Thursday, September 25, 2014

What was Keynes’ Political Philosophy?


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.

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.”
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.

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 [1946]: 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.


  1. Out of curiosity LK, have you read the last article John Maynard Keynes published in The Economic Journal? It came after his death, but it was called "The Balance of Payments of the United States".

    1. Yes, and in fact just added a quick update on it, because it clarifies Keynes' remark to Clay.

    2. I see. J.M. Keynes quotes his own words from a speech he delivered at the House of Lords: "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.""

      I find it interesting that Joan V. Robinson and Richard F. Kahn apparently disapproved of that statement in the posthumously-published article.

      Apparently, Joan V. Robinson said of that passage by J.M. Keynes: "He had forgotten his own quip, that in the long run we are all dead."

      Richard F. Kahn apparently described that passage as "the words of a sick man" in a lecture delivered at the British Academy, but I forgot the exact year.

    3. Yes, that is the key passage as well as the sentences before that.

      Do you have a reference for where Joan Robinson said that about Keynes?

    4. I don't recall the exact source where Joan V. Robinson said that, unfortunately. But there is a piece by her called "A Lecture Delivered at Oxford by a Cambridge Economist". It first appeared in a 1953 pamphlet called "On Re-Reading Marx", and the entire pamphlet was later reprinted in Volume IV of her Collected Economic Papers some time in the 1970ies.

      The aforementioned piece in the pamphlet has statements by Joan V. Robinson that can be seen as critical of J.M. Keynes. And here's a link to a scanned PDF copy of the original pamphlet itself:

  2. The fact that Keynes recommended the socialization of investment suggests that Keynes was not a liberal.

    "But none of his essays ever elaborates in the slightest the content of this proposal. We do not know in what form the socialization should be implemented” (Brunner).

    What did Keynes mean by socialization of investment?

    What are the best Post-Keynesian papers on Keynes's recommendation for the socialization of investment?

    1. While I would not consider John Maynard Keynes a conservative, I actually would say that there is a basis for that view - more so than LK gives credit for. As John Maynard Keynes grew older, he did make statements that would be conservative in the vein of Edmund Burke.

      But I would disagree with your statement, "The fact that Keynes recommended the socialization of investment suggests that Keynes was not a liberal." According to the second installment of Lord Robert Skidelsky's three-volume biography of John Maynard Keynes, the prominent British economist himself was not the only person in the Liberal Party that supported public works programmes. In the same volume of Lord Skidelsky's trilogy, it is made clear that the legendary British economist was not happy that the Liberal Party was dwindling as a political force and being overtaken by the Labour Party and the Conservative Party as major parties in his lifetime, but was resigned to that fact.

  3. Depends what you mean by conservative. I consider myself rather conservative in the Burkean sense, as would Keynes, I think. But is by conservative we mean free markets then it is absurd to claim that because Keynes made a comment that interest rates might be too low and import restrictions a bad long-run policy that he was conservative in this sense.

    This ties into a broader issue: today conservatives are no longer conservatives. They are generally libertarian types who favour all sorts of non-conservative social policies, are distrustful of the government (!) and promote economic policies that undermine social institutions like the family. Conservativism in the true sense barely exists any more.

    1. Yes, points taken. I do remember reading in Skidelsky's biography that Keynes was taken by some aspects of Burke, though with criticisms.

      But even so, Keynes during his life did not explicitly self-identify as a conservative, but as a liberal. I think that is the crucial point, and one that makes attempts claim him as a conservative dubious.

      Surely the UK conservatives by late 1920s were pretty much already the fiscally conservative, anti-union, pro-wage cutting types (e.g., think of the 1926 general strike) that modern conservatives are?

    2. Yes, the libertarian streak had already manifested in the conservative movement by the turn of the 20th century. It has been downhill since then.

      Frankly, I think his ties with progressivism brought out the worst in Keynes. Progressivism in the early 20th century was a hideous program that centered around eugenics and population control.

  4. LK, you may want to check Gilles Dostaler' "Keynes and his battles". In it, Dostaler makes a convincing argument about Keynes NOT turning into a conservative in his later years. Even if one would not buy the argument, one still has to keep in mind the political context of that time: Keynes was fought both by the (conservative) people from the Bank of England and the people from the Labour Party, such as Hugh Dalton, a fight that became more bitter when Clement Attlee came into power. Keynes voted for Labour in 1936. And he liked Burke not because of his conservatism, but because the emphasis on the futility of current sacrifices vis a vis uncertain future "benefits", something that he took from Burke.

  5. Keynes might have been dissatisfied with the liberal party of his day, but he still identified with abstract progressive liberalism. It certainly does not mean he self-identified as a conservative.

    And since corporatism was very much a progressive liberal thing, this is not much of an argument for refuting the view that Keynes was a liberal.

  6. I was referring to the weaker "corporatism" in America as it developed from the 1920s -- this was not fascist but in the American progressive tradition, albeit partly in the Progressive wing of the Republican Party, but also and increasingly in the Democratic party, certainly by the 1930s.

    The hard fascist "Corporatism" was far more extreme than American/British tradition.

    Apart from which, the Keynes of the GT and later isn't really a corporatist anyway.