“The more troublous the times, the worse does a laissez-faire system work”
John Maynard Keynes’s Blueprint for Managed Capitalism
In the summer of 1922 Roy Harrod, a young Englishman who had recently graduated from Oxford University with high honors, knocked on the door of 46 Gordon Square, a handsome Georgian row house in London’s Bloomsbury neighborhood, where he had been invited to lunch. The economist John Maynard Keynes warmly greeted his visitor, who was there to seek career advice. Two other guests were also present, one of whom was a French economist. “The talk began without any pause; it was quick and animated,” Harrod recalled many years later. “Keynes was discussing with the Frenchman the latest gossip about Continental statesmen, their mistresses, their neuroses, as well as their political manoeuvers … There was financial talk of the latest movements in the exchanges, budgetary positions, the international movement of money. This was still far beyond my ken.”1
Keynes had shot to international fame with his 1919 polemic The Economic Consequences of the Peace. The book savaged the postwar Treaty of Versailles, in which the victors in the Great War, at the behest of France and Belgium, imposed heavy reparations on Germany. In his role as an economic adviser to the British Treasury, Keynes had been part of the British delegation at Versailles, but he left the conference early in protest at the punitive nature of the treaty. If the allies deliberately aimed to impoverish Germany and the rest of central Europe, “vengeance, I dare predict, will not limp,” Keynes wrote. “Nothing can then delay for long that final civil war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing, and which will destroy, whoever is victor, the civilization and the progress of our generation.”2 Keynes’s criticisms were well-founded. By 1922, the straitened government of the Weimar Republic had resorted to printing money, and a period of hyperinflation had begun. By the fall of 1923, prices would rise a trillion-fold relative to the prewar level, paper currency would be rendered virtually worthless, and many middle-class Germans would see their savings wiped out. Prices also rose sharply in other European countries, including Austria-Hungary, Czechoslovakia, and Greece, causing widespread hardship and undermining political stability.
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