deficit soaring and unemployment shrinking fast as Britain
geared up for war, Keynes identified the problem as too much, rather than too little, demand. His
prescription? Fiscal restraint. When an American disciple expressed shock, Keynes shot back, ''You
are more Keynesian than I am.''

Skidelsky has another surprise in store for those who think of Keynes as the patron saint of big
government. Keynes's ''How to Pay for the War'' was a blueprint specifically designed to preserve
personal freedom and prevent Britain from being turned into a centrally planned ''slave'' state.
Shown a rationing plan, he said sarcastically, ''The policy of fixed prices plus having nothing in
the shops to buy -- an expedient pursued for many years by the Russian authorities -- is undoubtedly
one of the very best ways of preventing inflation!'' Though some of his ideas were adopted, his
proposal to rely on compulsory savings (to be paid back after the war), in lieu of confiscatory
taxes, price controls and rationing, was ultimately defeated by the Labor Party, which saw wartime
controls as the first, desirable step toward socialism after the war.

Keynes's second challenge was to negotiate Britain's wartime loans in Washington. Here Skidelsky
imparts a provocative twist to his narrative by emphasizing the rivalry ''between Britain and
America for postwar position which went on under the facade of the Grand Alliance.'' Skidelsky, a
Tory peer as well as the professor of political economy at the University of Warwick, shares the
sentiments of revisionist British historians like John Charmley who argue that Britain made a
mistake in throwing its lot in with America and accepting the American terms for aid. ''Churchill
fought to preserve Britain and its empire against Nazi Germany,'' he writes. ''Keynes fought to
preserve Britain as a Great Power against the United States. The war against Germany was won; but,
in helping to win it, Britain lost both empire and greatness.''

Using the calm of war to reflect on the turmoil of the coming peace (as he used to joke), Keynes
then turned his attention to postwar financial and trade arrangements. Here, too, his ideas shaped
the debate, as he argued that if America wanted an open trading system and the liberation of
Britain's colonies, it had to provide large cash infusions to war-ravaged countries. His proposal
for an International Clearing Union to overcome the economic conflicts of the 1930's framed the
debate that ultimately led to Bretton Woods and the creation of the International Monetary Fund and
the World Bank. Keynes died before the Marshall Plan got under way, but his vision was crucial in
its creation.

The Eton-educated Keynes liked to think of his countrymen as Greeks living in an American ''new
Roman empire,'' but found negotiations with Americans ''exhausting and exasperating.'' ''I always
regard a visit to the U.S. as in the nature of a serious illness to be followed by a
convalescence,'' Keynes wrote to a friend, complaining that America's capital was full of ''utter
boobies'' who spoke incomprehensible legalese (''Cherokee''). Yet he never wavered from his belief
that ''the New World had to be yoked, and kept yoked, to the Old World, if the latter were to enjoy
durable peace and prosperity.''

Skidelsky asserts that Keynes's faith in America's good intentions explains ''what otherwise might
seem inexplicable, namely the deference Britain paid to American wishes, both during and after the
war, and its failure to exploit crucial elements in its bargaining position -- like fighting a more
limited war, or even making a separate peace with Germany.'' Here Skidelsky's otherwise nuanced
analysis veers into implausibility. It stretches credulity to think that Britain and the United
States would really have wound up on a more nearly equal footing after the war, as Skidelsky
implies, had Keynes succeeded in clawing back more of Britain's war costs or gotten the Americans to
agree that Britain could retain its interwar system of imperial trade preferences.

Skidelsky contends that ''the way Washington managed the flow of lend-lease supplies had the effect,
and possibly the intention, of leaving Britain dependent on U.S. help after the war on whatever
terms America chose to impose.'' This may be true. What is unconvincing is his broader claim that
''the terms on which American help was rendered to Britain during the war would decide whether or
not Britain remained a great power.'' Most historians agree that the war merely accelerated the
dissolution of Britain's empire. And although Britain's peacetime options were surely circumscribed
by external debt piled up during the war, as well as by the termination of its special trade and
currency relationships with former colonies, the terms of American aid simply could not have
accounted for the huge gap in economic clout at war's end. America's population, after all, was four
times as large, its economy four times as big and its factories 50 percent more productive.

Indeed, Skidelsky's emphasis on Keynes's foreign policy role misses the far more likely cause of
Britain's failure to keep pace with the war's losers, Germany and Japan, in the decades following
World War II -- namely, Britain's disastrous postwar experiment with socialism. He does note,
however, that Keynes had curiously little to say about the infamous Beveridge ''cradle to grave''
social security plan, which inaugurated that experiment. Keynes focused exclusively on the plan's
affordability, ignoring its potential for wreaking havoc with incentives and efficiency. ''The
battle lines on social policy were being drawn up which have raged ever since,'' Skidelsky writes.
''Keynes's incuriosity about this battle is itself curious. The truth seems to be that he was not
interested in social policy as such, and never attended to it.''

Keynes once referred self-deprecatingly to his own writing as ''the croakings of a Cassandra who
could never influence the course of events in time.'' But by the time his diseased heart finally
gave out, he had placed his stamp on policy more than any economist before or since. Despite
oversights and mistakes, his influence was enormously positive. The open trading system and the
institutions created at Bretton Woods contributed to the greatest period of prosperity that the
world has ever known. The continuing debate over who was to blame for Britain's decline
notwithstanding, British living standards rose faster in the half-century after the empire was lost
than before.

By portraying Keynes as a man of action as well as ideas, Skidelsky has, as he hoped, ''rescued
Keynes from the economists, and placed him in the world of history where he properly belongs.''
Skidelsky has not only achieved a masterpiece of biographical and historical analysis, but
demonstrated that Keynes attained his own stated ideal of economic thinkers as ''the trustees, not
of civilization, but of the possibility of civilization.''


Sylvia Nasar, the Knight professor of journalism at Columbia University, is the author of ''A
Beautiful Mind,'' a biography of the mathematician John Nash.