KEYNES, JOHN MAYNARD

John Maynard Keynes (June 5, 1883–April 21, 1946) was a brilliant, colorful, and outspoken English economist whose General Theory of Employment, Interest, and Money (1936) provided the academic rationale for governmental use of a compensatory fiscal policy in countering the peaks and valleys of economic cycles. Keynes was born in Cambridge; his father, John Neville Keynes, was a noted philosopher and economist, and his mother, Florence Ada Keynes, was mayor of the city.

John Maynard Keynes was educated at the finest British schools, Eton and then King's College, Cambridge, becoming in his youth a part of the Bloomsbury Group, which consisted of a dozen privileged aesthetes, including Virginia Woolf, Lytton Strachey, and Clive Bell. Unsettled as to métier, Keynes took a position with the Foreign Service, but soon tired of his assignment at the India desk.

In 1915 Keynes joined the British Treasury staff, distinguishing himself in the effort to manage national financing of World War I. He gained international fame as a key member of the British delegation to the Paris Peace Conference during the drafting of the Versailles treaty in 1918 and 1919. Deeply concerned about the vindictive peace treaty and the impossible level of reparations imposed on Germany, he published in 1919 The Economic Consequences of the Peace, a book sharply critical of the treaty and the heads of state who drafted it.

Keynes continued to write and offer advice on public economic issues during the 1920s, publishing at the end of the decade what he considered to be his magnum opus, the two-volume A Treatise on Money (1930). Critics noted that it failed to address adequately key economic issues of the time, including especially the relationship between production, employment, and money. Keynes immediately began to address the criticism through another project, which became his General Theory.

Deeply concerned about the economic crisis of the 1930s, Keynes quickly became persuaded of the wrong-headedness of the widely held business cycle theory of the time that advised policy makers to let "natural" adjustment of money supply and interest rates ameliorate the crisis without governmental intervention. In Keynes's view, when times were so bad that potential investors were unwilling to borrow and initiate new enterprises, even with interest rates near zero, the government should step in and stimulate demand by borrowing and investing. Keynes advocated these views in an open letter to Franklin D. Roosevelt published in the New York Times on December 31, 1933, and in a meeting with the president in June 1934. Yet, neither the letter, the meeting with the president, nor the publication of the General Theory were significant in shaping New Deal economic policy. When, during the recession of 1937 to 1938, Roosevelt's advisors moved him toward acceptance of a rationale for a compensatory fiscal policy, they did so principally on the basis of their independently-derived observations and experience.

Though Keynes had little direct influence upon New Deal policy formation, his General Theory provided the most coherent after-the-fact academic explanation for the crisis and recovery of the 1930s and 1940s, and it became the foundation of postwar economic policies and perspectives. In 1944 Keynes was the chief British Treasury representative at the Bretton Woods Conference held in New Hampshire to provide a foundation for the postwar world economy. His influence there helped in the design and establishment of the World Bank and the International Monetary Fund.

Keynes was knighted in 1942; his ideas, as interpreted against the backdrop of the Great Depression, informed a generation of economic thinkers and made him the best-known economist of the twentieth century.

KEYNES, JOHN MAYNARD

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