Keynes is back!

It seems to be an age ago that we could mention the name of John Maynard Keynes without howls of derision. Now, though, Keynes - a liberal intelligence of the highest order - appears to be back in fashion. If you don't believe me, have a look at the New Stateman for this week in which, with extraordinary zeal, the likes of Noreena Hertz claim him for their own.

Now, I don't know about you but as one of those for whom the bankruptcy of monetarism, then supply-side economics, then neo-liberal market economics and (that famous phase) 'post-neoclassical endogenous growth theory' came and went as so much froth and fluff, I am glad that the old boy is due for a serious examination again. But it should be a serious and sensitive rehabilitation - not a 'hero-fest' for socialists.

Let's be clear. Keynesianism (or the moderated neo-Keynesianism of the late eighties) isn't for softies. It is for real, thoughtful and purposeful liberals. Socialists beware. There are no easy rules for state management of recessions, and intervention is not - genuinely not - the simple prescription anywhere in Keynes. Keynes was, and remains, a difficult - sometimes even an unpalatable - thinker and that great trinity of works (The Treatise, the General Theory and How to Pay for the War) evolves an approach to economic analysis that is subtle and powerful.

What he did not offer was the sort of simple panaceas that Labour politicians seem to want and socialist commentators insistently believe are at least palliative in effect (never enough for them of course, but a means of mollifying the voters that usually eject Labour when recessions strike).


What he did offer was a thoroughgoing analysis of how, by concerted action allied to confident and assertive government leadership in the face of business apathy and loss of confidence, an economy like our own could be coaxed back to health.

Keynes knew that his prescription would allow capitalist economies to retain their liberal freedoms, but that other (similar but by no means identical) prescriptions - from the authoritarian left and right - were available. In the General Theory he wrote:

"The authoritarian state systems of to-day seem to solve the problem of unemployment at the expense of efficiency and of freedom. It is certain that the world will not much longer tolerate the unemployment which, apart from brief intervals of excitement, is associated - and, in my opinion, inevitably associated - with present-day capitalistic individualism. But it may be possible by a right analysis of the problem to cure the disease whilst preserving efficiency and freedom."

Keynes saved liberals the fate of sinking with the classical system that demanded constraints on the demand side of the economy in a recession, but more than that he outlined an economic liberalism that is still relevant today.

Oh, and if Mervyn King happens to read this, he also said - as Mervyn will know - "a decline in the rate of interest will be a great aid to recovery and, probably, a necessary condition of it". Go to it, Mervyn!