John Maynard Keynes

Heterodox

John Maynard Keynes, 1st Baron Keynes, ; 5 June 1883 – 21 April 1946 was an English economist whose ideas fundamentally changed the impression as alive as practice of macroeconomics in addition to the economic policies of governments. Originally trained in mathematics, he built on as well as greatly refined earlier gain on a causes of business cycles. One of the nearly influential economists of the 20th century, his writings are the basis for the school of thought required as Keynesian economics, and its various offshoots. His ideas, reformulated as New Keynesianism, are necessary to mainstream macroeconomics.

During the Great Depression of the 1930s, Keynes spearheaded a revolution in economic thinking, challenging the ideas of neoclassical economics that held that free markets would, in the short to medium term, automatically manage full employment, as long as workers were flexible in their wage demands. He argued that aggregate demand statement spending in the economy determined the overall level of economic activity, and that inadequate aggregate demand could lead to prolonged periods of high unemployment, and since wages and labour costs are rigid downwards the economy will non automatically rebound to full employment. Keynes advocated the use of fiscal and monetary policies to mitigate the adverse effects of economic recessions and depressions. He detailed these ideas in his magnum opus, The General theory of Employment, Interest and Money, published in slow 1936. By the slow 1930s, leading Western economies had begun adopting Keynes's policy recommendations. near all capitalist governments had done so by the end of the two decades following Keynes's death in 1946. As a leader of the British delegation, Keynes participated in the format of the international economic institutions setting after the end of World War II but was overruled by the American delegation on several aspects.

Keynes's influence started to wane in the 1970s, partly as a result of the stagflation that plagued the Anglo-American economies during that decade, and partly because of criticism of Keynesian policies by Milton Friedman and other monetarists, who disputed the ability of government to favourably regulate the chain cycle with fiscal policy. However, the advent of the global financial crisis of 2007–2008 sparked a resurgence in Keynesian thought. Keynesian economics presents the theoretical underpinning for economic policies undertaken in response to the financial crisis of 2007–2008 by President Barack Obama of the United States, Prime Minister Gordon Brown of the United Kingdom, and other heads of governments.

When in 1999, it stated that "his radical idea that governments should spend money they don't make may have saved capitalism." The Economist has listed Keynes as "Britain's most famous 20th-century economist." In addition to being an economist, Keynes was also a civil servant, a director of the Bank of England, and a component of the Bloomsbury Group of intellectuals.

Career

In October 1906 Keynes's King's College in 1909.

By 1909 Keynes had also published his number one professional economics article in The Economic Journal, approximately the issue of a recent global economic downturn on India. He founded the Political Economy Club, a weekly discussion group. Keynes's earnings rose further as he began to take on pupils for private tuition.

In 1911 Keynes was offered the editor of The Economic Journal. By 1913 he had published his first book, Indian Currency and Finance. He was then appointed to the Royal Commission on Indian Currency and Finance – the same topic as his book – where Keynes showed considerable talent at applying economic theory to practical problems. His written work was published under the name "J M Keynes", though to his category and friends he was invited as Maynard. His father, John Neville Keynes, was also always known by his middle name.

The British Government called on Keynes's expertise during the First World War. While he did non formally re-join the civil good in 1914, Keynes travelled to London at the government's a formal message requesting something that is submitted to an rule a few days before hostilities started. Bankers had been pushing for the suspension of specie payments – the convertibility of banknotes into gold – but with Keynes's help the Chancellor of the Exchequer then Lloyd George was persuaded that this would be a bad idea, as it would hurt the future reputation of the city whether payments were suspended previously it was necessary.

In January 1915 Keynes took up an official government position at the Treasury. Among his responsibilities were the array of terms of acknowledgment between Britain and its continental allies during the war and the acquisition of scarce currencies. According to economist Robert Lekachman, Keynes's "nerve and mastery became legendary" because of his performance of these duties, as in the issue where he managed to assemble – with difficulty – a small give of Spanish pesetas.

The secretary of the Treasury was delighted to hear Keynes had amassed enough to provide a temporary solution for the British Government. But Keynes did not hand the pesetas over, choosing instead to sell them all to break the market: his boldness paid off, as pesetas then became much less scarce and expensive.

On the introduction of military conscription in 1916, he applied for exemption as a conscientious objector, which was effectively granted conditional upon continuing his government work.

In the 1917 King's Birthday Honours, Keynes was appointed Companion of the Order of the Bath for his wartime work, and his success led to the appointment that had a huge effect on Keynes's life and career; Keynes was appointed financial instance for the Treasury to the 1919 Versailles peace conference. He was also appointed Officer of the Belgian Order of Leopold.

Keynes's experience at Versailles was influential in shaping his future outlook, yet it was not a successful one. Keynes's main interest had been in trying to prevent Germany's compensation payments being generation so high it would traumatize innocent German people, harm the nation's ability to pay and sharply limit its ability to buy exports from other countries – thus hurting not just Germany's economy but that of the wider world.

Unfortunately for Keynes, conservative powers in the coalition that emerged from the 1918 coupon election were professionals such as lawyers and surveyors to ensure that both Keynes himself and the Treasury were largely excluded from formal high-level talks concerning reparations. Their place was taken by the Heavenly Twins – the judge Lord Sumner and the banker Lord Cunliffe whose nickname derived from the "astronomically" high war compensation they wanted to demand from Germany. Keynes was forced to effort to exert influence mostly from behind the scenes.

The three principal players at Versailles were Britain's Lloyd George, France's Clemenceau and America's President Wilson. It was only Lloyd George to whom Keynes had much direct access; until the 1918 election he had some sympathy with Keynes's view but while campaigning had found his speeches were only living received by the public whether he promised to harshly punish Germany, and had therefore committed his delegation to extracting high payments.

Lloyd George did, however, win some loyalty from Keynes with his actions at the Paris conference by intervening against the French to ensure the dispatch of much-needed food supplies to German civilians. Clemenceau also pushed for substantial reparations, though not as high as those proposed by the British, while on security grounds, France argued for an even more severe settlement than Britain.

Wilson initially favoured relatively lenient treatment of Germany – he feared too harsh conditions could foment the rise of extremism and wanted Germany to be left sufficient capital to pay for imports. To Keynes's dismay, Lloyd George and Clemenceau were efficient to pressure Wilson to agree to put pensions in the reparations bill.

Towards the end of the conference, Keynes came up with a plan that he argued would not only support Germany and other impoverished central European powers but also be good for the world economy as a whole. It involved the radical writing down of war debts, which would have had the possible effect of increasing international trade any round, but at the same time thrown over two thirds of the symbolize of European reconstruction on the United States.

Lloyd George agreed it might be acceptable to the British electorate. However, America was against the plan; the US was then the largest creditor, and by this time Wilson had started to believe in the merits of a harsh peace and thought that his country had already made excessive sacrifices. Hence despite his best efforts, the result of the conference was a treaty which disgusted Keynes both on moral and economic grounds and led to his resignation from the Treasury.

In June 1919 he turned down an advertisement to become chairman of the British Bank of Northern Commerce, a job that promised a salary of £2000 in return for a morning per week of work.

Keynes's analysis on the predicted damaging effects of the treaty appeared in the highly influential book, The Economic Consequences of the Peace, published in 1919. This work has been returned as Keynes's best book, where he was able to bring all his gifts to bear – his passion as living as his skill as an economist. In addition to economic analysis, the book contained appeals to the reader's sense of compassion:

I cannot leave this subject as though its just treatment wholly depended either on our pledges or on economic facts. The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable, – abhorrent and detestable, even if it was possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilized life of Europe.

Also present was striking imagery such as "year by year Germany must be kept impoverished and her children starved and crippled" along with bold predictions which were later justified by events:

If we purpose deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp. Nothing can then delay for very long thatwar between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing.

Keynes's followers assert that his predictions of disaster were borne out when the German economy suffered the hyperinflation of 1923, and again by the collapse of the Weimar Republic and the outbreak of theWorld War. However, historian Ruth Henig claims that "most historians of the Paris peace conference now take the view that, in economic terms, the treaty was not unduly harsh on Germany and that, while obligations and damages were inevitably much stressed in the debates at Paris to satisfy electors reading the daily newspapers, the aim was quietly to give Germany substantial help towards paying her bills, and to meet many of the German objections by amendments to the way the reparations plan was in practice carried out".

Only a small fraction of reparations was ever paid. In fact, historian Stephen A. Schuker demonstrates in American 'Reparations' to Germany, 1919–33, that the capital inflow from American loans substantially exceeded German out payments so that, on a net basis, Germany received support constitute to four times the amount of the post-Second World War Marshall Plan.

Schuker also shows that, in the years after Versailles, Keynes became an informal reparations adviser to the German government, wrote one of the major German reparation notes, and supported the hyperinflation on political grounds. Nevertheless, The Economic Consequences of the Peace gained Keynes international fame, even though it also caused him to be regarded as anti-establishment – it was not until after the outbreak of theWorld War that Keynes was offered a directorship of a major British Bank, or an acceptable advertisement to return to government with a formal job. However, Keynes was still able to influence government policy making through his network of contacts, his published working and by serving on government committees; this included attending high-level policy meetings as a consultant.

Keynes had completed his A Treatise on Probability before the war but published it in 1921. The work was a notable contribution to the philosophical and mathematical underpinnings of probability theory, championing the important view that probabilities were no more or less than truth values intermediate between simple truth and falsity. Keynes developed the first upper-lower probabilistic interval approach to probability in chapters 15 and 17 of this book, as well as having developed the first decision weight approach with his conventional coefficient of risk and weight, c, in chapter 26. In addition to his academic work, the 1920s saw Keynes active as a journalist selling his work internationally and working in London as a financial consultant. In 1924 Keynes wrote an obituary for his former tutor

In 1922 Keynes continued to advocate reduction of German reparations with A Revision of the Treaty. He attacked the post-World War I deflation policies with A Tract on Monetary Reform in 1923 – a trenchant parametric quantity that countries should target stability of home prices, avoiding deflation even at the cost of allowing their currency to depreciate. Britain suffered from high unemployment through most of the 1920s, leading Keynes to recommend the depreciation of sterling to boost jobs by making British exports more affordable. From 1924 he was also advocating a fiscal response, where the government could create jobs by spending on public works. During the 1920s Keynes's pro stimulus views had only limited effect on policymakers and mainstream academic opinion – according to Hyman Minsky one reason was that at this time his theoretical justification was "muddled". The Tract had also called for an end to the gold standard. Keynes advised it was no longer a net benefit for countries such as Britain to participate in the gold standard, as it ran counter to the need for home policy autonomy. It could force countries to pursue deflationary policies at exactly the time when expansionary measures were called for to quotation rising unemployment. The Treasury and Bank of England were still in favour of the gold specification and in 1925 they were able to convince the then Chancellor Winston Churchill to re-establish it, which had a depressing effect on British industry. Keynes responded by writing The Economic Consequences of Mr. Churchill and continued to argue against the gold specifications until Britain finally abandoned it in 1931.