This post is very much a work in progress, which I may update and expand in the future.
By the mid-1920s, Keynes had become an international celebrity and had married Lydia Lopokova on 4 August 1925.
On 9 February 1926, Keynes gave a speech at the Manchester Reform Club on “Liberalism and Labour,” in which he urged Liberals and Labour party politicians to forge a new alliance and put aside their ideological differences. This was later published in The Nation and Athenaeum on 20 February, 1926, and Keynes struck up a new-found friendship with Beatrice Webb after a lunch with her and Bernard Shaw on 19 March, 1926 (Skidelsky 1992: 247).
On 3 March 1926, Keynes took possession of Tilton house, South Downs near Lewes, which he had rented on a 21 year lease (Skidelsky 1992: 214). In future years, it was in Tilton house that Keynes and Lydia would spend their Christmas and Easter holidays and two and a half months during the summer (Skidelsky 1992: 217). Keynes made various improvement to the house including the addition of a library with an Italianate terrace, in which he wrote much of A Treatise on Money (1930) and The General Theory of Employment, Interest and Money (1936) (Skidelsky 1992: 215).
After renting Tilton, Keynes’ normal weekly schedule from 1926 to 1937 was as follows:
(1) during the Cambridge term, he spent the middle of the week in London and the weekend and Monday in Cambridge;From 1924 to 1929, Keynes had developed a new-found hostility to 19th century laissez-faire economics, well before he had fully worked out his later critique in The General Theory, and the basis of this was the idea that 19th century laissez-faire policies – to the extent that they had worked – had been based on historically-specific conditions that had ceased to exist by the 1920s (Skidelsky 1992: 219). Although these conditions had started to break down before 1914, the Frist World War had utterly shattered them, and the solution, Keynes thought, was a different set of policies, to address problems of population, money, and the balance between domestic saving and investment (Skidelsky 1992: 221).
(2) university vacations were spent in Tilton or London (Moggridge 1992: 403).
In short, Keynes believed that
(1) in order for capitalism to work properly, it required different economic and institutional policies in different stages of development andAnd Keynes saw his new set of interventionist policies as an alternative to the protectionism of conservatives and the redistributionist socialism of the left (whether Marxists or other socialists), and in the late 1920s was deeply involved in trying to reform the political and economic thinking of the British Liberal party (Skidelsky 1992: 222), although he had hopes that the British Labour party would take up his ideas (Skidelsky 1992: 232).
(2) economic prosperity is the foundation of a liberal political order (or liberal freedom), and – contrary to the ideas of Classical liberals like Hayek – not the other way round (Skidelsky 1992: 221).
This reformed Liberalism advocated by Keynes had obvious similarities to the pre-1914 “New Liberalism” but also differences, since Keynes went much further and supported macroeconomic intervention by governments and a managerial state rather than just mere welfare or redistributionism; moreover, Keynes was always concerned with the state of business confidence and expectations (Skidelsky 1992: 223–224).
The major venues for this activism within British Liberal circles by Keynes were the following:
(1) the Liberal Summer Schools which met alternately in Oxford and Cambridge from 1922 onwards;An important intellectual contribution to this was Keynes’ book The End of Laissez-Faire, published in July 1926, and derived from the Sidney Ball lecture he had given at Oxford university on 6 November 1924 (Skidelsky 1992: 225).
(2) the weekly publication the Nation, and
(3) the Liberal Industrial Inquiry, financed by ex-Prime Minister David Lloyd George, which published a report in 1928 called Britain’s Industrial Future (Skidelsky 1992: 222).
On 13 May 1925, the UK had adopted the Gold Standard Act, which returned the UK to pre-WWI parity between gold and the pound. This disastrous measure, championed by Winston Churchill, imposed a severe need for nominal wage reductions in the UK, which were difficult to achieve because of downwards nominal rigidity.
By 1926, this was causing labour disputes, especially when the subsidy to the coal industry, temporarily allowed by the Conservative government of Stanley Baldwin to avoid labour conflict, was due to expire on 30 April 1926. From 4–13 May 1926, the General Council of the Trades Union Congress (TUC) organised a general strike in the United Kingdom.
News footage of the general strike of 1926 can be seen in the videos below:
Keynes was sympathetic to the strikers. He was also opposed both to the Gold Standard and to the wage reductions (Skidelsky 1992: 242), and shifted his support within the Liberal party to Lloyd George (Skidelsky 1992: 249), who agreed with these positions.
In June 1926, Keynes visited Berlin and gave a lecture at the University of Berlin.
On 25 September 1926, Keynes and fourteen others met with David Lloyd George at Churt to discuss a new radical Liberal program, as part of Lloyd George’s attempt to revive the dying Liberal party (Skidelsky 1992: 258). Some months before this, the Liberal Summer School Committee, of which Keynes was a member, had established a Liberal Industrial Inquiry, to examine the economic problems relating to British industry (Skidelsky 1992: 258). Keynes served on the “Industrial and Financial Organisation,” one of the five committees, and studied the declining coal and textile industries as affected by the return to the gold standard (Skidelsky 1992: 258). Keynes’ experiences with the problems of the cotton industry in Manchester helped to shift his ideas from corporatist solutions (such as cartels and restricting output to raise prices) to demand-side policies (Skidelsky 1992: 263).
On 5 January 1927, Keynes gave a speech to the National Liberal Club on “Liberalism and Industry,” describing his research into British industrial decline, and he continued his work on the Liberal Industrial Inquiry throughout 1927 until the report was published as Britain’s Industrial Future on 22 February 1928 (Skidelsky 1992: 264).
In February 1927 Keynes resigned from the University Council of Cambridge but was still bursar and was very much involved with College affairs (Skidelsky 1992: 285–286). In these years, Arthur Cecil Pigou had become remote from university affairs owing to heart problems (Skidelsky 1992: 287).
In July 1927, Keynes oversaw the Liberal Summer School at Cambridge, which was attended by David Lloyd George, who was now the leading figure in the Liberal party (Skidelsky 1992: 264). In that same July, the Italian economist Piero Sraffa had arrived in London after fleeing Italy. Sraffa accepted an offer by Keynes to take a lectureship at Cambridge university. In autumn 1927, Richard Kahn was attending lectures at Cambridge and became Keynes’ student (Skidelsky 1992: 288).
Throughout 1927, Keynes was occupied in writing A Treatise on Money, and work continued into the summer of 1928 and 1929.
On 22 February 1928, the Liberal Industrial Inquiry had published the report called Britain’s Industrial Future, in five books, and Keynes had contributed to Books 2 and 5 (Skidelsky 1992: 265). This report essentially advocated a system very close to the social democratic Keynesian mixed economy of the 1950s and 1960s (Skidelsky 1992: 265), and at one point in the sections Keynes had contributed to the report he recommended a national investment board to stabilise capital investment (Skidelsky 1992: 267). As Skidelsky points out, Keynes’ view in the 1920s seems to have been that wage and price rigidities and other institutional changes in the 20th century had rendered the Marshallian neoclassical assumption of a tendency to equilibrium in market economies obsolete (Skidelsky 1992: 270–271), even though, Keynes thought, this tendency to equilibrium may have been true for the 19th century. Keynes therefore advocated state intervention in the 1920s but had not yet proceeded to a critique of neoclassical equilibrium theory itself as fundamentally empirically flawed.
In these years, Keynes’ economic ideas were similar to and influenced by Hubert D. Henderson (20 October 1890–22 February 1952) and Hubert Henderson and Dennis H. Robertson (23 May 1890–21 April 1963), though Keynes and Robertson’s ideas began to diverge from 1931 (Skidelsky 1992: 272). As a point of interest, in earlier years Robertson had developed a “real” theory of the business cycle in A Study of Industrial Fluctuation (1913).
Hattersley, Roy. 2012. David Lloyd George: The Great Outsider. Abacus, London.
Moggridge, D. E. 1992. Maynard Keynes: An Economist’s Biography. Routledge, London and New York.
Skidelsky, Robert. 1992. John Maynard Keynes. Volume Two. The Economist as Saviour 1920–1937. Macmillan, London.
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