John Maynard Keynes - Success and Wisdom
John Maynard Keynes (1883-1946)
English economist (pictured right)
His most famous book is...
The General Theory of Employment, Interest and Money (1936).
Why was he successful and wise?
1. Revolutionary
His General Theory revolutionized economics by emphasizing:
a) governments should increase their spending more than taxes
(to increase production and income and cut unemployment)
Keynes summed up his economic policy as “cheap money, wise spending” - low interest rates
coupled with government spending that increases production and employment.
b) the “multiplier effect”
This explains why an increase in government spending will eventually lead to a much bigger increase in income,
spending and production.
For example:
If the government builds a school, its builders and their employees will have more work and spend more money at
their suppliers and in shops, giving these businesses more money.
They will then spend more, giving other people and businesses more money and so on.
2. Influence
His ideas (later called Keynesian economics) were enormously influential
Keynes:
a) gave people hope
(by saying high unemployment could be cured through more government spending on things
like health, education and defence - see point 1).
This was particularly important during the Great Depression in the 1930's when
unemployment was very high
Pictured right is a poor Depression Californian family.
b) influenced Franklin D.
Roosevelt’s (pictured right below) New Deal policies
(to reduce unemployment in America during the Great Depression).
c) helped devise the Bretton Woods agreement in 1944
This stabilized the world economy by setting up the World Bank and the
International Monetary Fund (IMF) to help countries in financial difficulties.
3. Foresight
In another influential book, The Economic Consequences of the Peace (1919), he attacked the
huge war reparations that Germany had to pay after its defeat in the First World War.
He rightly said this would lead to:
- the collapse of the German economy.
- high inflation in Germany.
- more war and discontent (economic problems helped Hitler, pictured right).
Inflation, he wrote, is a secret way of robbing people of their wealth.
4. Intelligence and learning
The philosopher, Bertrand
Russell (pictured right), described Keynes as the most intelligent person he had ever met.
Keynes believed that knowledge comes from:
- learning from the past and present.
- changing your mind when the facts change.
- accepting new ideas by escaping from old ones.
Powerful men:
- are often “the slaves of some defunct economist”, he said.
- must realize that “ideas shape the course of history”.
5. Principles
Keynes (pictured right in David Low's portrait) believed that:
a) people come first
The needs of people must come before money.
He attacked the selfish greed of capitalism which he described as
“the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good
of everyone”.
b) everyone should love learning and life
His last words were, “I should have drunk more champagne”.
6. Action now
“In the long run we are all dead”, he said.
So governments must act now and not think that economic problems, such as inflation and
unemployment, will solve themselves.
Key quote on
change
If the barometer is high and the clouds are black, don’t waste time on a debate on whether to take an
umbrella.
Key quote on
creativity
Ideas shape the course of history.
Key quote on
the past, present and future
I do not know which makes a man more conservative – to know nothing but the
present, or nothing but the past.
Key quote on planning and
strategy
In the long run... we are all dead.
Key quote on
economics
The ideas of economists and political philosophers,
both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world
is ruled by little else.
The day is not far off when the economic problem
will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied,
by our real problems — the problems of life and of human relations, of creation and behaviour and
religion
Key quote on
education
Education: the inculcation of the incomprehensible into the indifferent by the incompetent.
Key quote on
innovation
The difficulty lies not in the new ideas but in escaping the old ones.
Key quote on
communication
Words ought to be a little wild, for they are the assault of thoughts upon the unthinking.
Key quotes on decision
making
When the facts change, I change my mind.
There is no harm in being sometimes wrong - especially if one is promptly found out.
It’s better to be roughly right than precisely wrong.
Key quote on business
ethics
Capitalism is the astounding belief that the
wickedest of men will do the wickedest of things for the greatest good of everyone
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