Anybody who has done even a shallow analysis of economics knows who John Maynard Keynes is. As one of the most influential economists and economic philosophers in history, his importance can certainly be put alongside the likes of Adam Smith. Keynes was British; however, I would argue his impact on this nation’s economy is more limited than most historians and economists realise. To some extent, Keynesianism has only been the economic policy of Britain for around six years.
Keynes was born in 1886 and died in 1946, but his legacy is still very much alive. Today, the government of Boris Johnson is at least somewhat Keynesian. The levelling up agenda certainly is reminiscent of Keynes, who believed that investment by the state in times of hardship was necessary for recovery. Often in the modern-day, people mistake Keynes for being broadly left wing, however, this is not the case. Keynes believed in free markets, just that in times of economic strife the government must invest somewhat in infrastructure to allow the free markets to recover. Often this is heavily reliant on loan capital, with the idea that once things are fine again the free market will provide money to pay back what is owed.
Between the end of the war and the Thatcher years, to some extent all the governments were at least somewhat Keynesian, primarily because like Keynes they were not against government intervention in the economy. This did not mean they were all by any means Keynesian. The Attlee government, one of the most transformative governments in the history of Britain, was not. Whilst Keynes broadly proposed government intervention in place of crisis, leaving at least some degree to the markets, Attlee and the Labour government broadly proposed a permanent state of wide scale state ownership. This proved expensive and in the long run to be disadvantageous, primarily because nationalised industries were not modernised (though this is a point for another article.) Furthermore, Attlee’s lack of investment in infrastructure would have likely been at Keynes’ disapproval, particularly when the new deal (which Keynes widely influenced) was so heavily based on the improvement of infrastructure. Towards the end of the period, too, the Labour governments issues caused by the large scale of government spending were largely caused by the lack of a Keynesian approach, that the governments of Wilson and Callaghan failed to see the importance of free markets in generating wealth for the next time a recession came along. Certainly, though, Thatcher saw them as Keynesian and thus blamed Keynesianism for the issues they created.
Only one prime minister could be argued to have truly been a Keynesian, Harold Macmillan, this probably being helped by the fact that Keynes had a friendly relationship with the Macmillans, who were publishers. Macmillan asked Keynes for help when writing his book “the middle way” and the Keynesian influences can be seen all over it. Despite the fact that Keynes died over a decade before Macmillan became Prime Minister, his government was the most Keynesian of them all. For example, this period experienced stop-go economics, designed to limit and then encourage economic growth, typically by adjusting interest rates. This policy could be considered broadly Keynesian, as it is primarily to stop the economy having either a boom or a recession, but instead promoting long term growth. Certainly, Keynes liked long term ideas, titling one essay “economic possibilities for our grandchildren,” and was broadly occupied with trying to stop the ups and downs in the economic cycle. Macmillan also did not overlook free markets like many of his Labour counterparts, something which Keynes would likely have also approved of.
Keynes is undeniably important. However, students of history and economics should be careful when analysing just quite how much he has truly influenced the economy of our nation.
Written by Adam Caudle