H-Diplo REVIEW ESSAY 302 14 January 2021

Zachary D. Carter. The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes. New York: Random House, 2020. ISBN: 9780525509035 (hardcover, $35.00). https://hdiplo.org/to/E302 Editor: Diane Labrosse | Commissioning Editor: | Production Editor: George Fujii

Review by Michael Cox, Founding Director, LSE IDEAS, and Emeritus Professor of International Relations, The London School of Economics

ohn Maynard Keynes, who died in 1946, still remains a figure of fascination who led what, by any measure, was a rich and varied life. A serious policy-maker with friends in the highest of places, a public intellectual of the first order, an J academic economist who seemed to prefer the company of writers, a central figure in the avant-garde Bloomsbury Group, a lover of ballet and patron of the arts, and actively gay for a period when being so could easily land one in prison, it is easy to understand why Keynes has attracted so much attention from so many different kinds of writers over the years. Born into a high-minded but happy academic family in Cambridge in 1883 before going on to be educated at Eton and King’s College Cambridge, Keynes loved the company of clever and creative people as much as he was attracted to the powerful and the influential. Keynes was certainly not a ‘man of the people.’ Indeed, as he would have been the first to admit, he was an elitist to his fingertips who had no great affection for the proletariat, never much liked trade unions, and thought the USSR a quite “detestable” place.1

But if Keynes had little time for the first ‘worker’s state,’ he certainly loved England. Indeed, there was something very English about Keynes, and even though he did not like conservatives very much, he still thought the English were a superior kind of people and the British Empire a very fine institution. Indeed, for a while, he even worked in the India Office, and based upon his experience there—he never actually visited the sub-continent itself—he wrote his very first book.2 Keynes, however, never quite mastered that peculiar English art of the understatement, and rarely passed up the opportunity of letting those whose intellect he regarded as being second rate know precisely what he thought of them. Keynes did have a capacity for drawing people into his orbit, and over the years attracted his fair share of admirers from Churchill through to his old rival at the London School of Economics, Lionel Robbins who later on penned a quite moving portrait of him during his negotiations with the Americans during and just after WWII. But he always retained a wonderful capacity for putting people down and saying things that many found highly disconcerting.

No doubt for this reason, and many others besides, he has attracted more than his fair share of enemies who have accused him, amongst other things, of being an overrated economist who not only provided modern politicians with an ‘excuse’ to

1 See John Maynard Keynes, “A Short View of Russia” published after a visit in 1925. http://pombo.free.fr/krussia.pdf

2 Keynes, Indian Currency and Finance (London, Macmillan & Co, 1913).

© 2021 The Authors | CC BY-NC-ND 3.0 US H-Diplo Review Essay 302 spend money at will, 3 but of actually knowing very little about economics itself!4 One particularly hostile writer even insists that Keynes had a ‘deep hatred and contempt for the values and virtues of the bourgeoisie’ as well as for ‘the basic institutions of family life’!5 Others have been somewhat more restrained but nonetheless have attacked Keynes (somewhat more gently to be sure) for having written a highly tendentious and inaccurate attack on the Versailles Peace Treaty,6 of Page | 2 then giving bad advice to the German government which in turn helped cause Germany’s hyperinflation of the 1920s,7 and finally of preaching the virtues of appeasement in the bleak decade which followed.8

Possibly the one thing his critics have not been able to accuse Keynes of is being a dangerous radical with Communist leanings. He may have liked the company of the young Marxists he taught up in Cambridge in the 1930s, but he refused to join the Labour Party, thought planning to be economically impractical, and wondered what anybody could ever learn from reading that ‘dreary out of date’ book which Marx wrote called Das Kapital. Yet in spite of this, he has still become something of a hero to sections of the socialist left who have come to regard him as being on the side of the political angels, 9 in large part of course because he wrote a book in 1936 which according to the author of this very fine biography of the great man is one of the seminal books of the twentieth century.10 Indeed, according to Zachary Carter, the General Theory of Employment, Interest and Money remains “one of the great works of Western letters” -- a “work of genius” no less that is at one and the same time dangerous, liberating, incomprehensible beautiful, profound and frustrating (256). Carter also adds, wisely, that it is also one of those books that most intelligent people—including I suspect the majority of economists— always claim to have read but without it seems really understanding what the book says. He also goes on to suggest in a rare moment of hyperbole that it might also be regarded as one of the worst, if not “the worst-written” books “of significance ever published in the English language” (257). Which leads one to ask: has he ever tried reading the great Arnold Toynbee? Still, the point is well taken. The General Theory is not an easy read.

Yet Keynes was more than just an iconoclast who wrote one very important, but difficult, book that revolutionized economics. He was, in a very real sense, a sensitive barometer to what the British historian E. H. Carr in 1939 called a “twenty years’ crisis,”11 one which witnessed a revolution in Russia, economic collapse in the 1930s, and the rise of Nazism

3 Quoted in J. M. Buchanan, John Burton and R.E Wagner eds; The Consequences of Mr Keynes (London, The Institute of Economic Affairs, 1978), 8.

4 See ‘Hayek On Keynes’s Ignorance of Economics,’ https://mises.org/wire/hayek-keyness- ignoranceeconomics#:~:text=He%20makes%20very%20strong%20claims,is%20only%205%20minutes%20long.

5 See Murray N. Rothbard, Keynes, The Man (Auburn: Mises Institute, 2010).

6 Margaret Macmillan later attacked The Economic Consequences of the Peace as being “a little book with a very dry title.” See her “Keynes and the Cost of Peace,” The New Statesman, 31 October 2018.

7 Niall Ferguson, “Keynes and German Inflation,” The English Historical Review 110:436 (April 1995), 368.

8 Etienne Mantoux, The Carthaginian Peace or The Economic Consequences of Mr Keynes (Oxford: Oxford University Press, 1946).

9 See Geoff Mann, “Socialism’s Biggest Hero Is a Bourgeois British Capitalist,” Foreign Policy, 5 December 2019, https://foreignpolicy.com/2019/12/05/keynes-keynesian-socialism-biggest-hero-bourgeois-british-capitalist/.

10 Keynes, General Theory of Employment, Interest and Money (London Macmillan, 1936).

11 E.H. Carr, The Twenty Years’ Crisis; An Introduction to the Study of International Relations (1939; reissued by Palgrave with a new introduction by Michael Cox in 2001 and 2016).

© 2020 The Authors | CC BY-NC-ND 3.0 US H-Diplo Review Essay 302 and Stalinism which together presented the liberal economic order with the most profound ideological challenge to which it seemed to have no answer other than to repeat the mantra that the market would finally right itself. But as Keynes pointed out to those who cared to listen, that was not happening and was never likely to happen. Some other answer was required, and Keynes sought to provide it in 1936, by first explaining why classical economics was no longer fit for the purpose, then Page | 3 suggesting an entirely new way of thinking about the way market economies actually worked—or, more precisely, did not work—and finally by providing policy answers that would, he believed, provide hope in a world where there seemed to be very little.

As Carter explains in some of the best passages of the book, The General Theory is a book of huge theoretical complexity even if Keynes himself was trying to do something very basic, namely to point out that that societies were not the inevitable outcome of “tragic insufficient resources” or scarcity but rather the result of political choice. (273). There was no reason therefore why governments should not intervene in order to save an economic order that was palpably failing. Reform of the order he insisted was always preferable to its overthrow; in fact, it was the only way to save capitalism from itself. As one of his many American followers later recalled: “Keynes was very much influenced by what was going on in Germany (he hated it); he was influenced by what was going on in the Soviet Union (he didn't like it), and was scared to death….that the young people were turning mostly to Communism or Fascism. He wanted to get his book, his analysis, understood, in providing a viable alternative, a way of maintaining capitalism, maintaining prosperity with the property relations that he knew in a capitalist economy.”12

But what led Keynes to this point? How did he arrive at his own ‘Finland Station’ called the General Theory? Carter does a very good job in exploring the long road that led Keynes from the dreamy spires and ‘backs’ of Cambridge to becoming the most famous economist of his age. In many ways though the story he tells is remarkably familiar one, and one of the more obvious questions running through my own mind as I read, while thoroughly enjoying the experience of reading The Price of Peace, was the somewhat unsettling one: do we really need yet another book about Keynes, however well written it happens to be? I think we do. But there might be others out there who might think that enough is enough. After all, for the Keynes cognoscenti of which there are more than just a few (even if they are not to be found in departments of economics these days) there are many weighty tomes one can consult from Roy Harrod’s original volume of 1951,13 through to Robert Lekachman’s study of 1967 14 and on to a number of other very good general works by Peter Clarke (1988 and 2010), 15 D. E. Moggridge (1992),16 David Felix (1999)17 Gilles Dostaler (2007)18 and Richard Davenport–Hines (2015).19 To be fair,

12 Lorie Tarshis quoted in David Colander and Harry Landreth, “Political Influence on the Textbook Keynesian Revolution: God, Man and Lorie Tarshis at Yale,” (1998); http://community.middlebury.edu/~colander/articles/Political%20Influence%20on%20the%20Textbook%20Keynesian%20Revolutio n.pdf.

13 Roy Harrod, The Life of John Maynard Keynes (London: Macmillan, 1951).

14 Robert Lekachman, The Age of Keynes (London: Allen Lane, The Penguin Press, 1967).

15 Peter Clarke, The Keynesian Revolution in the Making, 1924-1936 (Oxford: Clarendon Press, 1988), and Keynes: The Twentieth Century’s Most Influential Economist (London, Bloomsbury, 2009).

16 D.E. Moggridge, Maynard Keynes: An Economist’s Biography (London and New York: Routledge, 1992).

17 David Felix, Keynes: A Critical Life (Westport: Greenwood Press, 1999).

18 Gilles Dostaler, Keynes and His Battles (Cheltenham: Edward Elgar, 2007).

19 Richard Davenport-Hines, Universal Man: The Seven Lives of John Maynard Keynes (London: William Collins, 2015).

Carter does refer to Harrod and Davenport-Hines in his ‘selected bibliography.’ He also pays due homage at the altar of the high priest of Keynes studies: Robert Skidelsky (536).20 But one could still be left asking: what has been added to the sum of human knowledge?

The answer, I think, is probably a little less than the various puffs on the back cover of his book might suggest, but a great Page | 4 deal in terms of making the whole Keynes accessible to a wider reading public and doing so in great style. The book might be long, but it is never boring. In fact, it fairly races along. Carter also displays a genuine ability, no doubt honed as a financial journalist, in explaining complex economic issues well. He is especially good too on Bloomsbury and Keynes’s relationship with the ‘Bloomberries’ including the novelist Virginia Woolf, the artist Duncan Grant (one of Keynes’s early lovers) and the central figure in Bloomsbury, Lytton Strachey. He also deals well with Lydia Lopokova and his early relationship with and marriage to the Russian ballerina. I am not so sure, however, that Keynes’s meeting and falling in love with Lydia—someone of whom Virginia and the gang around Gordon Square did not much like—was, as Carter claims, “the decisive juncture that made him a force in the history of ideas” (xiii). Lydia was very good for Keynes, and he clearly adored her. But what he wrote after he met her in 1920 would, I suspect, have been written with or without her.

Carter is also right to point out that for all his liberalism Keynes owed a debt to two writers who have rarely been thought of as sheltering under the liberal umbrella: Thomas Malthus and Edmund Burke. Carter, however, might have said a good deal more about the relationship between Malthus and Keynes. Keynes was in no doubt himself. Malthus he believed was the real founder of economics at Cambridge. 21 Certainly, Keynes accepted Malthus’s controversial views on over-population which in part helps explain why he was so pessimistic about the state of Europe after the First World War. 22 But even more significant perhaps, Keynes really did think that if economists more generally had followed Malthus rather than Ricardo, then economics as a science would have been in a much healthier state than it was when he decided to revolutionize it in 1936 by, in fact, going back to Malthus.23 Carter though is much better on the Keynes-Burke relationship and shows how much he owed to that great writer who was vocal in his support for most forward-looking causes before going on to pen his famous or infamous diatribe against the French revolution and indeed against all forms of revolutionary change. Even so, it is a bit of stretch to describe Burke, as Carter describes Burke, as a “Scottish philosopher” (99). It is true of course that Burke knew Adam Smith and had a long association with Glasgow University. But the statue standing outside Trinity College at the heart of the Irish capital might suggest that another nation has a prior claim on him.

On one issue though Carter is absolutely spot on: that the real turning-point in Keynes’s life came not with the publication of the General Theory in the 1930s but rather with his being asked to become a policy adviser for the British government at the beginning of the First World War. Here indeed was the perfect example of that old nostrum that ‘it’s not a question of what you know but who you know.’ That Keynes was terribly clever was obvious. Even Bertrand Russell feared getting into an argument with him. But as Keynes himself readily admitted, it was the influential friends he had met at Cambridge who provided him with the opportunity which he then seized with both hands. Moreover, having been given the keys to the door marked ‘power,’ and allowed access into its corridors, he rarely looked back. Keynes never had to speak ‘truth to power’: he was already in the heart of the beast by 1915 trying to get loans from Americans he did not much like for a war of

20 Robert Skidelsky published three separate volumes on Keynes in 1983, 1994 and 2000. These then appeared in an abridged form, John Maynard Keynes: 1883-1946. Economist, Philosopher, Statesman (London: Penguin Books, 2003).

21 See Keynes, “Robert Malthus: The First of the Cambridge Economists,” in his 1933 collection Essays in Biography (London: Mercury Books, 1961).

22 “The spectre of Malthus was at the very core” of his pessimism in 1919 according to Robert J. Mayhew, Malthus: The Life and Legacies of an Untimely Prophet (Cambridge: Harvard University Press, 2014), esp. 168.

23 See for example R.P. Rutherford, “Malthus and Keynes,” Oxford Economic Papers 39:1 (March 1987): 175–189, and Duncan Kelly, “Malthusian Moments in the Work of John Maynard Keynes,” The Historical Journal, 63:1 (February 2020): 127-158.

© 2020 The Authors | CC BY-NC-ND 3.0 US H-Diplo Review Essay 302 which he did not approve, while telling Prime Minister Lloyd George (of whom he did not approve either) why an early negotiated peace with Germany was an economic necessity.

Then, as the war began to look like it might be won, he started thinking longer and harder than probably anybody else at the time about how to rebuild the economies of a shattered Europe after four years of bitter fighting. It was at this point that Page | 5 Keynes quite literally came into his own. Indeed, some of his very best early work, composed even before he arrived in Paris in 1919, addressed the problems of long-term European reconstruction. He wrote memo after memo. He lobbied friends as well as opponents. He spent long nights pouring out his heart out to the South African J.C. Smuts, his closest ally in Paris. And he bombarded the politicians in Paris with figures and tables. But all to no avail. The Americans had no interest in letting their allies off debts incurred as a result of the war. Meantime the British and the French, and in truth the United States too, were quite unprepared to act with magnanimity towards a country which in their view had begun the war. It was a tragedy in the making. Keynes may not have been the only person in Paris to become disillusioned. But he was the only one to resign in disgust; more important still, he was one of the few to go public and tell the world in no uncertain terms why the peace was bound to fail. The result was a book: The Economic Consequences of the Peace, which as Carter rightly points out, changed his life for ever.24

Overall, Carter does a very good job when it comes to this crucial transitional phase in Keynes’s life. But his otherwise reliable and lively discussion of the period stumbles a bit. The Economic Consequences was certainly controversial; however, it is hardly fair to call it, as Carter does, “provincial” and “short-sighted,” even if some of its critics would agree with him that it was “vicious” and “unfair.” Nor was it, as Carter goes on to claim, written with a “narrow audience of British experts” in mind (94). On the contrary, Keynes went out of his way to make sure that the book, which was soon translated into several languages, got the widest distribution possible. He even made a deal with the Labour Party at the time to bring out a cheap edition which went on to sell in its thousands. Carter is right to point out that Keynes’s “emotionally compelling” polemic upset all sorts of people back in Britain, especially those in the conservative establishment (95). He is also right in suggesting that Keynes’s book was an act of redemption reaching out to those of his Bloomsbury friends who had never approved his role during the war. Indeed, the book’s iconoclasm was very much inspired by Lytton Strachey’s 1918 volume 25 whose “elegant, energetic character assassinations” according to one writer “destroyed for ever the pretensions of the Victorian age to moral supremacy.”26 Still, it is something of an exaggeration to suggest that “virtually everyone outside of Bloomsbury” was mortified by the idea of Keynes writing The Economic Consequences of the Peace in the first place (103). In fact, a whole raft of establishment insiders from Austen Chamberlain to Lord Robert Cecil (as important a figure in the creation of the League of Nations as Woodrow Wilson) agreed with what he had to say, even if they were not entirely convinced that he should have been spilling the beans in such a public fashion.

Keynes may have paid a price of sorts for his iconoclasm. But one senses he did not care very much. After all, he was now famous, richer and more in demand than ever as a writer and public speaker. He just lapped it up. He was also very good at explaining to the wider ‘reading public’ why the old economic order would no longer pass muster in a world turned upside down by war, rising expectations, and persistently high levels of unemployment. The result was a series of brilliant interventions which many read but few within the economic establishment took very seriously. Balanced budgets remained the name of the game. Wage reductions were necessary if capitalists were going to rehire workers. And further cuts to public spending were essential in order to reassure the markets.

24 See Keynes, The Economic Consequences of The Peace (London, Macmillan, 1919), with a new introduction by Michael Cox (London: Palgrave Macmillan, 2019). The new 2019 edition is reviewed by John Milton Cooper in H-Diplo Essay 245, 16 June 2020. https://networks.h-net.org/node/28443/discussions/6193759/h-diplo-review-essay-245-keynes-economic-consequences-peace-new

25 See Lytton Strachey, Eminent Victorians (London: G. P. Putnam’s Sons, 1918).

26 The quotation is from Roy Hattersley, New Statesman, 12 August 2002

Meanwhile, at the London School of Economics, the newly appointed Austrian free marketer, Friedrich von Hayek (who makes many appearances in Carter’s book) provided all sorts of theoretical arguments as to why the coming of the great crash after 1929 was less a symptom of decline and more a necessary corrective following an unsustainable investment boom fuelled by a too ready supply of credit. Nor was he alone in trying to see Keynes off. Another Austrian economist, Joseph Schumpeter, was attempting to do much the same from his Harvard vantage point. More open-minded than Hayek perhaps, he was equally opposed to Keynes, pointing out that capitalism had only become the dynamic system it was Page | 6 precisely because it allowed for companies to go under in a wave of creative destruction that would in time relaunch the economic system along an ever more innovative path.

If the powerful and influential were not prepared to listen to Keynes in the inter-war period—including, incidentally, the founder of the welfare state, William Beveridge- they still turned to him at the beginning of the Second World War when Britain was in dire need of his wise advice. As Carter makes clear, Keynes was once again in his element, writing clear and concise pamphlets advising the government27 while travelling back and forth across the Atlantic where Roosevelt’s enemies on the right continued to snipe away at the economic progressives around the President. But with New Dealers now in the ascendancy, and the state now playing an ever more vital role in eliminating what had still been a depressed U.S. economy before the war, it was a very different and more accommodating America than the one Keynes had encountered during WW1.

Of course the opposition had not disappeared; it had just underground. Forced onto the ideological defensive for the duration of the war, it soon mobilized its not inconsiderable intellectual resources as the conflict began to wind down—and once again leading the charge against the ‘collectivists’ (and by implication Keynes) was none other than Keynes’s old LSE foe, Hayek. Hayek’s small volume The Road to Serfdom (1944)28 which he began writing during the war while still in Britain had hardly any impact at all back in Britain itself. In the United States, however, its impact was enormous, and though it did not mention or attack Keynes by name (Keynes even wrote a note to Hayek saying it was a “grand book”) it did help prepare the ground for those who would later go on to attack Keynes and Keynesianism in America. (341-342)

The much bigger challenge facing Keynes however was less what Hayek was saying and more the state of Great Britain after five years of bruising war which made the country increasingly dependent on a United States which showed no more generosity to its war-time ally after World War II as it had done after WW1. Once again Keynes confronted allies who had stood beside Britain in war but remained as competitive as ever in peace. Nor were they prepared to be bamboozled by the clever Englishman. Thus they conceded next to nothing to his ideas at Bretton Woods. In September 1945, President Truman then announced an abrupt cancellation of Lend Lease. Nor did Washington prove to be particularly helpful when it came to supporting a wider British role in the world. Indeed, it looked to many in London, as it did to Keynes, that by 1945 the United States was going all out for global domination in a refashioned international system in which the dollar would now become the dominant currency (which it did), the British Empire a thing of the past (which it was soon to become), while America and America alone would hold a monopoly in nuclear weapons (which it continued to do until 1949). Keynes may have made all the best speeches in his extraordinarily difficult negotiations with the Americans, but the Americans now had the upper hand, and Keynes knew it.

But what then happened to that ill-defined entity that came to be known as Keynesianism especially in the United States itself? Carter exaggerates somewhat when he suggests that “without the political support his ideas won in the United States, Keynes and his work would be” or presumably would have become “a minor curiosity for professional intellectuals” (xx-xxi). On the other hand, the picture he paints of American economics in the so-called ‘age of Keynes’s is a very persuasive one. His central point is well made: that Keynes may have won over many American converts, but his argument about market failure and the need for an enhanced role for government posed enormous ideological problems in a country wedded to a

27 See Keynes, How to Pay for the War (London: Macmillan, 1940).

28 F.A. Hayek, The Road to Serfdom (London, Routledge, 1944).

© 2020 The Authors | CC BY-NC-ND 3.0 US H-Diplo Review Essay 302 particular idea of freedom and the free market. Nor did it become any easier once the Cold War had been unleashed at home. Indeed, as Carter shows, (though the story has been told before)29 an early popular textbook on economics by Lorie Tarshis30—who had studied under Keynes at Cambridge—was effectively blackballed, and within a year or so of having been published was dropped from university curriculums around the country (378). Paul Samuelson’s 31 on the other Economics Page | 7 hand, with what Carter terms its “classical economic world view” and Keynesian-lite approach (379) went on to become a publishing sensation. Nor did the immensely successful John Kenneth Galbraith escape the attention of the thought controllers. His various books could hardly be described as anti-corporation or anti-big business.32 But even this did not stop him coming under suspicion from the FBI.

Of course the 1960s and President Lyndon B. Johnson’s ‘Great Society’—a second New Deal in all but name—with its declaration of a war on poverty, civil rights legislation supported by a “barrage of environmental” regulation (450) briefly revived the spirits of American Keynesians. However, it was a form of Keynesianism which “no longer carried a subversive connotation” according to Carter (452). Moreover, even this watered down version of the original was soon to be jettisoned in stages: first in the 1970s with the onset of an economic crisis for which Keynesianism (ironically) was blamed; then in the 1980s with the coming of President Ronald Reagan and Prime Minister Margaret Thatcher both inspired by the free market nostrums of Milton Friedman33 and Hayek (Thatcher’s favourite author apparently); and finally in the post-Cold War years as hyper-globalization carried all before it in a drive to remake the world in the image of one vast market-place with the state now playing a diminished role in deregulated economies where the very idea of protecting jobs, let alone achieving full employment, now seemed like some distant dream.

Carter thus concludes on a downbeat note, with neo-liberalism in command and what remained of Keynesianism and “Keynesian themes” now “relegated to speciality journals maintained by intellectuals who wielded no political influence and were tolerated by their more prestigious colleagues as harmless eccentrics” (510). Yet every cloud has a silver lining of sorts, even if the storm did not break for a while. In fact for a few years after 2001 everything looked just fine economically. Thus the “great moderation,” as Ben Bernanke termed it in 2004, appeared to be set to go on for ever;34 a year later Alan Greenspan told Congress that in spite of a few minor issues, the U.S. economy “seemed to be on a reasonably firm footing;”35 and when, in 2006, the Columbia university based economist Nouriel Roubini predicted a crash at a meeting of the International Monetary Fund, he was subjected to ridicule.36 Yet as we now know only too well, the soaring nineties and the boom years after 9/11 when the housing market just kept on rising finally came to a shuddering halt in 2008. The good times were well and truly over as Americans quickly discovered that the “prosperity” they had “enjoyed for a few brief years

29 See David Colander and Harry Landreth, The Coming of Keynesianism to America (London: Edward Elgar, 1996).

30 Lorie Tarshis, The Elements of Economics: An Introduction to the Theory of Price and Employment (Boston: Houghton Mifflin, 1947).

31 Paul Samuelson, Economics, 19th ed. (New York: McGraw-Hill Education, 2010 [1948]).

32 See for example John Kenneth Galbraith, American Capitalism: The Concept of Countervailing Power (New York, Houghton Mifflin, 1952); The Great Crash 1929 (New York: Houghton Mifflin Co.1954); and The Affluent Society (New York: Houghton Mifflin, 1958).

33 See, for example, Milton Friedman and Rose D. Friedman, Free To Choose, (New York: Harcourt, 1980).

34 Remarks by Governor Ben S. Bernanke, “The Great Moderation.” At a meeting of the Eastern Economic Association, Washington D.C., 20 February 2004.

35 Alan Greenspan, “The Economic Outlook,” Before the Joint Economic Committee, U.S. Congress, 9 June 2005.

36 Stephen Mihm, “Dr Doom,” The New York Times Magazine, 15 April 2008.

© 2020 The Authors | CC BY-NC-ND 3.0 US H-Diplo Review Essay 302 was dependent on a volatile, unregulated financial sector overflowing with capital it could not control” (493). The efficient market turned out not to be quite so efficient after all.

Yet far from the crisis leading to a serious reengagement with Keynes, it led to nothing of the sort. His acclaimed biographer Skidelsky may have hoped for a “return of the Master,” but in truth it never really happened.37 As Carter notes, however, even if governments in the West resisted any kind of formal rerun of Keynesianism, they found it almost impossible not to Page | 8 do what Keynes himself might have recommended in order to prevent a return to the 1930s: namely, lower interest rates, intervene to save key industries, and pour taxpayers’ money into the economy. Nor has the spectre of Keynes departed the scene even now, and more than a decade later, when faced with an ever greater threat in the shape of a global pandemic, policy-makers in the West find that the only way of dealing with the economic meltdown which followed was not by waiting for the market to find a new equilibrium but by massive deficit spending directed by governments, just the sort of policies that would have been approved of by Keynes. Carter’s book went to press before COVID-19 turned the world upside down. Nonetheless, almost the last words he utters at the very end of his impressive study might have brought a wry smile to the great man’s face. As Carter observes, “despite everything” we find “ourselves” once again “back with Keynes”—not, one supposes, because he got everything right or provided any ready-made blueprint for sure-fire recovery, but because “there is simply nowhere else to go” (534).

Michael Cox is Emeritus Professor of International Relations, London School of Economics and Founding Director of LSE IDEAS. He is the author, editor and co-editor of over twenty books including works on the USSR, the end of the Cold War and the US role in the world system. His most recent books include a new edition of E.H Carr’s The Twenty Years’ Crisis (Palgrave, 2016), a 3rd edition (with Doug Stokes) of his best-selling volume US Foreign Policy (Oxford University Press, 2018), and a collection of his essays The Post-Cold War World (Routledge, 2019). He has also recently brought out a new centennial edition of John Maynard Keynes’s The Economic Consequences of the Peace (Palgrave, 2019) and has also just finished working on a new edition of E. H. Carr’s 1945 classic, Nationalism and After which will appear in 2021. He is now working on a new history of the LSE entitled, The “School”: LSE and the Shaping of the Modern World.

37 Robert Skidelsky, Keynes: The Return of the Master (London, Allen Lane, 2009).