In our troubled times, there is much to learn from John Maynard Keynes' approach to understanding and remedying the problems of stagnating economies and unstable financial systems.
Interest in Keynes is itself cyclical: opinion lurches from lauding to disparaging Keynes, especially in the popular, stereotypical conceptions of his work held by many of those who have not read it, and who may not realise that Keynes does not equal Keynesian. With the run on Northern Rock in 2007 and the collapse of Lehman Brothers in 2008, the public and politicians alike increasingly realised that Keynes has something useful to say about financial instability.
More recently, however, Keynes is popularly identified as an advocate of expansionary fiscal policy: digging holes to fill them with banknotes may be just a facetious metaphor, but in the public and political imagination, any suggestion of extra government spending is dangerous in the face of record fiscal deficits and rising public debt. Esoteric but important distinctions between spending on public investment versus public consumption have largely been lost in public debates.
Against this backdrop, Roger Backhouse and Bradley Bateman's book is a welcome move away from the straw-man caricatures of Keynes' work that often severely underestimate the complexity, depth and breadth of his vision. Backhouse and Bateman have written a book that may help to correct the misconceptions: they analyse what Keynes really thought as opposed to what most people think he thought. They also analyse the different dimensions of Keynes' thought, including his moral philosophy, rejecting the utilitarian view that the ultimate goal is something like the greatest good for the greatest number accompanied by faster growth and more money to go around.
For Keynes, the danger comes when money becomes an end in itself, not just a means to achieve something greater. Throughout his life, from his membership of the Apostles to his Bloomsbury friendships and later in his patronage of the arts, Keynes had always thought that there were higher goals than the pursuit of money and profits.
Backhouse and Bateman also present Keynes the psychologist, with his focus on psychological laws, the social psychology of financial markets and entrepreneurial animal spirits, all of which link into the modern economist's growing interest in behavioural themes. They explore Keynes the economic physician taking a diagnostic approach to solving the problems of capitalism. The authors perceptively emphasise that Keynes did not reject capitalism, nor did he wholeheartedly embrace it; instead he saw it as a mixed bag of bad and good, but with its advantages outweighing its costs. The role of government should be to support capitalism by boosting volumes of investment when private investment is insufficient and by supporting institutions to control the worst of capitalism's excesses when necessary, particularly in the reining-in of financial speculation. The authors also emphasise that Keynes' revolution was neither dogmatic nor authoritarian; just as his views evolved through his life, so he was receptive to challenges and adapted his own view over time.
This book is readably short and enjoyable for anyone who knows Keynes' work, but those who are less familiar with the ideas may struggle in places.
It is, however, a timely contribution. Now that the initial post-2008 rush of fresh interpretations of Keynes' work has subsided, it is a good time to reflect and develop a more balanced assessment of what Keynes had to say, and to think about how perennially useful his thoughts may (or may not) be. Backhouse and Bateman's nuanced account of Keynes will hopefully enable the layperson better to understand that Keynes has many insights into modern economic and financial problems. In this, Capitalist Revolutionary is a welcome addition to the literature.
Capitalist Revolutionary: John Maynard Keynes
By Roger E. Backhouse and Bradley W. Bateman. Harvard University Press 208pp, £20.00. ISBN 9780674057753. Published 26 November 2011