Studies in Economic Nationalism

SECTION II

TWENTIETH CENTURY DOCTRINE

CHAPTER VI

THE ECONOMIC NATIONALISM OF JOHN MAYNARD KEYNES

I

The mercantilist heritage and Fichte’s blueprint for an isolated and collectivist state are both greatly honoured in the deeds of the contemporary world. The extent of the impact of these ideas upon the doctrines of our times can best be gauged through the writings of John Maynard (later Lord) Keynes, the most controversial and, beyond any doubt, the most influential political economist of the second quarter of the twentieth century. Soon after the end of World War I, Keynes revolted against the international discipline inherent in the gold standard and set himself up as. a defender of national monetary autonomy. He later exerted the leading intellectual influence in Great Britain’s departure from the canons of free trade. The next step was his advocacy of national self-sufficiency (from 1933 onward). Having gone far along this line and in the direction of the “bilateralist” practice (meantime developed into a fine art by Nazi Germany’s Hjalmar Schacht), he experienced during World War II a progressive change of heart and became in the last and all-too-short phase of his life, an ardent fighter for international economic co-operation, based on Anglo-American partnership.

Keynes’ early training was, of course, in the classical economics and he was a worthy heir to the liberal, free trade tradition of British economics. He held strongly to these views as late as January 1923. At that time Keynes was the chief editor of a series of special supplements issued by the Manchester Guardian under the title Reconstruction in Europe. The first issue of that series appeared on April 20, 1922, and there we can read in Keynes’ leading article, devoted to “The Stabilisation of the European Exchanges: a Plan for Genoa”, the following views on monetary reconstruction:

I see no other solution of stabilisation practicable now, except the traditiona solution — namely, a gold standard in as many countries as possible.

The twelfth and last issue of the series, dated January 4, 1923, contained Keynes’ moving article entitled “The Underlying Principles” from which I quote the following:

We must hold to free trade in its widest interpretation, as an inflexible dogma to which no exception is admitted, wherever the decision rests with us. We must hold to this even if we receive no reciprocity of treatment and even in those rare cases where by infringing it we could in fact obtain a direct economic advange. We should hold to free trade as a principle of international morals, and not merely as a doctrine of economic advantage. I include in free trade the abandonment of any attempt to secure for ourselves exclusive supplies of food and materials — in spite of what is said below about the pressure of population on resources. For if pressure of population is to lead to a regime of armed and powerful nations grabbing resources from weak holders, our last state will be worse than it ever can be under any alternative policy.

Keynes’ “conversion” to economic nationalism was a slow and gradual process. It was undoubtedly prompted by his sense of disappointment and frustration over the strength of protectionist feelings and policies in the post-war world; the failures of monetary reconstruction during the twenties; the way in which the leading nations of the world entered the Great Depression without having evolved means of coping with such a calamity through co-operation rather than in insulation from one another. There was indeed much to discourage the most enthusiastic liberal and free trader; still it is a matter of historical record that a great many liberals and free traders did not become discouraged but continued the fight for a workable world economy.

Be this as it may, Keynes’ work falls, from the point of view of our inquiry, into three periods. The first, the free trade period, to which reference has just been made, ended about 1923 with the publication of the Tract on Monetary Reform, a book about which more will be said below. The second, in which Keynes gradually became a partisan of economic insulation, lasted from 1923 until about 1943. The third period started in the middle of the war, in 1943 or thereabout, and lasted until his untimely death in 1946.

Keynes’ wartime “conversion” — or, rather, “reconversion” — to international economic cooperation, had on his many followers divergent and conflicting effects. Those who like his biographer, Sir Roy Harrod, followed him in the path of internationalism developed a tendency to regard their master’s previous economic nationalism as a temporary aberration which meant but little, and his newly regained faith as the basic, fundamental feature of his personal philosophy. They could claim in favour of their position the fact that the internationalist philosophy of Keynes’ last years was in line with the philosophy of the young Keynes as expressed in the Manchester Guardian’s “Reconstruction Supplements”.

The other group of Keynes’ disciple, the confirmed economic nationalists, refused to follow him into the new fight he undertook from about 1943 onwards. In their opinion it is the “last phase” which represented an “aberration” brought about by wartime conditions and exigencies; they feel confident that, had he lived, Keynes would have returned to the nationalistic fold along the path of national insulation. This latter group of Keynes’ ex-followers can claim to be the “orthodox Keynesiams”, since the major writings of their prophet, from the Tract on Monetary Reform (1923) to the General Theory of Employment, Interest and Money (1936), bear them out; it is the prophet himself who, as I pointed out in an earlier book1 (written while he was still alive but published after his death), was no longer a “Keynesian” in good standing towards the end of his career. Although his writings espousing economic nationalism are what interest us mostly here, his “conversion” first and “re-conversion”, afterwards, have implications that cast a great deal of light upon the problems discussed in this book. More will be said about this later.

Mine is, of course, not a biographer’s interest in the person of Keynes but the student’s interest in his doctrines. It so happens, however, that the intellectual portrait of Keynes that results from the present study is considerably at variance with the image drawn for posterity by his official biographer.2 This makes it all the more necessary for me to document the account that follows by extensive quotations, and to take issue with certain interpretations divergent from and conflicting with my own. The discussion that follows falls into five parts: The first deals with Keynes’ monetary nationalism; the second with his fight for the adoption of a tariff to supplant Britain’s traditional policy of free trade; the third is devoted to Keyne’s advocacy of national self-sufficiency and to his attitudes towards bilateralism; the fourth deals with his “re-conversion” to internationalism — its causes and significance; while the fifth examines Keynes’ attitudes towards liberalism and collectivism.

II

When, in 1923, Keynes published A Tract on Monetary Reform 3, he was no newcomer to the literature of money. His Indian Currency and Finance had won him in 1913 considerable recognition as well as a seat, notwithstanding his youth, on a royal commission. During World War I and at the Peace Conference that followed he was a Treasury official. By 1923 he was also the celebrated author of The Economic Consequences of the Peace3a, a book which did as much as any single one possibly could to sabotage the Peace Treaty of Versailles. The Tract on Monetary Reform, Keynes’ first major offensive against the gold standard, was a time-bomb placed on the rails upon which the slow-moving train of international monetary reconstruction was eventually to pass. What that system stood for, namely, international discipline in matters of monetary policy and the subordination of domestic policy objectives to the requirements of a country’s international solvency (under a system of stable exchange rates), was deeply repellent to Keynes. Independent national economic policy and fluctuating exchange rates —that was what he, personally, now stood for. In varying presentations, this was to remain one of the principal themes of his writing.

To trace the development of Keynes’ ideas, let us begin with the Tract on Monetary Reform. The argument of that book is twofold. On the theoretical plane, Keynes places national monetary autonomy ahead of the international interdependence of prices and of stable exchange relations between currencies. On the practical plane, he opposes the then growing influence of the United States Federal Reserve System on the functioning of the gold standard. On either plane he favours national monetary autonomy as against monetary internationalism. The following quotation contains the gist of the theoretical argument:

Since …the rate of exchange of a country’s currency with the currency of the rest of the world (assuming for the sake of simplicity that there is only one external currency) depends on the relation between the internal price level and the external price level, it follows that the exchange cannot be stable unless both internal and external price levels remain stable. If, therefore, the external price level lies outside our control, we must submit either to our own internal price level or to our exchange being pulled about by external influences. If the external price level is unstable, we cannot keep both our own price level and our exchanges stable. And we are compelled to choose. …

The right choice is not necessarily the same for all countries. It must partly depend on the relative importance of foreign trade in the economic life of the country. Nevertheless, there does seem to be in almost every case a presumption in favour of the stability of prices, if only it can be achieved. Stability of exchange is in the nature of a convenience which adds to the efficiency and prosperity of those who are engaged in foreign trade. Stability of prices, on the other hand, is profoundly important. 4

Having analysed elsewhere5 Keynes’ argument in greater detail, I shall limit myself here to a few brief observations. The definition of foreign exchange rates in terms of relations between the domestic price levels of the respective countries is a great oversimplification of the really existing, and far more complex, relationships.6 In the words of Professor John H. Williams, “the dilemma between the aims of external and internal monetary stability is [probably] more apparent than real, and … it arises very largely out of a too literal acceptance of the abstractions of gold-standard theory”.7 What is true, however, is that if there are fluctuations of major amplitude in world prices, due, e.g., to the business cycle, a country can either participate in these price movements and maintain exchange stability or it can abandon that stability and seek an autonomous course for its domestic prices. Whatever the reasons may be for choosing the latter as against the former course, it must be realized that the country deciding upon it severs up to a point its organic relations with the world economy. Such a decision represents a first step in the direction of economic insulation. And a first step is, most frequently, followed by others.

“Stability of exchange is in the nature of a convenience which adds to the efficiency and prosperity of those who are engaged in foreign trade”, says Keynes in the passage quoted above, displaying a surprising lack of appreciation of the real significance of stable exchange rates between the various currencies. Just as in the past the introduction of a single national monetary unit helped countries to achieve internal economic cohesion, so stable parities are the basis upon which a coherent world economy is built. Stable currencies, freely convertible into one another, are the best approximation we have ever had to a single world currency. They render possible the development of stable and sustained currents of trade; combined with free trade, they bring about real international economic integration. Not only those who are directly engaged in foreign trade benefit from such a state of affairs; benefits are extended to all producers, traders, and consumers alike, for their welfare is promoted by the growing international division of labour and by the existence of wide and dependable markets. The future author of the essay on “National Self-Sufficiency” had evidently no appreciation in 1923, of the importance of an international monetary order. What attracted him, on the contrary, was the quest for national monetary autonomy.

Along with many economists of the early twenties Keynes was all in favour of innovation; a stable price level, proclaimed by Irving Fisher to be the only true aim of monetary policy, was then an objective greatly in vogue, and the “bright young economists” looked scornfully upon that prehistoric relic of the unscientific past, the gold standard. Thus Keynes:

In truth, the gold standard is already a barbarous relic. All of us, from the Governor of the Bank of England downwards, are now primarily interested in preserving the stability of business, prices, and employment, and are not likely, when the choice is forced upon us, deliberately to sacrifice these to the outworn dogma, which had its value once, of £3: 17: 10½ per ounce. Advocates of the ancient standard do not observe how remote it now is from the spirit and the requirements of the age. A regulated non-metallic standard has slipped in unnoticed. It exists. Whilst the economists dozed, the academic dream of a hundred years, doffing its cap and gown, clad in paper rags, has crept into the real world by means of the bad fairies — always so much more potent than the good — the wicked ministers of finance. 8

The other — and very important — reason for Keynes’ opposition to Britain’s return to the gold standard had to do with the emergence of the United States after World War I as a major financial centre:

… I see grave objections to reinstating gold in the pious hope that international co-operation will keep it in order. With the existing distribution of the world’s gold, the reinstatement of the gold standard means, inevitably, that we surrender the regulation of our price level and the handling of the credit cycle to the Federal Reserve Board of the United States. Even if the most intimate and cordial co-operation is established between the Board and the Bank of England, the preponderance of power will still belong to the former. The Board will be in a position to disregard the Bank. But if the Bank disregard the Board, it will render itself liable to be flooded with, or depleted of, gold, as the case may be. Moreover, we can be confident beforehand that there will be much suspicion amongst Americans (for that is their disposition) of any supposed attempt on the part of the Bank of England to dictate their policy or to influence American discount rates in the interests of Great Britain. We must also be prepared to incur our share of the vain expense of bottling up the world’s redundant gold.

It would be rash in the present circumstances to surrender our freedom of action to the Federal Reserve Board of the United States. We do not yet possess sufficient experience of its capacity to act in times of stress with courage and independence. The Federal Reserve Board is striving to free itself from the pressure of sectional interests; but we are not yet certain that it will wholly succeed. It is still liable to be overwhelmed by the impetuosity of a cheap money campaign. A suspicion of British influence would, so far from strengthening the Board, greatly weaken its resistance to popular clamour. Nor is it certain, quite spart from weakness or mistakes, that the simultaneous application of the same policy will always be in the interests of both countries. The development of the credit cycle and the state of business may sometimes be widely different on the two sides of the Atlantic.9

That the emergence of the Federal Reserve Board as the world’s major central bank raised serious problems, no one would deny. That the gold standard as a “two-headed” system would be more difficult to run than it was in the days when the Bank of England ran it alone, was also a foregone conclusion. But it was essential in the interest of rebuilding a well-knit world economy that co-operation between these two great central banks should be tried. Keynes, instead of examining the implications of such an Anglo-American central banking partnership, and suggesting ways in which it could be made to work, rashly rejected the whole notion and objected a priori to any surrender of Britain’s “freedom of action”. Here was, not very loud yet — but to grow louder in later years — the voice of monetary nationalism.

Keynes’ criticism of the return of Great Britain to the gold standard in 1925 is well-known.10 It should be noted here that it was formulated more in terms of the gold parity adopted for the pound11 than in those of outright opposition to the gold standard itself. In later years all the economic difficulties of Great Britain were to be blamed all too exclusively on that operation.12

Thus there were two strands in Keynes’ thought and the burden of criticism was placed now on the new gold parity of the pound, now on the gold standard system itself. In 1925, Keynes still saw a way out: an American inflation. As this too will be a recurring tune in his writings, a short quotation may be in order:

When the return to the gold standard was first announced, many authorities agreed that we were gambling on rising prices in the United States. The rise has not taken place, so far.

In my opinion we need not yet abandon the hope that it will take place. The tendency of American prices is upwards, rather than downwards, and it only requires a match to set alight the dormant possibilities of inflation in the United States. This possibility is the one real ground for not being too pessimistic.13

Interestingly enough the same hope for an American inflation can be read between the lines of some of Keynes’ writings of 1933 and again at the end of World War II. Given a certain dollar-sterling parity relation, a rise of prices in the United States would reduce the competitiveness of American as compared to British goods in third markets. It was not until 1951 that the inflationary effect of an American inflation on raw materials prices began to worry the British economists because of the consequences for Britain’s terms of trade. This, however, is in the nature of a digression. Let us return to Keynes’ attitudes towards the international monetary system. Next to the Tract on Monetary Reform, his most comprehensive treatment of the problem is to be found in the second volume of his Treatise on Money (1930). In Chapter 35 of that monumental work14 he speaks of auri sacra fames: “The choice of gold as a standard of value is chiefly based on tradition. … Dr. Freud relates that there are peculiar reasons deep in our subconscious why gold in particular should satisfy strong instincts and serve as a symbol. … Of late years the auri sacra fames has sought to envelop itself in a garment of respectability as densely respectable as was ever met with, even in the realm of sex and religion. … Gold has become part of the apparatus of conservatism and is one of the matters we cannot expect to see handled without prejudice.”15 Because he was an enthusiastic iconoclast, Keynes’ prejudice was all against what he had called in 1923 “a barbarous relic”. But prejudice it was, not cool reason, which led Keynes to oppose eventually not only the monetary use of gold, but also economic internationalism as such, and to accuse the gold standard and world trade of causing all the ills of the world, including strife and war. In 1930, as in 1923, Keynes was hankering after national monetary autonomy, impatient with the “discipline” of an international monetary standard:

But is it certain that the ideal standard is an international standard? It has been usual to assume that the answer is so obviously in the affirmative as to need no argument. I do not know where it has been questioned, except in my own Tract on Monetary Reform, Chapter IV. The conveniences and facilities which an international standard offers to foreign trade and foreign investment is thought sufficient to clinch the matter. The lack of an international standard of value is assumed to be just one more of those foolish hindrances to international mobility, such as tariffs, which can only serve to impoverish the whole world in the misguided attempt to benefit some separate part of it.16

Keynes’ arguments in 1930 were much more sophisticated than those advanced seven years previously had been — but they are equally vulnerable to technical analysis.17 What interests us most in the present context is the fact that Keynes regarded the requirements imposed by membership in an international monetary system as unduly limiting the freedom of national economic action. What he was willing to accept, was “the management of the value of gold by a supernational authority”18 — but just how such an authority would function, he did not say. It is not uncommon for a “planner” to seek an outlet for his idealism in an expression of yearning for supernational planning; what he cannot accept is an “unmanaged” international system.

After the publication of the Treatise on Money and under the impact of the depression, Keynes moved rapidly in the direction, first, of protectionism, then, of self-sufficiency. Before we turn to these aspects of his economic nationalism, one final quotation, this from the General Theory of Employment, Interest and Money published in 1936, the Master’s magnum opus and most influential work on economics.19 Here is the passage in question:

Never in history was there a method devised of such efficacy for setting each country’s advantage at variance with its neighbours’ as the international gold (or, formerly, silver) standard. For it made domestic prosperity directly dependent on a competitive pursuit of markets and a competitive appetite for precious metals.20

This strange phrase appears in Keynes’ discussion (and rehabilitation) of the mercantilists. The phrase is strange because, applicable though it may be to the mercantilist quest for precious metals, it bears no relationship whatsoever to the gold standard of the latter part of the nineteenth and early twentieth centuries. But this is not all:

The mercantilists were under no illusions as to the nationalistic character of their policies and their tendency to promote war. It was national advantage and relative strengh at which they were admittedly aiming.

We may criticize them for the apparent indifference with which they accepted this inevitable consequence of an international monetary system. But intellectually their realism is much preferable to the confused thinking of contemporary advocates of an international fixed gold standard and laissez-faire in international lending, who believe that it is precisely these policies which will best promote peace.21

As a matter of historical record, these “contemporary advocates” were entirely justified in their beliefs — far more so than Keynes was in his disbelief.

III

From monetary nationalism—advocacy of autonomous national monetary policies as against the “discipline” of an international system — Keynes moved to protectionism. As already indicated, this phase in the evolution of his ideas did not start till 1931. Until then he managed to reconcile (in his own mind, at least) the demands for monetary “autonomy” with a traditionalist attachment to the principles of free trade. Eventually, the iconoclast 22 got the better of the traditionalist, all the more so as intellectually Keynes was on the march in the direction of “national self-sufficiency”. The immediate occasion, however, for the formulation of his protectionist proposals was the depression and the aggravation of unemployment. The vindicator of mercantilism could readily see the connection between trade restrictions and the creation of employment. On March 7, 1931, there appeared in the New Statesman and Nation Keynes’ article on “Proposals for A Revenue Tariff”, the initial thrust in a campaign that was to end — in the following year — in the abandonment of free trade as Great Britain’s official policy 23:

… the main decision which seems to me today to be absolutely forced on any wise Chancellor of the Exchequer, whatever his beliefs about protection, is the introduction of a substantial revenue tariff. … Compared with any alternative which is open to us, this measure is unique in that it would at the same time relieve the pressing problems of the budget and restore business confidence. I do not believe that a wise and prudent budget can be framed today without recourse to a revenue tariff. But this is not its only advantage. In so far as it leads to the substitution of home produced goods for goods previously imported, it will increase employment in this country.

As was to be expected, this proposal met with a storm of protest. Professor Robbins answered in the very next issue of the New Statesman and Nation. Two passages from Keynes’ retort, appearing in the same weekly on March 21, 1931, are worth quoting for they throw a good deal of light on his frame of mind. In the first place, he attributes to the then prevailing fall in prices the revived interest in protection. He then proceeds as follows:

… If prices rise to their former level, and if unqualified free trade turns out to be as much in the interests of this country in the conditions of the twentieth century as it certainly was in the conditions of the nineteenth century, then I believe that the tariff will be taken off again. But if I look into the bottom of my own heart, the feeling which I find there is, rather, that a tariff is a crude departure from laissez-faire, which we have to adopt because we have at present no better weapon in our hands, but that it will be superseded in time, not by a return to laissez faire, but by some more comprehensive scheme of national planning.

Now this is a very interesting statement, revealing as it does Keynes’ preoccupation with the eventual introduction of “some more comprehensive scheme of national planning” to take the place of free trade. It is so important a pronouncement, in fact, in relation to Keynes’ intellectual evolution, that I am surprised that his biographer, although he quotes another passage of this article, passes it over in silence. The second passage which needs to be quoted here follows:

Professor Robbins taunts me in conclusion with abandoning ‘the service of high and worthy ideals in international relations’ for ‘the service of the mean and petty devices of economic nationalism’. I know that he sincerely feels this, and that for him, as for many others, free trade stands as a banner and as a symbol of fundamental reason and decency between nations. Free trade unbesmirched invokes old loyalties, and recalls one of the greatest triumphs of reason in politics which adorn our history. It is a poor retort, perhaps, to this, to say that one must not let one’s sense of the past grow stronger than one’s sense of the present and of the future, or sacrifice the substance to the symbol.

Keynes’ “sense of the present and of the future” was taking him deeper and deeper into the morass of economic nationalism. From a deliberate defender of the mercantilists he was now to become an unwitting rediscoverer of Fichte’s economic isolationism. On the road from monetary “autonomy” to “national self-suffciciency” he also embraced, not unnaturally, “comprehensive national planning”.

In the same year, 1931, there appeared the celebrated Macmillan Report.24 Keynes was a member of the Committee on Finance and Industry and one of the principal authors of the report. He was also — and from the point of view of our present inquiry, more significantly — one of the signers of the important Addendum I to the report. This addendum, described by Sir Roy Harrod in his biography as “a supplementary report in favour of a public works programme”, contains an interesting section entitled: “Control of Imports and Aids to Exports”, of which the following passages are the most striking:

Proposals under this heading raise political and social issues which extend far beyond the necessities of the present emergency. … We shall confine ourselves … to considering briefly the uses of tariffs or Import Boards, etc., and subsidies on articles of foreign trade regarded as an expedient to meet a situation in which a country has a large unemployed surplus of labour and of plant which it is unable to bring into use in the conditions imposed on it by its economic relations, arising out of relative rates of interest and money-costs, with the rest of the world. … (Paragraph 39.)

It appears to us … that, if imports were to be controlled, whether by a tariff with compensation for exports, or by Import Boards, or in some other way and home produced goods substituted for them, there is a presumption, so long as present circumstances last, that this would mean a net increase of employment and of national productivity. … (Paragraph 41.)

Since many of the arguments in favour of a restriction of imports apply equally in favour of schemes of assistance to exports, some system of restricting imports, accompanied by a policy of giving advantages to the export industries, would seem to be the most practical plan of action. (Paragraph 43.)

Now, these proposals go far beyond a revenue tarif. They foreshadow the use of import quotas (the cryptic reference to Import Boards) and they include export subsidies. The armoury of mercantilism was speedily being re-established!

IV

Having, in his first world-famous book25, done as much as one man could do to undermine the peace treaty of Versailles, having later placed an intellectual time-bomb under the international gold standard, having produced the ammunition which decisively helped in the destruction of the last vestiges of Great Britain’s free trade policy, Keynes was next led to giving his personal version of the gospel of national self-suciciency. It appeared in two instalments in the New Statesman and Nation, on July 8 and 15, 1933, as well as in the Summer 1933 issue of the Yale Review. Entitled “National Self-Sufficiency”, this is one of Keynes’ most brilliant and most wrong-headed essays, displaying to an exceptional extent the qualities of persuasiveness, drama, self-assurance, and that mixture of genuine “strong feelings” and intellectual irresponsibility which were characteristic of so many of the writings of this extraordinary man. 26 This essay, which is not readily available outside the periodicals where it appeared, can well be regarded, for all its brevity, as one of Keynes’ most significant writings. Because of its importance and because it is not easily accessible, there are several passages that must be quoted in full.

Keynes starts with a reference to his past beliefs on the question of free trade:

I was brought up, like most Englishmen, to respect free trade not only as an economic doctrine which a rational and instructed person could not doubt, but almost as a part of the moral law. I regarded ordinary departures from it as being at the same time an imbecility and an outrage. I thought England’s unshakable free trade convictions, maintained for nearly a hundred years, to be both the explanation before man and the justification before heaven of her economic supremacy. As lately as 1923 I was writing that free trade was based on fundamental truths “which, stated with their due qualifications, no one can dispute who is capable of understanding the meaning of the words”.27

Looking again today at the statements of these fundamental truths which I then gave, I do not find myself disputing them. Yet the orientation of my mind is changed; and I share this change of mind with many others. Partly, indeed my background of economic theory is modified… But mainly I attribute my change of outlook to something else — to my hopes and fears and preoccupations, along with those of many or most, I believe, of this generation throughout the world, being different from what they were.28

Keynes then proceeds to examine the relation between world trade and peace, and his views are the exact opposite of those that were advanced by Richard Cobden in the middle of the previous century:

We are pacifist today with so much strength of conviction that, if the economic internationalist could win this point, he would soon recapture our support. But it does not now seem obvious that a great concentration of national effort on the capture of foreign trade … and that a close dependence of our own economic life on the fluctuating economic policies of foreign countries are safeguards and assurances of international peace. It is easier, in the light of experience and foresight, to argue quite the contrary. …

I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel — these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national. …

For these strong reasons, therefore, I am inclined to the belief that, after the transition is accomplished, a greater measure of national self-sufficiency and economic isolation among countries than existed in 1914 may tend to serve the cause of peace, rather than otherwise.29

That economic isolation among countries would serve the cause of peace is precisely the doctrine of Fichte —who also claimed to be a devotee of peace. But Fichte, in examining the conditions under which a country could envisage self-sufficiency, was led to the inescapable conclusion that it first had to conquer enough of the world’s surface to have the resources it needed to live self-sufficiently in well-being and in comfort. This is why Fichte’s celebrated “pacifism” was, in the first instance, a theory justifying aggressive warfare. Keynes’ approach is free from such disturbing overtones. The reason is simple: he does not go into the question of whether self-sufficiency is a goal that can be achieved without a major surrender of well-being. In this he is intensely British. He takes the British Empire and Commonwealth links for granted and, with one exception (or possibly two), is not concerned with the rest of the world. To these exceptions I shall presently revert. But first a few additional quotations will be useful to provide the reader with a full appreciation of the scope of Keynes’ position:

… I am not persuaded that the economic advantages of the international division of labour today are at all comparable with what they were. … A considerable degree of international specialization is necessary in a rational world in all cases where it is dictated by wide differences of climate, natural resources, native aptitudes, level of culture and density of population. But over an increasingly wide range of industrial products … I have become doubful whether the economic loss of national self-sufficiency is great enough to outweigh the other advantages of gradually bringing the product and the consumer within the ambit of the same national economic and financial organization. … National self-sufficiency, in short, though it costs something, may be becoming a luxury which we can afford, if we happen to want it. (pp. 759-60, italics added.)

Having gone so far, Keynes asks a very pertinent question — a question which is at the heart of this entire issue. Are there sufficiently good reasons, he queries, why we may happen to want it? Indeed why should we want self-sufficiency? What has it to offer us that is worth even the smallest price which it would cost? If it were to carry the promise of peace, then, indeed, it would be worth almost any price, short of actual distress; but Keynes’ affirmations notwithstanding, the weight of historical evidence is surely to the contrary. Nor does Keynes rest his case on the “pacifism” which he claims for his proposal. No, he rests his case on what he regards as the wholesome and desirable right of a country to carry out within its boundaries any economic and social experiments in which it may wish to engage. But let us hear this in his own words:

Each year it becomes more obvious that the world is embarking on a variety of politico-economic experiments, and that different types of experiment appeal to different national temperaments and historical environment. The nineteenth century free trader’s economic internationalism assumed that the whole world was, or would be, organised on a basis of private competitive capitalism and of the freedom of private contract inviolably protected by the sanctions of law…

But today one country after another abandons these presumptions. Russia is still alone in her particular experiment, but no longer alone in her abandonment of the old presumptions. Italy, Ireland, Germany have cast their eyes, or are casting them, towards new modes of political economy. Many more countries after them I predict, will seek, one by one, after new ecoonomic gods. …30

But the point for my present discussion is this. We each have our own fancy. Not believing that we are saved already, we each should like to have a try at working out our own salvation. We do not wish, therefore, to be at the mercy of world forces working out, or trying to work out, some uniform equilibrium according to the ideal principles, if they can be called such, of laissez faire capitalism. There are still those who cling to the old ideas, but in no country of the world today can they be reckoned as a serious force. We wish — for the time at least and so long as the present transitional, experimental phase endures — to be our own masters, and to be as free as we can make ourselves from the interferences of the outside world. (pp. 761-62; italics added.)

This, then, is the ultimate motivation of Keynes’ advocacy of national self-sufficiency. In a later section of this chapter it will be shown that Keynes’ philosophy must be regarded as a peculiar mixture of collectivism and liberalism. The above quotation has much bearing on this matter. Who are the “we” of the last paragraph quoted? “We” who have our own fancies, “we” who do not wish to be at the mercy of world forces, “we” who wish to be our own masters — who are “we”? Is it each of the individuals who compose the British (or any other) society — or is it the British nation as distinct from any nation, or any nation as distinct from all other nations? Much evidently depends on the answer to that question: the human individual had the greatest opportunity to work out his destiny in accordance with his wishes, his fancies, and his desires for freedom from interferences under the system that Keynes decries as the “laissez faire capitalism” of days gone by. He enjoyed similar opportunities neither before the advent of that system nor since its partial disappearance in the thirthies (under the impact of the Great Depression). But if Keynes means the right of nations to be “free from the interferences of the outside world”, this is another story altogether, for such “national independence” can only be achieved at the expense of the freedom of the individual citizen and of the requirements of world order. There cannot be much doubt that it is the latter interpretation of “we”, i.e. we, the community, that Keynes has in mind.

Having thus taken us very far into the dangerous world of nationalism and collectivism, Keynes ends his essay with a forceful plea for “bold, free, and remorseless criticism” and sharply critizes Stalin because he “has eliminated every independent, critical mind” and “has produced an environment in which the processes of mind are atrophied”. “The bleat of propaganda”, says Keynes in a final bouquet of verbal fireworks, “bores even the birds and the beasts of the field into stupefaction. Let Stalin be a terrifying example to all who seek to make experiments.”

These are fine words, and had Keynes but reflected on the connection that exists between collectivist planning and intolerance of criticism, he might have decided not to publish his essay after all. As it is, having given a tremendous amount of encouragement to all the budding collectivist experimenters, he opened for himself a little avenue of retreat Should Stalin’s “terrifying example” not be heeded, “I, at any rate,” he says, “will soon be back again in my old nineteenth century ideals.” As a matter of fact, while Keynes moved impenitently for another decade along the path of nationalism, he seems to have made at least a beginning along the road back in the last years of his life. 31

Keynes never reverted again, at any length, to the subjectmatter of the essay just discussed; there are sufficient grounds to believe, though, that it represented far more than a passing mood. I have previously referred to some of the views formulated in his General Theory of Employment, Interest and Money. In the final passage of that influential book he takes up again the problem of the economic causes of war:

War has several causes. Dictators and others such, to whom war offers, in expectation at least, a pleasurable excitement, find it easy to work on the natural bellicosity of their peoples. But, over and above this, facilitating their task of fanning the popular flame, are the economic causes of war, namely, the pressure of population and the competitive struggle for markets. It is the second factor, which probably played a predominant part in the nineteenth century, and might again, that is germane to this discussion.

I have pointed out … that, under the system of domestic laissez faire and an international gold standard such as was orthodox in the latter half of the nineteenth century, there was no means open to a government whereby to mitigate economic distress at home except through the competitive struggle for markets. For all measures helpful to a state of chronic or intermittent underemployment were ruled out, except measures to improve the balance of trade on income account.32

But this is precisely where Keynes’ interpretation of history has no foundation in recorded facts. Except for minor conflicts, most of them colonial, and for the Franco-Prussian War, the nineteenth century was a century of peace — the most peaceful century indeed in many hundreds of years. The Franco-Prussian War itself was not due to economic reasons but to Bismarck’s need for a foreign war which would speed up the consolidation of a German empire. Nor was there, as far as I know, any recorded instance in the liberal countries of the nineteenth century of governments adopting aggressive economic policies to improve “the balance of trade” as a cure for underemployment. The very concept of laissez faire precluded the adoption of such policies. Actually, there was no visible concern at that time over cures for chronic “underemployment” (should such a condition have then existed for any length of time, which also is subject to doubt).

This evident misinterpretation of history serves a purpose, however, for Keynes goes on as follows — in a vein reminiscent both of his earlier essay and of the views of Fichte:

But if nations can learn to provide themselves with full employment by their domestic policy … there need be no important economic forces calculated to set the interest of one country against that of its neighbours. There would still be room for the international division of labour and for international lending in appropriate conditions. But there would no longer be a pressing motive why one country need force its wares on another or repulse the offering of its neighbour… with the express object of upsetting the equilibrium of payments so as to develop a balance of trade in its own favour. International trade would cease to be what it is, namely, a desperate expedient to maintain employment at home by forcing sales on foreign markets and restricting purchases,… but a willing and unimpeded exchange of goods and services in conditions of mutual advantage.

The type of international trade that Keynes describes and rejects is precisely trade dominated by the mercantilist creed. It had ceased to be that in the age of free trade, from the middle of the ninetheenth century up to World War I. It reverted to the old pattern once again when national planning and a revival of mercantilism resulted in attempts to regulate imports and exports for nationalistic purposes and without due regard for the welfare of people living in the various trading nations. Keynes’ concern with measures to fight unemployment in the deep depression of the thirties was very honourable. His scorn for what has been called “beggar-my-neighbour policies” in international commerce is also highly understandable and commendable. But the judgment he passes on liberal international trade as a whole and the references he makes, in the passages quoted, to nineteenth century conditions, can only be regarded as a misrepresentation of history. It is almost an intellectual tragedy when a man of Keynes’ stature and of Keynes’ mind stoops to such methods in support of questionable policy recommendations!

Following the line of his intellectual development, it is not surprising to find Keynes entering eventually upon the path of bilateralism. “Keynes is believed to have had a mild flirtation with bilateralistic ideas at some time in the late thirties or early forties,” wrote an American student of his works, “but if this is true, there are no traces of it in his published writings.” 34 Actually, although it would appear that Keynes did not express his views on this subject in print, his “flirtation” with bilateralism is confirmed by a number of people who knew him during the early years of World War II. It is also confirmed by his biographer, Sir Roy Harrod. 35 Having gone thus far, Keynes was faced with new situations and it is at that point, somewhere between 1941 and 1943, that his famous “conversion” back to internationalism took place.

V

There can be no doubt that in the course of the early years of the war Keynes’ approach to international economic relations underwent a profound change, that he abandoned the path of narrow economic nationalism which, for a time, had led him to the notion that England should adopt bilateralist policies in its future relations with the rest of the world, and became, in the last years of his life, an eloquent and convinced champion of an Anglo-American partnership for the restoration of multilateral world trade. Just what brought about such a change of heart is a fascinating question and it appears not to be an insoluble one.

As noted at the beginning of this chapter, one can consider this “conversion” as Keynes’ return to “his earlier internationalism”, to which Professor Robbins refers in his refutation of the essay on “National Self-Sufficiency”. 36 In view of that we must regard it as a “re-conversion” rather than a “conversion”, Keynes’ first conversion having been from his early internationalism to, first, monetary and, then, economic nationalism. But such a “re-conversion” — from economic internationalism to economic nationalism and back again, some twenty years later — is a very rare occurrence indeed, especially when a man of the intellectual calibre and of the immense influence of John Maynard Keynes is involved! And it is a matter of very great interest to find out what brought about this change of attitude. Although Harrod, because he does not admit Keynes’ economic nationalism to have been deep-rooted and consistent for about twenty years prior to the period we are investigating, does not deal with this problem in the particular way outlined here, he nevertheless furnishes us, I believe, with the most important elements of an explanation.

Harrod recalls the negotiations that took place in 1941 for the Master Lend-Lease Agreement, Article VII of which included provisions of great importance for the future Anglo-American partnership for the revival of multilateral trade. According to Harrod’s account, Keynes reacted unfavourably to the original American proposals, which went far in the direction of eliminating, after the war, discriminatory trade practices and quantitative restrictions on trade and payments. “He, too,” Harrod recounts, “had had the idea that the lend-lease commitments might somehow be tied up with a big programme of collaboration in world reconstruction. What he had in mind was the application with American assistance of Keynesian remedies for unemployment and trade depression on a world scale. … He had also in the forefront of his mind the appalling problems that Britain would face after the war in the matter of her own trade balance.”37 He was averse, therefore, to the non-discrimination provisions of the American draft. From there on Harrod’s account must be quoted in full38, for here, I believe, we find the key to the drastic change that took place in Keynes’ views on post-war Anglo-American co-operation and thereby on the nature of the future world economy:

The word was passed around in certain British official quarters that Keynes had created an unhappy impression in the United States by insisting that after the war Britain would have to adopt bilateral methods in her trade policy. When the matter came to his ears, he strongly denied that he had advocated such a policy. He had in fact only had one talk about such matters in the State Department. In this he had taken the line that Britain would be driven willy-nilly to such a policy, unless there was a determined effort to reconstruct world trade and finance after the war, an effort which presupposed generous support from the United States. This single talk had been interrupted in the midst by the other engagements of his interlocutors. It was quite monstrous to charge him with having spread the doctrine of bilateralism on the strength of it.

Mr. Harry Hawkins recalls the occasion; he had been the spokesman of the State Department. Keynes had indeed warned his audience that Britain would have to employ all the weapons of Dr. Schacht, unless there was a large joint Anglo-American effort to restore equilibrium of trade and thus make such devices unnecessary. Mr. Hawkins had not come briefed to make any adequate reply, and they had been pressed for time. He had confined himself to giving a counter-warning. Should Britain indeed feel compelled to adopt such measures, the United States would be driven, not out of ill-will, but by the inevitable logic of events, to adopt a similar policy herself. She would have to do so to protect and enforce the just claims of her own citizens. In this economic warfare, he pointed out, it was only too probable that the United States would be the victor. If Britain was hard driven and seriously attempted to employ Schachtian tactics, she must remember that she would not gain the benefits of a Power who did this alone, but would lead all others, including the United States, to similar ways, and the law of the jungle would rule in foreign trade. Weighty words!

It follows from the above passage that Keynes was induced by his American conversations to proceed to a far-reaching re-examination of his views on Britain’s post-war economic policy.39 Obviously these conversations could only have given the original impetus, or maybe they precipitated a process of “agonizing reappraisal” which had already started in his mind. It is well-known that Keynes’ closest circle during the war included people who were thoroughly convinced, all along, of the need for Britain to engage in the closest cooperation with the United States, not only during but also after the war. These people, who certainly did not underestimate — as some of Keynes’ American connections might have done — the scope of post-war readjustment that it would be necessary for Britain to undertake, were convinced that only within the framework of revived multilateral world trade and only in closest partnership with the United States could Britain’s problem be resolved. Be that as it may, there is evidence that these conservations in Washington played a role in bringing about a change in Keynes’ general attitude to British foreign economic policy. In 1923 and in 1933, Keynes evidently believed that Anglo-American co-operation was neither urgent nor essential and, possibly, he even doubted whether it was possible. By 1943 he must have come to the conclusion that it was henceforth not only possible but indeed indispensable. Once this was admitted, there was no further scope for economic nationalism.

This would seem to me to be the true explanaiton of Keynes’ “re-conversion”. 40 Having reached the conclusion that co-operation with America was indispensable for Great Britain, Keynes devoted the remaining (and all too few) years of his life to promoting and cementing this partnership. There is little published material from these strenuous years and Keynes’ last great speech delivered in the House of Lords, on December 18, 1945 41, must be regarded as the most important declaration of his new faith. In that speech, from which key pasages are quoted below, he made an unequivocal stand in favour of multilateral trade:

The object of the multilateral system is to enable us to pay the United States by exporting to any part of the world and it is partly for that very reason that the Americans have felt the multilateral system was the only sound basis for any arrangement of this kind.

Referring to the kind of policy the United States and Great Britain could agree upon and foreshadowing the conversations that were about to begin concerning the establishment of an International Trade Organization, Keynes went on as follows:

… much of these policies seem to me to be in the prime interest of our country, little though we may like some parts of them. They are calculated to help us regain a full measure of prosperity and prestige in the world’s commerce. They aim, above all, at the restoration of multilateral trade, which is a system upon which British commerce essentially depends.42 You can draw your supplies from any source that suits you and sell your goods in any market where they can be sold to advantage. The bias of the policies before you is against bilateral barter and every kind of discriminatory practice. The separate economic blocs and all the friction and loss of friendship they must bring with them are expedients to which one may be driven in a hostile world, where trade has ceased over wide areas to be co-operative and peaceful and where are forgotten the healthy rules of mutual advantage and equal treatment. But it is surely crazy to prefer that. Above all, this determination to make trade truly international and to avoid the establishment of economic blocs which limit and restrict commercial intercourse outside them, is plainly an essential condition of the world’s best hope, an Anglo-American understanding, which brings us and others together in international institutions which may be in the long run the first step towards something more comprehensive. Some of us, in the tasks of war and more lately in those of peace, have learnt by experience that our two countries can work together. Yet it would be only too easy for us to walk apart. I beg those who look askance at these plans to ponder deeply and responsibly where it is they think they want to go.

It is impressive to see how far Keynes had travelled since the days of 1933 and of 1936. Although we can trace his change of heart and its probable causes, it is difficult to say how deep his “reconversion” actually was. There are strong indications that he would have continued to travel the new road. In June 1946 the Economic Journal, of which Keynes had been Editor for many years, published posthumously his last article. Its subject is: “The Balance of Payments of the United States”. In that article, between the lines of which one can read Keynes’ recurring hope for an American inflation (a hope discreetly voiced in the House of Lords speech as well), he seems to be turning away from some of his other inter-war conceptions. “I find myself moved, not for the first time,” he writes, “to remind contemporary economists that the classical teaching embodied some permanent truths of great significance, which we are liable today to overlook because we associate them with other doctrines which we cannot now accept without much qualification. There are in these matters deep undercurrents at work, natural forces, one can call them, or even the invisible hand, which are operating towards equilibrium. If it were not so, we could not have got on even so well as we have for many decades past. … I must not be misunderstood. I do not suppose that the classical medicine will work by itself or that we can depend on it. We need quicker and less painful aids, of which exchange variation and overall import control are the most important. But in the long run these expedients will work better, and we shall need them less, if the classical medicine is also at work. And if we reject the medicine from our system altogether, we may just drift on from expedient to expedient and never get really fit again.” 43

It is impossible to be certain about the direction in which Keynes would have gone on from there. Would he have come to reject import quotas and exchange controls or would he have maintained his adherence to these mercantilist controls? No one can say, and the different schools of his disciples are entirely at odds when it comes to this question. Fortunately, this is not a matter on which it is necessary to express an opinion here. The important thing to note in the present context is the fact that Keynes reached the end of the road of economic nationalism and found it to be a blind alley, and that findig it to be a blind alley he retraced his steps and entered the highway of international co-operation for the re-establishment of multilateral trade. What is one man’s intellectual and moral experience is, of course, of primary interest to his biographer and many will regret that Sir Roy Harrod did not tell us much more about this phase of Keynes’ life, upon which he should be in a unique position to enlighten his readers. But the fact that circumstances of the real world forced so enthusiastic an iconoclast and so influential an advocate of economic nationalism as Keynes to revise and reverse his views is not just one man’s experience; it is an experience which sheds much light upon the nature of economic nationalism itself. What this experience reveals is the essential sterility of the nationalistic and isolationist approach to a country’s major economic problems. This is why an account of Keynes’ “reconversion” to internationalism had to find a prominent place in the present book.

VI

Our main theme in this inquiry is the connection between economic nationalism and collectivism. Was Keynes, then, a liberal or a collectivist? This question calls for careful consideration.

As everybody familiar with his work will readily concede, Keynes was not the kind of man on whom it would be easy to pin a label. We find troughout Keynes’ writings a great many statements upholding a liberal outlook on life and on individual prerogatives and liberties. It would be easy to compose an impressive anthology of such statements in which practically every single major work of Keynes would be represented. Keynes considered himself to be a liberal and yet even in his writings on the subject of liberalism he expresses views which only a collectivist could hold. In an earlier book, The Trade of Nations, I myself described Keynes as having been “fundamentally a liberal”. 44 Since then I have re-read and pondered over practically everything Keynes has written. It is my conclusion now that Keynes never took a clear-cut stand in the controversy between liberalism and collectivism. He never found it necessary to make a choice. He seems not to have been impressed by anything contradictory between sets of divergent views which he would almost simultaneously express and which would strike almost anyone else as inconsistent. There is, however, one criterion that could be usefully applied in this connection. It is this: what are his actual policy recommendations? And here the general impression is that Keynes was fascinated by collectivism, even while he would say kind and beautiful things about liberalism and even though he was a foe of totalitarianism. Although Keynes very frequently expressed sentiments favourable to individual liberty and to political freedom, his policy recommendations invariably go the other way. If he was a liberal, then he was that extraordinary kind of liberal whose practical recommendations consistently promote collectivism.

I have already commented on the clearly collectivist implications of Keynes’ essay on “National Self-Sufficiency”. But let us go further back. In 1926 Keynes wrote a small book entitled The End of Laissez-Faire, a part of which he included in his Essays in Persuasion published in 1931. From this I quote the following: 45

I believe that some co-ordinated act of intelligent judgment is required as to the scale on which it is desirable that the community as a whole should save, the scale on which these savings should go abroad in the form of foreign investments, and whether the present organisation of the investment market distributes savings along the most nationally productive channels. I do not think that these matters should be left entirely to the chances of private judgment and private profits, as they are at present.

Now, this is a collectivist recommendation, involving the determination by the state of matters which, in a liberal society, are left to individual decisions. In his General Theory, Keynes takes up this idea in much greater detail. “I expect to see the State”, he says, “taking an ever greater responsibility for directly organizing investment”; and again: “I conceive … that a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment … .” It is true that he goes on to say that “beyond this no obvious case is made out for a system of State socialism which would embrace most of the economic life of the community” 46, thereby lending support to those who claim that he was not a socialist. Unfortunately, having never examined the practical consequences of a “somewhat comprehensive socialisation of investment”, he had no opportunity to say whether he would accept these consequences or abandon his socialization proposal, for it is hard to see how an economic system could long remain liberal in which all investment decisions would have to be taken by the state. It is precisely because Keynes frequently failed to follow his suggestions to their logical end that his doctrinal position is, in many cases, far from clear.

Let us turn once more to the The End of Laissez-Faire:

The time has already come when each country needs a considered national policy about what size of Population, whether larger or smaller than at present or the same, is most expedient. And having settled this policy, we must take steps to carry it into operation. The time may arrive a little later when the community as a whole must pay attention to the innate quality as well as to the mere numbers of its future members.47

Now, any careful reader of these lines will perceive how alien they are to the liberal concept of society. What Keynes is actually advocating is government regulation not only of the size of the population but also of the qualitative aspects of that population — and that opens the door to very unwholesome speculations indeed. Again, Keynes does not spell out his thought in full and we are merely left with an uneasy feeling that there is a good deal of the collectivist in him. 48

Examples could be multiplied, but the above quotations coupled with Keynes’ views on “national self-sufficiensy” and his views — already cited — on the need for comprehensive economic planning, all lead to the same conclusion. Even though Keynes was not a consistent doctrinal collectivist, his practical recommendations would allow collectivism to infiltrate the social system and, very likely, to conquer it. In that, as in his views on monetary autonomy and economic insulation, Keynes is truly a child of his age, and that age is full of confusion and is a very dangerous one for the freedom of man.

Far be it from my intention to pass an overall judgment here on Keynes’ economic and political work. His influence has been immense and has stemmed from the books and other writings analysed in the preceding pages, as well as from his personal qualities. In summing up, I feel I can do no better than quote the following passages from Professor Jacob Viner’s review of Harrod’s Life:

Keynes probably contributed more than any other one person to the abandonment by England of its most important legacies from the classical tradition: the belief in the gold standard, in free trade, in free competition, in private and public frugality and thrift, and in a moderately cosmopolitan approach to international economic problems. … I am not convinced… that the final result of Keynes’ application of his unequalled power of advocacy to the overturn of the classical tradition in economics will be to make this a better or safer world to live in. Keynes was a great man but he was also at a number of critical moments in recent history — from 1919 to 1939 — a greatly wrong man.49

____________________

3a London, 1919.

“There is no doubt that what he mainly had in mind was that he wanted Britain, sooner or later, to make a bold experiment in achieving full employment. by. the methods that he advocated; in order that the experiment should be successful, British dependence on foreign conditions should be limited. The International Conference made it abundantly clear … that the world was not ripe for Keynesian experiments. So let us cultivate our own garden; it was the best we could do….” (Op. cit., p. 446; italics added.)

One may wonder whether the publication of this essay in the United States was not prompted by Keynes’ desire to convert the United States to the “Keynesian doctrines”. However that may be, his influence in the States became very considerable for a time. It may also be noted — although this might be pure coincidence — that the United States did embark upon an isolationist course of domestic policy in pursuit of an expansionist programme just about the time when Keynes’ essay appeared.

33 Ibid., pp. 382-3.

“Und wenn ich einige einzelne Brocken beitragen kann zu einem von deutschen Ökonomen zubereiteten vollen Mahl, eigens auf deutsche Verhältnisse abgestellt, werde ich zufrieden seine Denn ich gestehe, dass vieles in dem folgenden Buche hauptsächlich mit Bezug auf die Verhaltnisse in den angelsächsischen Ländern erlãutert und dargelegt worden ist. Trotzdem kann die Theorie der Produktion als Ganzes, die den Zweck des folgenden Buches bildet, viel leichter den Verhältnissen eines totalen Staates angepasst werden, als die Theorie der Erzeugung und Verteilung einer gegebenen, unter Bedingungen des freien Wettbewerbes und eines grossen Masses von laissez-faire erstellten Produktion.” (Allgemeine Theorie der Beschäftigung, des Zinses und des Geldes, Berlin, Duncker & Humblot, 1936).

Keynes’ Preface is dated 7 September 1936 and it has been maintained in the recent printings of the book (such as the 1955 printing from which my quotation is taken).