Religion & Liberty Online

Free marketers can learn from Keynes, says Samuel Gregg

John Maynard Keynes, 20th century British economist, is best known for his book, “The General Theory of Employment, Interest and Money” (1936), but it was his pointed analysis of the Treaty of Versailles, “Economic Consequences of the Peace,” which first launched him into the public eye. Keynes’s “Economic Consequences” incinerated main political players of the time who had a hand in drawing up the Versailles treaty, especially Woodrow Wilson, Lloyd Wilson and Georges Clemenceau. “Deep down, he believed, there was a fair amount of vindictiveness at work, especially on France’s part,” writes Acton’s director of research, Samuel Gregg, in an article written for Law and Liberty. Keynes believed the Allied powers’ vindictiveness aided in “degrading the lives of millions of human beings . . . depriving a whole nation of happiness.”

“Economic Consequences” swayed many people’s opinion of the Versailles treaty but not without criticism, some challenging the economic analysis, Germany’s supposed inability to meet reparation demands or a lack of understanding concerning the wider political context and challenges faced by the Allied powers. “It would be easy to dismiss Keynes’s Economic Consequences as reflecting the naivety of a political novice or characterized by flawed economic analysis and predictions. That, however, would be to seriously underrate the book’s longer-term significance,” notes Gregg. Keynes’s depiction of the Versailles treaty was certainly not without bias, but, Gregg encourages, we can still gain some important observations from his writings.

Keynes didn’t always get his way. But it’s hard to think of any economist who comes even close to Keynes in terms of single-handedly shaping the parameters within which questions of economic policy have been discussed throughout the West from the 1920s onwards up to today. From this perspective, Economic Consequences marked the beginning of Keynes’s role in propelling economics and economists to the forefront of politics and the formation of public policy.

Put another way: having asserted the primacy of economics at Versailles, Keynes discovered that advancing economic ideas in public life requires smart and relentless politics. That’s one reason why, for better or worse, we still live very much in a Keynesian world. In this regard, free marketers could learn something from their nemesis.

Read Gregg’s piece, “The ‘Economic Consequences’ of John Maynard Keynes.”

Caroline Roberts

Caroline Roberts is a managing editor at the Acton Institute and produces Acton's weekly podcast, Acton Line.