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John Maynard Keynes

1883 – 1946 · English
#political-economy#liberalism#economics

The most important economist of the 20th century and the figure whose work defines what "macroeconomics" even is. Keynes was a Cambridge don, Treasury official, Bloomsbury aesthete, speculator, art collector, and principal architect of the postwar international financial system — all of which he managed somehow to be at once.

His early reputation was made by The Economic Consequences of the Peace (1919), a furious short book denouncing the Versailles reparations as economically ruinous and politically catastrophic. His mature masterwork, The General Theory of Employment, Interest, and Money (1936), was written in response to the Great Depression and answered the question classical economics could not: how can an economy remain stuck at high unemployment for years? Classical theory said markets self-correct; Keynes showed that aggregate demand can remain persistently too low, that investment depends on volatile "animal spirits" as much as on interest rates, and that in such conditions the self-correcting mechanisms (wage cuts especially) can make things worse. The implication was that governments could and should use fiscal policy — tax cuts, public spending — to stabilize demand.

This argument became the orthodoxy of the postwar West and underwrote the growth of the The Welfare State. It was partly displaced after the 1970s stagflation by the monetarist counter-revolution of Milton Friedman and the rise of Neoliberalism, only to return, somewhat chastened, after the 2008 crisis. His 1944 negotiations at Bretton Woods — where he proposed (and lost to American proposals) an international clearing union — still set the frame for debates about global financial architecture.

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