Economic conservatives never really trusted Richard Nixon. Faced with rising inflation the president resorted to price and income controls declaring: "I am now a Keynesian in economics". Almost everyone agrees that his timing was terrible. As Keynesians struggled to make sense of the stagflation that ensued, neoclassical economists like Milton Friedman successfully seized the opportunity to press the case for freer markets and smaller government. According to many commentators, Keynesianism was dead.
Now that the tables have turned again, journalists are taking another look at Nixon’s comically bad timing. Last year an editorial in the Nation recalled:
In 1971, after announcing wage and price caps to curb inflation, Richard Nixon famously declared, "We are all Keynesians now." But moments after the phrase escaped his lips, it was no longer true. Indeed, the thirty-seven years since then have seen a nearly full-scale repudiation of Keynes at home and abroad, as neoliberalism remade our political economy and ushered in the new Gilded Age.
On the weekend, the Australian’s Michael Stutchbury did the same thing:
Richard Nixon declared "we’re all Keynesians now" in 1971, just before the whole idea was about to be discredited by 1970s "stagflation".
The funny thing about these stories is that the "we’re all Keynesians now" quote doesn’t belong to President Nixon — it belongs to Milton Friedman.
Shortly after the Nation ran its editorial, reader Bruce Bartlett of wrote a letter to the editor :
In the opening sentence of your November 3 lead editorial, you quoted Richard Nixon as saying, "We are all Keynesians now." In fact, it was economist Milton Friedman who said that. His exact words were, "In one sense, we are all Keynesians now; in another, nobody is any longer a Keynesian" (Time magazine, February 4, 1966). What Nixon said in 1971 was slightly different. Following an interview with Howard K. Smith of ABC, Nixon said, "I am now a Keynesian in economics" (New York Times, January 4, 1971).
Mr Bartlett is correct. In the December 31, 1965 issue, Time magazine reported:
Though Keynes is the figure who looms largest in these recent changes, modern-day economists have naturally expanded and added to his theories, giving birth to a form of neo-Keynesianism. Because he was a creature of his times, Keynes was primarily interested in pulling a Depression-ridden world up to some form of prosperity and stability; today’s economists are more concerned about making an already prospering economy grow still further. As Keynes might have put it: Keynesianism + the theory of growth = The New Economics. Says Gardner Ackley, chairman of the Council of Economic Advisers: "The new economics is based on Keynes. The fiscal revolution stems from him." Adds the University of Chicago’s Milton Friedman, the nation’s leading conservative economist, who was Presidential Candidate Barry Goldwater’s adviser on economics: "We are all Keynesians now."
Naturally Milton Friedman couldn’t let a quote like that stand. So in the 4 February issue Time carried this letter:
Sir: You quote me [Dec. 31] as saying: "We are all Keynesians now." The quotation is correct, but taken out of context. As best I can recall it, the context was: "In one sense, we are all Keynesians now; in another, nobody is any longer a Keynesian." The second half is at least as important as the first.
The University of Chicago
This is one of those times when a Wikipedia entry is more accurate than what appears in newspapers. I found all these links through the entry on "We are all Keynesians now." You can also find the same information in Milton and Rose Friedman’s book Two Lucky People.