Montreal, January 15, 2009 • No 263


Vincent Geloso is an economics and politics student at Université de Montréal and an occasionnal collaborator at the Financial Post.






by Vincent Geloso


          In the midst of the current financial crisis, the collapse of historical corporations like the Big Three, and the rise of unemployment, there is talk of the need to save the capitalist system. Several prominent columnists, like Paul Krugman in The New York Times and Martin Wolf in the Financial Times, claim that to save capitalism, we have to look to John M. Keynes for inspiration.


          Martin Wolf points out that at first, the Great Depression deeply divided economists along ideological lines.(1) On the one hand, free market economists like Ludwig von Mises and F.A. Hayek argued that the crisis would purge the excesses of the 1920s and that growth would soon return. On the other hand, socialists argued that the crisis was proof that capitalism had failed and that central planning of the economy was crucially needed. According to Wolf, that is where Keynes―who was deeply committed to liberalism (in its European sense)―stepped in to save the day.

A Man Divided Against Himself

          Keynes insisted that the crisis be considered a technical issue in order to preserve as much liberty as possible while accommodating a certain level of intervention from the government. Wolf believes this is the genius of Keynes. The case, however, is more tenuous than Wolf's article would have us believe.

          Keynes was probably one of the most complex intellectual figures of the 20th century. His work is replete with contradictions. French biographer Alain Minc refers to his works as an "alchemy of contraries."(2) That is probably a sounder appreciation of Keynes.

          Keynes had a well-documented hatred of money and speculation, which probably earned him his many friends on the Left.(3) Among them were Beatrice and Sydney Webb, authors of Soviet Communism, a book reviewed by Keynes that claimed that the Soviets were "engaged in the vast administrative task of making a completely new set of social and economic institutions work smoothly and successfully over a territory so extensive that it covers one sixth of the land surface of the world."

"Keynes was probably one of the most complex intellectual figures of the 20th century. His work is replete with contradictions. French biographer Alain Minc refers to his works as an 'alchemy of contraries.' That is probably a sounder appreciation of Keynes."

          Keynes's official biographer, Robert Skidelsky, says that Keynes changed his mind on the virtues of Soviet Russia in 1928, but that review was written in 1936.(4) Keynes probably had a certain fascination for Russia due to his hatred of profit and speculation (even though he himself made a fortune) while clearly and virulently abhorring its horrors. However, it is the destruction of the profit motive and the elimination of private property that were at the root of those horrors. Keynes refused to consider them as root causes and blamed "some beastliness in the Russian nature―or in the Russian and Jewish natures when, as now, they are allied."(5)

The Noble Experiment

          He viewed Soviet Russia as a social experiment in planning. He also seemed to hold the same view concerning Fascist Italy and Nazi Germany.(6) In the German preface of Keynes's perennial work The General Theory of Employment, Interest and Money, Keynes wrote the following, which has been dismissed and disregarded by several of his defenders:

[M]uch of the following book is illustrated and expounded mainly with reference to the conditions existing in the Anglo-Saxon countries. Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state [emphasis added], than is the theory of the production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire.

          Keynes actually considered in his essay National self-sufficiency that fascism, Nazism and communism were "social experiments" whose failures and tragedies could be explained by administrative bungling.(7) Nazi Germany's economic disaster occurred because it was run by "unchained incompetents," according to Keynes. Although he considered that Mussolini was acquiring wisdom, he said that Soviet Russia was the result of "administrative incompetence." Keynes disregarded any other explanations that a "liberal" would consider for these failures; he only viewed them as experiments.

          Keynes was a man who often changed his mind (which is not a reproach in and of itself) but harboured very deep inconsistencies. While he probably never tried to destroy capitalism or liberalism, he never tried to save it either. Instead, he unconsciously adhered to ideas that were to have disastrous impacts on the course of human history. Keynes was never a liberal.

1. Martin Wolf, "Keynes offers us the best way to think about the crisis," Financial Times, December 24, 2008.
2. Alain Minc, Une sorte de diable : les vies de John Maynard Keynes, Paris: Éditions Grasset, 2007.
3. Idem.
4. Ralph Raico, "Was Keynes a liberal?," Independent Review (2008). 13-2 : 165-88.
5. Idem.
6. Idem.
7. John Maynard Keynes. The Collected Writings: Social, Political and Literary Writings v. 28. Edited by Donald Moggridge. London: Macmillan, Cambridge University Press, and St. Martin's Press for the Royal Economic Society, 1982.