Masters of money: John Maynard Keynes

John Maynard Keynes Keynes personally helped create institutions like the World Bank

It's hard to think of a British man born in the 1880s whose name you hear more often, in current debates, than John Maynard Keynes.

I've made a TV series, with help from the Open University, about three economic thinkers from the past who have something interesting to tell us about the financial crisis and how to get past it: Friedrich Hayek, Karl Marx and, tonight, Keynes.

You might think it an odd trio for a series. Even for BBC Two.

Keynes has gone down in history as the first of the big spenders - the man who thought government could spend their way out of problems. (In fact, there's a lot more to him than that, but I'll get to that in a minute.)

If you've heard Hayek's name, it will have been as Keynes' arch enemy - the "Austrian" economist who wrote the Road to Serfdom and believed that markets should be as free as humanly possible.

And Marx - well, wasn't he some some kind of Communist?

But what all three had in common was that they understood both the genius of capitalism, and its inherent instability.

I spoke about Keynes on the Today programme this morning. He was very, very clever. Even his enemies will admit that.

Stephanie Flanders: Keynes' basic idea... was gradually built into the fabric of every western economy

In the programme, Nicholas Wapshott says Keynes "caused more inferiority complexes with justification than anyone else in his generation".

He was one of the first to say, in the 1930s, that economies could just get stuck: they might sink, and then NOT float magically back up. When that happened, he said, the only solution was for the government to borrow its way out.

You can see why the shadow chancellor, Ed Balls, would like to talk about Keynes. A lot.

But he also said governments should balance the books when the sun was shining. George Osborne would probably also want to point out that when Keynes was telling the Treasury to borrow more, 80 years ago, it was barely borrowing anything at all - not more than 10% of Britain's national income - in the first year of the financial crisis alone.

Yes, there really is something for everybody in Keynes. It turns out being a brilliant economist wasn't even his main interest.

He also found time to be a world class investor, help found the Arts Council - and to shock even his friends from the Bloomsbury Set by marrying a Russian ballerina. (They thought, with good reason, that he was gay.)

"If one considers how small a share of his time and energy he gave to economics, the fact that he'll be remembered chiefly as an economist is both miraculous and tragic."

That was Friedrich Hayek's rather barbed comment, years after Keynes' death. But, he added, "Keynes would have been remembered as a great man by all who knew him, even if he had never written on economics."

In one of the only long television interviews that he has given since becoming governor of the Bank of England, Sir Mervyn King told me the financial crisis had helped him get a keener understanding of Keynes' analysis of the 1930s.

But, Sir Mervyn said, the most important message he took from Keynes right now was the need for countries to work together to tackle global economic issues - whether it's the crisis in the eurozone or the massive financial imbalances that helped cause the crisis in 2008, and could yet come back to bite us.

If you beggar your neighbour (and trading partner), you might very well beggar yourself. Keynes saw the world learn that lesson the hard way in the years after World War I.

When he personally helped the Allies create institutions like the World Bank, at the end of World War II, he was trying to make sure we wouldn't get into such a mess again.

He was only partly successful. Unfortunately for us. We debate that, at length, in the film - and the parallels between the events of the 1920s and 1930s and the eurozone crisis today.

But at a national level, Keynes' basic idea that governments should intervene when things go wrong, was gradually built into the fabric of every Western economy from the 1940s onwards.

It's still there now. That is why nearly all of them ran a large budget deficit in the wake of the global financial crisis. And why George Osborne is still running one, even though he'd rather not. It is built in. The debate is over how much to borrow, when the economy is still weak, not whether to borrow at all.

Yet, when you read what Keynes actually wrote, you can't help feeling he had another, equally powerful message for governments today: that the world was a deeply unpredictable place, and uncertainty an inescapable part of economic life.

He might be the grandfather of activist government, but Keynes also said, in effect, that you should never think you have it covered, that you've abolished boom and bust.

For me, that's the great paradox. The man who did most to make economists and politicians arrogant - to make them think they could bend the world to their will - also gave them, or ought to have given them, the very best reasons for self-doubt.

The first episode of Masters of Money is broadcast on BBC Two at 21:00 BST on Monday, 17 September.

Stephanie Flanders Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • rate this

    Comment number 372.

    All economic experts thus far are of the mark seeing the economic mess! Alternatively, He who knows how society should function is totally ignored. For your information Google The World Monetary Order to Come.

  • rate this

    Comment number 371.

    @368.Each One Teach One
    "it's like bankers hogged out on manipulating property for personal greed"

    The 1992 Monster Raving Loony Party manifesto:
    "Banks shall be unable to write-off, or claim relief against the first 15% of any loan or bankrupted debt left with them. This will introduce an unfamiliar note of responsibility to the lending policy of institutions even more loony than our own."

  • rate this

    Comment number 370.

    @51.Sage Against The Machine
    "Why did Dorothy wear silver slippers on the Yellow Brick Road in the original L. Frank Baum book? (Clue - Silver Slippers = silver-based money, Yellow Brick Road = Gold Standard!)"

    A more important question was raised: why were they changed to ruby slippers in the film?

  • rate this

    Comment number 369.

    #366. ComradeOgilvy

    The unit of exchange could be the megaJoule.

    To buy a car you would save up, or borrow, megaJoules and credit the dealership.

    The point being that MJs would be universal. Based upon reality.
    Another Bretton Woods would be needed of course to replace the $ with MJs. Marks on bits of paper, bits in memory, would be backed up by something real.

    Convertible the world over.

  • Comment number 368.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 367.

    So Hayek thought markets should be as free humanly possible while Keynes was a director of the British Eugenics Society. Says it all really.

  • rate this

    Comment number 366.


    All entirely true. But this does not make it a suitable currency.

    I have no better suggestions myself of course but a means of exchange, it seems to me, should not be so easily manipulatable by the 'powerful'. This is even more open to corruption than what we now have.

    BTW, HG Wells' 'Modern Utopia' is worth a read (if you haven't already). Makes the same case as you most eloquently.

  • rate this

    Comment number 365.

    363 Nautionier - please think before you comment on the Norwegian economy. Its not focused on internal drivers and markets its driven by selling gas to germany. Its oil and gas activities dwarf everything else. Sweeden is in large part an export economy. Dont know anything about Finland - but know a fair ammount about Norway - its unrecognisable from your description.

  • rate this

    Comment number 364.

    Whether we like it or not energy is already being used universally as a limit to human activity.

    Whether because the climate is too hot or too cold energy is needed for humans to survive.

    If there is no energy there are no humans.
    Subsistence farmers grow their crops using available energy.

    For the euro sceptics 1 KWH = 3.6 mega Joules.

  • rate this

    Comment number 363.

    349 nautonier,guess so whale meat again,point being kill whales sell fish as exports to people who eat fish and whales to those who eat whales double kill no waste,wild farming profitable not much in baltic for swedes
    Point is - The average Swede, Norwegian or Fin is now better off than the average Brit - reason is their economies are focussed on their intenal drivers & markets

  • Comment number 362.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 361.

    . Yes - it is energy.
    So base money upon oil.

    In the next 20 years - trading in 'energy units' - (Kj's better than just oil as tends to concentrate imbalance of financial power towards those still sitting on largest oild reserves as holding ROW to ransom) - will, IMWO, indeed become a 'new global gold standard'

    Yes indeed - energy willl become more important than 'money'

  • rate this

    Comment number 360.

    Keynes' policies worked during the late 30's to drag the world out of the great depression when governments started the arms race to build up for WW2. I believe it was Marx who said he wanted to hang all capitalists. When asked where he would get so much rope, he replied "The capitalists will sell it to us".

  • rate this

    Comment number 359.

    Keynes has been much abused, especially by left wing idiots like Balls & Brown that got Britain in such a mess.

    The essence of Keynes' theory was to borrow money to invest in infrastructure that, once recession was over, would increase efficiency. B&B simply built a client-state of dependants in non-jobs who would then vote for them; the greatest act of perfidy since the war.

  • rate this

    Comment number 358.

    356 oc iran iran chicken prices up oil price premum, 22% of oil reserves,
    bit like southern rhodesia at udi lot to offer to many own goals to score now on in fussion or fission no way of practicalities

  • rate this

    Comment number 357.


    Catchy ;-)

    Do you think when fusion is mastered or we beam energy from space stations or we harness geothermal energy, that the increased supply won't alter the value? Cheap. May as well use air.

    Then there's the issue of Iran. Gets uglier still somehow.

  • rate this

    Comment number 356.

    #355. ComradeOgilvy

    A Watt Hour is a Watt Hour is a Watt Hour.

    A Watt Hour can never be inflated.

    If there is technological advances that allows us to make Watt Hours easily then rejoice!

  • rate this

    Comment number 355.


    A recipe for runaway inflation as a direct consequence of technological advances, and one that cannot be controlled by either governments or market forces.

  • rate this

    Comment number 354.

    The answer is staring us in the face and yet still folk ignore it.

    Whether we like it or not there is already a world currency.

    . Yes - it is energy.

    Energy is needed, required, by just about all man's activities.
    Energy is currently best espoused by oil. But there are others.

    So base money upon oil.

    While we are at it tax air fuel. Tax trawler fuel so preserving fish stocks.

    No free lunch.

  • rate this

    Comment number 353.

    Computerisation added to the exponential growth in money as debt. It was a tool, not a cause.

    Abandoning the gold standard allowed that. But that was inevitable at some point anyway.

    The crime is in privatisation of the money supply. A different issue.


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