To cut a long story short, Keynes was a “progressive” liberal, not a conservative and not a direct supporter of the UK “Labour” party, in contrast to some people who seem to think Keynes was a conservative.
Keynes opposed Marxism and communism, and his opinion of Marx’s economics was low, even scornful.
Keynes called himself a “liberal” throughout his life, not a conservative, and his “liberalism” was firmly in the tradition of the progressive, interventionist type that developed in the UK from the late 19th century onwards.
Around 1911 Keynes seems to have had some contact with the Fabian socialists at Cambridge; his father commented in his diary entry for 6 September 1911:
“Maynard avows himself a Socialist and is in favour of confiscation of wealth” (quoted in Moggridge 1992: 190).We should not be misled by the word “socialist” here. Keynes’ “socialism” at this time wasn’t Marxism, but the progressive liberalism of these years that was in favour of progressive taxation and income tax. Moreover, at this time Keynes’ radical “socialist” views were still compatible with the Liberal idea of support for free trade.
Again, a close look at Keynes’ political and economic ideas in later life shows him to be firmly in the camp of what we would call a progressive, left-leaning liberal.
Keynes tells us this himself in his essay “Am I a Liberal?” (1925), where he rejects both conservatism and Labour party politics:
“Now take my own case—where am I landed on this negative test? How could I bring myself to be a Conservative? They offer me neither food nor drink—neither intellectual nor spiritual consolation. I should not be amused or excited or edified. That which is common to the atmosphere, the mentality, the view of life of—well, I will not mention names—promotes neither my self-interest nor the public good. It leads nowhere; it satisfies no ideal; it conforms to no intellectual standard; it is not even safe, or calculated to preserve from spoilers that degree of civilisation which we have already attained.So, for Keynes, the conservatives were a sterile road to nowhere; the Labour party was “superficially … attractive,” but on closer inspection was not satisfactory. The party that Keynes chose to identity with was the Liberal Party: “the best instrument of future progress.” The British liberal party that Keynes supported had become increasing progressive by the late 1920s.
Ought I, then, to join the Labour Party? Superficially that is more attractive. But looked at closer, there are great difficulties. To begin with, it is a class party, and the class is not my class. If I am going to pursue sectional interests at all, I shall pursue my own. When it comes to the class struggle as such, my local and personal patriotisms, like those of every one else, except certain unpleasant zealous ones, are attached to my own surroundings. I can be influenced by what seems to me to be Justice and good sense; but the Class war will find me on the side of the educated bourgeoisie.
But, above all, I do not believe that the intellectual elements in the Labour Party will ever exercise adequate control; too much will always be decided by those who do not know at all what they are talking about; and if—which is not unlikely—the control of the party is seized by an autocratic inner ring, this control will be exercised in the interests of the extreme Left Wing—the section of the Labour Party which I shall designate the Party of Catastrophe.
On the negative test, I incline to believe that the Liberal Party is still the best instrument of future progress—if only it had strong leadership and the right programme.”
When Lloyd George became leader of liberal party for the 1929 general election, he proposed a large program of what we now call Keynesian stimulus to solve Britain’s problem of high unemployment after the disastrous return to the gold standard. At this time, Keynes was an economic adviser to the Liberal party and helped design that program.
Keynes’ greatest work the General Theory and his later writings do not change this assessment. In his last years Keynes was not in sympathy with the more radical aspects of the Labour party and its economic program after it came to power after WWII, such as its nationalisations, which confirms his earlier unwillingness to associate himself with the British Labour party. On April 18, 1946, for example, Keynes, in a private conversation, attacked the Labour government’s decision to “nationalise the road-hauliers, which he regarded as an unnecessary act of regimentation” (Skidelsky 2000: 471).
Finally, the haters of Keynes point to something Keynes allegedly said to Henry Clay when they went to lunch on 11 April 1946, about 10 days before Keynes’ death:
“On Thursday 11 April he had lunch at the Bank after the regular meeting of the court. He sat next to Henry Clay; they discussed the American loan. Keynes said that he relied on Adam Smith’s ‘invisible hand’ to get Britain out of the mess it was in, and went on: ‘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.’ ‘An interesting confession for our arch-planner,’ Henry Clay noted. The now-retired Montagu Norman, the recipient of Clay’s letter, wrote back: ‘About Keynes ... I think he relied on intellect, which perhaps means that he ignored the “invisible hand”, and I guess he was led astray by Harry White. But surely it is easy to arrange a loan if you ignore its repayment, and is there any hope of that, unless there is to be such an inflation across the Atlantic as will affect their claims and provide an easy way out?” (Skidelsky 2000: 470).First, the story about what Keynes said appears to be based on a letter of Henry Clay to Montagu Norman on 11 June, 1946 (Skidelsky 2000: 540, n. 43): there is no independent evidence that Keynes made such a remark. Did Clay accurately record what Keynes even said, or exaggerate its meaning somewhat?
As we will see below, Keynes probably did make this remark or something to its effect, but its proper context shows us that it does not have the significance that Keynes’ critics attach to it.
Before I get to that, it is of course laughable to see how the remark is seized upon by libertarians and conservative critics, who all show a type of intellectual bankruptcy akin to that of the Christian fundamentalist who tries to discredit the modern Darwinian theory of evolution by claiming that Darwin repudiated the theory on his deathbed. (We know, of course, that this story is a complete lie invented by a Christian apologist called Elizabeth Hope.)
But suppose it were true: that Darwin recanted the Origin of Species. Would such a thing provide good grounds for rejecting the modern theory of Darwinian evolution? Not in the least. Certainly not if Darwin provided no arguments refuting his original evidence. The theory presented in Origin of Species stands by itself and its truth depends on the cogency of the evidence and arguments. Modern science has reinforced the central ideas of the Origin of Species, and whatever the dying Darwin thought is irrelevant to the modern case that can be made for its truth.
Now suppose, for the sake of argument, the extreme view that Keynes really did repudiate his earlier ideas by this remark. Once again, it is the same with the central ideas of the General Theory, and certainly as refined and developed in modern Keynesian theory, which stand or fall by their own merits and the cogency of the evidence and arguments offered in support of them. In the end, it matters not one whit what Keynes thought in his last days or on his deathbed, certainly if he never provided any evidence for why he rejected his earlier theory. Theories in the natural sciences, social sciences and economics stand and fall on their merits, not on what the original inventor of them said or did on his deathbed or last few days.
But, as it happens, a careful look at the context of the statement attributed to Keynes shows that it is “the American loan” obtained by the UK after WWII, the post war problems of a possible US current account surplus, an international dollar shortage after 1945, and other balance of payments difficulties that are the context of the remark (as described in Moggridge 1992: 822–825). We can see this clearly by looking at Keynes’ posthumously published paper “The Balance of Payments of the United States” (Economic Journal 56.222 : 172–187), which he had been writing in 1946 (Moggridge 1992: 822). By relying on “a solution of our problems on the invisible hand” Keynes appears to have been talking about allowing alleged long-run natural tendencies to current account and trade account equilibrium in the United States (Keynes 1946: 185) to work, whereby solving any problem of a dollar shortage in the years after 1946.
Yet even in this paper Keynes qualified his views:
“I must not be misunderstood. I do not suppose that the classical medicine will work by itself or that we can depend on it. We need quicker and less painful aids of which exchange variation and overall import control are the most important. But in the long run these expedients will work better and we shall need them less, if the classical medicine is also at work. And if we reject the medicine from our systems altogether, we may just drift on from expedient to expedient and never get really fit again. The great virtue of the Bretton Woods and Washington proposals, taken in conjunction, is that they marry the use of the necessary expedients to the wholesome long-run doctrine. It is for this reason that, speaking in the House of Lords, I claimed that ‘Here is an attempt to use what we have learnt from modern experience and modern analysis, not to defeat, but to implement the wisdom of Adam Smith.’”” (Keynes 1946: 186).Keynes’ comment to Henry Clay seems to be just a re-statement of the ideas above.
And I see no reason to think that the comment of Keynes shows any rejection of the fundamental ideas of the General Theory. Keynes’ program of monetary and fiscal policy interventions to maintain aggregate demand is essentially compatible with private production of commodities and a capitalist economy. A greater concern for Adam Smith’s “invisible hand” in his last years, perhaps over balance of payments difficulties in the context of the the American loan, does not require that Keynes rejected aggregate demand management, or suddenly became some reborn advocate of complete laissez faire.
Keynes, John Maynard. 1946. “The Balance of Payments of the United States,” Economic Journal 56.222 (June): 172–187.
Moggridge, D. E. 1992. Maynard Keynes: An Economist’s Biography. Routledge, London.
Skidelsky, R. J. A. 2000. John Maynard Keynes: Fighting for Britain 1937–1946 (vol. 3), Macmillan, London.