A Fresh Look at Keynes: Robert Skidelsky's Trilogy

• Author: Anand Chandavarkar
• Position: Retired IMF staff member

Keynes is widely recognized as the dominant economist of the past century. A recent scholarly biography evaluates how well his reputation has stood the test of time.

The publication of the final volume of Robert Skidelsky's impressive trilogy-John Maynard Keynes: Fighting for Britain, 1937-1946-is an appropriate occasion to evaluate Keynes's life and his legacy as the most creative and influential economist of the twentieth century, even though, as the book's subtitle suggests, it is really about Keynes's part in Britain's struggle for survival during the war years. As Lionel Robbins, the Director of the Economic Section of the War Cabinet, wrote to Keynes's widow, the ballerina Lydia Lopokova: "Maynard had given his life for his country, as surely as if he had fallen on the field of battle." Keynes struggled stoically against an incurable heart condition, first diagnosed in 1937, to become the architect of Britain's wartime economic strategy and the postwar financial order. "His illness did not diminish his prodigious energy, though it may have affected his judgment," Skidelsky observes.

Keynes's role, reminiscent of that of Walter Bagehot in the nineteenth century as the "Spare Chancellor," was that of an unpaid advisor-without portfolio-to three successive Chancellors of the U.K. Exchequer during 1940-46 (Kingsley Wood, John Anderson, and Hugh Dalton). As such, he was the architect of successive war budgets that were inspired by his seminal monograph, How to Pay for the War, which based war finance on the theory that government absorption of purchasing power through taxes, loans, and compulsory savings, while the government allocates resources through the price system, is vastly more efficient and equitable than price and other controls. This role, in Skidelsky's words, "made him the Churchill of war finance and postwar financial planning."

Ironically, despite this stellar contribution, there is only one reference to Keynes in Winston Churchill's five-volume history of World War II, even though Churchill knew Keynes intimately as an active member since 1927 of the Other Club, a dining society that Churchill founded in 1919. This omission was not due to any lack of esteem for Keynes. In fact, Churchill exhorted John Anderson, on his appointment as Lord President of the Council, to "summon economists like Keynes to give their views to you personally." Rather, it reflected, as Skidelsky notes, "Churchill's indifference to the economic and financial aspects-and consequences-of the war."

Contributions

Although Skidelsky's work is, in his words, "about practical applications, not theory" and "much more about the relationship between politics and economics than previous biographies of Keynes have been," it does emphasize the influence of Keynes's main theoretical propositions. Thus, Keynes's liquidity preference theory-that is, the public's demand for excessive cash balances-led him to advocate cheap money, capital controls, and the primacy of creditor country adjustment in his plan for an International Clearing Union. The comprehensive analysis of his General Theory of Employment, Interest, and Money, which allows an almost infinite variety of applications, framed his fiscal plans to counter both inflation and depression. His skepticism on the sensitivity of international trade and capital flows to price and exchange rate movements explains his preference for fixed over floating exchange rates. His principal achievements-the first "Keynesian" budget of Kingsley Wood in 1941, the Full Employment White Paper of May 1944, and the establishment of the International Monetary Fund-were largely the work of others. His distinction is rather in the authority and influence he imparted to policies that...