Not happy Maynard

Last night I happened upon a chapter by Murray Rothbard in a book called “Dissent on Keynes: A Critical Appraisal of Keynesian Economics. It was published in 1992 and the web version was published in 2003 and available here.

The brief? Well roughly the brief Junie Morosi intimated she wanted filled on Milton Friedman when he visited Australia in the mid 1970s. “Who is this guy and what have we got on him”. It’s a dirty job, but I guess someone has to do it.

In short, Murray is not happy with Maynard. Not happy at all.

I read Rothbard’s “Keynes, the Man”, (pdf) on and on with horrified fascination. You can certainly take it from Murray that Keynes was not a very nice fellow.

A man who thought and acted in terms of power and brutal domination, who reviled the concept of moral principle . . . who was a systematic liar, twisting truth to fit his own plan, who was a Fascist and an anti- Semite.

In a passage titled “the swindler” Rothbard quotes a letter Keynes wrote to Strachey saying this. “I find economics increasingly satisfactory, and I think I am rather good at it. I want to manage a railroad or organise a Trust or at least swindle the investing public”. This is in a private letter from 1905 which was no doubt full of things that can be misrepresented – like jokes and ironic chutzpah. Then having cited some rumours that Keynes used information he had from his job in Treasury to advantage himself in the market, and noting that the case is “still unproven, though suspicions certainly remain” ends the section with this paragraph.

Even if we cannot prove the charge of swindling against Keynes, we must consider his behavior in the light of his own bitter condemnation of financial markets as “gambling casinos” in The General Theory. It seems probable, therefore, that Keynes believed his successes at financial speculation to have swindled the public, although there is no reason to think he would have regretted that fact. He did realize, however, that his father would disapprove of his activity.

Rothbard is also not happy with Maynard’s time within Treasury working on Indian finance. Rothbard comments that Keynes “never felt the need to travel to India, to learn Indian languages, or to read any books on the area except as they dealt with finance”. Definitely not happy with that.

Rothbard reckons that Keynes “habitually made up statistics to suit his political proposals” but doesn’t substantiate this. He’s not happy that Keynes said he was a free trader but recommended tariffs on one occasion. Not happy at all about it in fact. He mentions that the time Keynes did this was 1931. If you think about it 1931 was a fairly bad time and Keynes argued that higher tariffs were the lesser of two evils and (from memory) a temporary expedient to enable reflation without a balance of payments crisis during the worst economic depression in recorded economic history, but he doesn’t mention that.

Two canards I was surprised didn’t get a gurnsey were that Keynes was an appeaser. He wasn’t but argued for delaying hostilities against Germany as long as possible whilst aggressively rearming. Also, there is correspondence between Keynes and Schumacher, best publicly known as the author of Small is Beautiful, which shows that the international financial arrangements that Keynes proposed at Bretton Woods were the same as Schumacher had suggested. Keynes wrote back to him saying he was thinking along similar lines.

The one blow that grazes its target is the charge of anti-Semitism. Rothbard, as you would expect spares no effort to give us details of Keynes’ anti-Semitism. Keynes’ biographer Skidelsky treats the issue in some length and fairly sympathetically. They were different times and times when it was normal to speak of inherent traits of different races. I don’t have Skidelski’s bio here in Canberra with me so I can’t check it, but IIRC, Keynes went to considerable lengths to help some Jews particularly as things got worse for them in the 1930s and 40s. But all that having been said, the passage that Rothbard cites is certainly distressing.

Describing the French Finance Minister Louis-Lucien Klotz, as a “short, plump, heavy-moustached Jew, well groomed, well kept, but with an unsteady, roving eye, and his shoulders a little bent with instinctive deprecation.” Keynes then described this moment:

Lloyd George had always hated him and despised him; and now saw in a twinkling that he could kill him. Women and children were starving, he cried, and here was M. Klotz prating and prating of his “goold.” He leant forward and with a gesture of his hands indicated to everyone the image of a hideous Jew clutching a money bag. His eyes flashed and the words came out with a contempt so violent that he seemed almost to be spitting at him. The anti- Semitism, not far below the surface in such an assemblage as that one, was up in the heart of everyone. Everyone looked at Klotz with a momentary contempt and hatred; the poor man was bent over his seat, visibly cowering. We hardly knew what Lloyd George was saying, but the words “goold” and Klotz were repeated, and each time with exaggerated contempt.

Rothbard goes on

At that point, Lloyd George came to the climax of his performance: turning to the French premier, Clemenceau, he warned that unless the French ceased their obstructive tactics against feeding the defeated Germans, three names wo uld go down in history as the architects of Bolshevism in Europe: Lenin and Trotsky and . . . Keynes wrote: “The Prime Minister ceased. All around the room you could see each one grinning and whispering to his neighbour ‘Klotsky.'” (Keynes 1949: 229; Skidelsky 1986: 360, 362) The point is that Keynes, who had never particularly liked Lloyd George before, was won over by his display of George’s savage anti-Semitic pyrotechnics. “He can be amazing when one agrees with him.” declared Keynes. “Never have I more admired his extraordinary powers”.

The following passage from Rothbard is as close to self refuting as it gets. Having told us about Keynes’ lying, cheating, immoralist and obscurantist ways, Rothbard comments:

Keynes was nevertheless able to cajole opponents and competitors. Even as he cunningly turned his students against his colleagues, he was still able to cozen those same colleagues into intellectual surrender. Harassing and hammering away unfairly at Pigou, Keynes was yet able, at last and from beyond the grave, to wring an abject recantation from his old colleague. Similarly, he inspired his old foe Lionel Robbins to muse absurdly in his diary about the golden halo around Keynes’s “godlike” head. He was able to convert to Keynesianism several Hayekians and Misesians who should have known ¢â¬â and undoubtedly did know ¢â¬â better: in addition to Abba Lerner, John Hicks, Kenneth Boulding, Nicholas Kaldor, and G.L.S. Shackle in England, there were also Fritz Machlup and Gottfried Haberler from Vienna, who landed at Johns Hopkins and Harvard, respectively.

Even Hayek wrote well of him. Another person cruelly seduced by Maynard’s generosity towards someone with whom he’d had heated disagreements.

So how did Keynes do it all? He didn’t know much economics, he was clever enough, but not ‘brilliant’. Well he was charismatic you see. And he did it all not with thumbscrews and the rack but just with bewitching words and a theory so devilishly calibrated in its invocation of nonsense and obscurantism that it was too hard for the older economists to understand but sufficiently easy for the newcomers to take up.

Seems almost obvious when pointed out.

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17 years ago

If memory serves me correct, there is a slant in the latest edition of ‘Dissent’ magazine.

I find that Keynes is perhaps outdated. But for sure, he saved the economies in his days, and helped get ours in order.

But we need to improve, (somehow) i beleive.

Don Wigan
Don Wigan
17 years ago

There’s extraordinary irony in this attack. Rothbard is taking on Keynes’s strongest points – his humanitarianism. It’s almost like Downer trying to label Curtin an appeaser.
Keynes was an active participant in the Fabian Society of the early 20th century. That included such diverse intellects as Shaw, Wells, Beatrice and Sidney Webb. Whatever you might feel about these individuals they did set out to make society better and fairer. Keynes was unsuccessful in the 1921 Paris Accords in persuading the allies of the dangers of trying to bleed all war reparation costs from Germany. There is little doubt that he was right. He was a major driving force for the Bretton Woods Agreement after WWII which helped achieve that prosperity and security.

For most of his earlier life Keynes was criticised by other economists for being too humanitarian and comprehensible to lay people- sort of like an earlier version of J K Galbraith, a great Keynes admirer. According to one wag (possibly Galbraith) he only won general peer acceptance because his General Theory contained lengthy tracts of incomprehensibility – thus making him respectable.

The fact that economists in various treasuries and central banks accepted his theories had a lot to do with direct experience. The Great Depression had had a devastating affect on so many people as to compel most leaders to try to avoid it. Aside from the suffering, the impact put at risk stable government, leading to a rise in totalitarianism on both the left (communism) and right (fascism/nazism), leading in turn to war.

Rothbard clearly has underestimated Keynes’s intellect. True, he only won second prize in economics at Cambridge (to Otto Niemeyer, of all people) but there seems little doubt of his accepted intelligence by both politicians and bureaucrats.

As to the anti-semitism allegation, I think you are closest to it in saying if the language as indeed used carelessly it had more to do with the age than with any inherent racism. T S Eliot was similarly loose occasionally.

Tony Harris
17 years ago

Bertrand Russell was one of the great controversialists of his generation (actually about three generations when you consider the length of his active life) but he felt that he was taking his life in his hands when he got into an argument with Keynes.

It is a great pity that the Keynes who made the most lasting impact on the profession and also the public mind was the author of The General Theory (who rubbished the benighted classicals) and not the classical post-war Keynes. Consequently the wisdom of the classicals and the Austrians had to be rediscovered many years later after the long “Keynesian diversion”.

Tony Harris
17 years ago

PS Murray didn’t think much of Adam Smith either.

A strange person Rothbard, apparently at some stage in the 1970s he threw in his lot for a short time with the New Left, as though they had something to offer in the way of loosening up the fabric of society that would be good for libertarian/anarchism.

This was his take on the New Left until it ran out of steam and the supporters morphed back into the left wing of the Democrat party.

One of the best things about the New Left was its angry critique of the policies and strategies of the Old Left (symbolized by the Communist Party) namely, to function as the loyal left-wing of the Democratic Party, of modern liberalism

derrida derider
derrida derider
17 years ago

A man of genius may be told by this infallible sign – that all the dunces are in confederacy against him (Swift).

Rothbard is a dunce – ’nuff said.