Extravagance

Ross McKibbin

  • The Keynesian Revolution in the Making, 1924-1936 by Peter Clarke
    Oxford, 348 pp, £29.50, November 1988, ISBN 0 19 828304 0

A few years ago the present director-general of NEDO, Mr Walter Eltis, told me that in due course Keynes would simply be a footnote in the history of economic theory. If so, it will be a stupendously long footnote, for additions to the already vast Keynesian literature mount by the day, not least from Mr Eltis himself.[*] The reason why the literature mounts is obvious enough. Keynes stands as a reproach to a society which, not once but twice, has permitted (and indeed partly created) large-scale unemployment and everything that accompanies it – poverty, waste, unearned privilege – and which has justified these things by recourse to the commonsense maxims of bourgeois life. Keynes has earned his enduring power to irritate because his economics were designed to subvert these maxims: but, unlike Marx, who inhabited ‘the underworld’ and whose economics were too flawed anyway, he did so from within the house. While there is any room for guilt or shame in our society Keynes will remain central to our public life, however much some would wish it otherwise.

There is thus nothing untimely in the publication of Peter Clarke’s elegant and absorbing book. Dr Clarke writes it consciously as a historian, and though he generously acknowledges the work of those students of Keynes who are economists, his approach is primarily historical. He works on two assumptions: first, that the intellectual basis of Keynes’s economics was, a priori, dependent upon prejudice or intuition; second, that what became of Keynesian economics was the result of a marriage between his academic and public life. Therefore, a ‘doctrine-historical’ analysis can only be partial or misleading. There is nothing surprising in the first of these assumptions. Presumably all economists (and historians) discover their conclusions before their argument: it is the process by which the argument is perfected (and the conclusion modified) which Dr Clarke insists we treat historically. Thus much of the book is (necessarily) as concerned with the views of those with whom Keynes engaged in public life as it is with Keynes’s own: the two relate dialectically. As a piece of intellectual archaeology, it sets out to explain why Keynes out of any number of ‘solutions’ should finally have lighted upon ‘home development’ (state-financed capital development), how an apparent ‘gap’ between savings and investment could satisfactorily be explained, and how wage-stickiness, which had originally been seen as a kind of social maladjustment, became in The General Theory a ‘problem’ which it was neither practically nor in principle desirable to ‘solve’. The book begins in 1924 because that is when, Dr Clarke argues, Keynes first approached unemployment in a potentially radical way – in an article in the Nation (August 1924) proposing ‘a reorientation which amounted to hardly less than a revolution in economic policy’ – and substantively ends with the publication of The General Theory.

The book is largely chronological and leads us to The General Theory via the more important stations on the way: the battle against the return to gold at par in 1925 (though Dr Clarke wisely refrains from rehearsing that), Keynes’s involvement with Lloyd George in 1928-1929 (We can conquer unemployment), his part in the Macmillan Committee and the simultaneous writing and publication of the Treatise on Money, and 1932-1936, when all the blocks were assembled and The General Theory finally constructed. The last station is different from the others: it is ‘doctrine-historical’ and though Dr Clarke has done some important re-dating it is, in fact, a careful adjudication of the existing literature. We start when Keynes supported almost anything that was not the status quo and end up with the highly specific (or seemingly specific) conclusion of The General Theory.

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[*] Keynes and Economic Policy, edited by Walter Eltis and Peter Sinclair (Macmillan and National Economic Development Office, 473 pp., £35, 8 December 1988, 0 333 46997 6).