KEYNES RIGHT AND WRONG

LORD KEYNES died half a century ago on 21 April 1946, but his spirit lives with us today still — both at home and abroad — as no other Englishman's of his time, except Churchill. And not only in eco- nomics, where the influence of Keynesian- ism — roughly economic expansion — was worldwide after the war but is now gener- ally questioned. He was undoubtedly a man of genius, not only a devoted servant of the state, but a leading spirit in the cul- ture of our time, at least in its better aspects — encouraging the arts, music and theatre.

Like other men of genius, he was full of ideas, often innovative and heterodox, and naturally not all of them were right. He was fatally wrong about the Treaty of Ver- sailles. His world bestseller on the Peace had a shocking influence in undermining its authority and questioning its justice. Even today people are confused and don't know the truth about it.

What is the truth?

1) It restored Poland as a nation after centuries of suppression. 2) It gave free- dom to the three Baltic States such as they

How lovely — the Prescotts have invited us to join them for tiffin '

had never enjoyed before. 3) It created Czecho-Slovakia, the most successful democracy among the new succession states. 4) It freed the southern Slays from Austria and Hungary to go their various ways.

The territorial settlements of Versailles were essentially just. But we all accepted at the time Keynes's arguments that Ger- many having to pay reparations for the dreadful damage inflicted on France and Belgium was not. He also argued that, if Germany paid up, it would wreck trade, particularly British exports.

It now transpires that Keynes was wrong there too. Versailles, even on the economic side, had no such effect as his book por- tended. The Germans went in for inflation, sucked in more loans from London and New York and so enjoyed imports from Britain to such an extent that our exports did not suffer.

Furthermore, in succeeding years — as Mantoux's book, The Carthaginian Peace, showed from the figures — Germany spent more on rearming in the 1930s than ever was paid in reparations (even though financed by loans from Wall Street and the City, which were hence strong supporters of appeasement).

Keynes's book did untold damage, which is still evident today. It gave support to the muddled revisionists, and provided fuel for Hitler's propaganda against Versailles, which was so effective. All Germans believed it. But what they were resenting — and determined to reverse — was not so much Versailles as the fact that they had lost the first world war.

Historians now realise that, paradoxical- ly, Germany was left in a stronger position after that war than before it. (So again today, after the second world war, Achtung!) Though so wrong about Versailles, Keynes was 100 per cent right about the mistake of our return to the Gold Standard in 1926, at the impossible rate of $4.85 to the pound. (Today we are profiting from roughly $1.50 to the pound.) It was that exaggerated rate which made our exports uncompetitive — especially our coal trade — and produced the prolonged coal strike and eventually the General Strike. Significantly, Churchill who was the responsible Chancellor of the Exchequer — attacked by Keynes in another booklet — was doubtful about that return to the Gold Standard. His instinct was against it. But he was overruled by the Bank of Eng- land, the always pro-German Montagu Norman, the City, and the Treasury.

Keynes had served, with Ernest Bevin, on Macmillan's Committee on Finance and Industry — to which the benighted Norman admitted that he had never even considered the effect on industry of the return to the Gold Standard. Why would Keynes not pull together with Ernest Bevin (who had the trade unions with him) against those old men of the sea?

Keynes was very good to me when I was young, and used to encourage my reviews on political theory and history for his Eco- nomic Journal. He would send me post- cards regularly — though when he came to stay in All Souls he complained of the `arctic spartanism' of our bedrooms. Here too he was quite right. Cyril Radcliffe used to say that our way of life was one of 'pub- lic splendour and private squalor'. Cam- bridge dons did themselves much better, especially at King's when it was under Keynes's beneficent rule as bursar.

I kept up a constant argument with him, private and public, culminating in a little book, Mr Keynes and the Labour Movement. Why would he not see that the only way to get rid of the incubus of the 'National' Government was for his Liberals to join up with the Labour Party?

He would write back that I might well be right. But instead of supporting Labour in the election of 1935 he joined Lloyd George with his programme for unemploy- ment. Why was Keynes so obtuse political- ly? There never was, and there never would be, a Liberal government again. There was a regular majority in the country against the continued Tory rule — why wouldn't the Liberals join up with Labour to oust the old men? They wouldn't and the coun- try went blundering on with appeasement, under Chamberlain with his ineffable Tory majority in Parliament, to the renewal of war in 1939.

Keynes was open-minded about sex. When Nicholas Davenport, economics expert of The Spectator, took me to the opera, Maynard said, 'You can't do that, he's my boy.' But I wasn't his boy — or anybody else's, come to that. I was always my own man: and not afraid to stand up to him with my views.