J. Bradford DeLong
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/

April 2002


I wrote a review of the third volume of Robert Skidelsky's John Maynard Keynes biography, _John Maynard Keynes, 1937-1946: Fighting for Britain_, for the _Journal of Economic Literature_. I thought that I was writing a favorable review: "...finest biography of an economist that I have ever read... third volume... not quite...up to its predecessors...still a superb book...wit, charm, control, scope, and enthusiasm. You read these books and you knew Keynes... Skidelsky’s greatest achievements... Skidelsky is superb... Skidelsky is also superb... Skidelsky skillfully recreates the milieu... a few places in _Fighting For Britain_ where Skidelsky seems to me to lose his way... on this terrain Skidelsky is less at home, and his touch is less sure... claims are overstatements.... These blemishes do not greatly mar [Skidelsky's] achievement... amazingly well-constructed narrative... magnificent portraits of Keynes and his age... skill and care with which Skidelsky has drawn his portraits is breathtaking.... We are all deeply, deeply in his debt."

Skidelsky does not seem to agree that I was writing a favorable review.

The American edition of _John Maynard Keynes, 1937-1946_ has a newly-added preface, the relevant parts of which* read:

...Britain and America spent much of the war jockeying for post-war position. The battleground of this war was finance. I have called it 'Keynes's War' to distinguish it from 'Churchill's War'--because without Lend-Lease Britain could not have fought Churchill's War, and financial negotiations with the United States took up most of Keynes's time from 1941 till his death in 1946. The plot of this war was simple: America tried to get the highest price, Britain to pay the lowest price, for lend-lease.... It was as natural for the United States to use its wartime financial leverage to weaken Britain as a financial and commercial rival as it was for the British to try to minimise or evade the strings attached to American help. But it is not easy to get this message across, first because it shatters the myth of the United front against evil, secondly, becasue Americans tend to believe that their nation is uniquely idealistic, and therefore exempt from calculation of self-interest.

In a bold pre-emptive strike, the American economist Bradford DeLong has posted a rejoinder to my theme on his home Web page (www.j-bradford-delong.net). Essentially he denies or minimises the existence of wartime economic conflict between Britain and the United States.... DeLong's technique of refutation leaves much to be desired. He seems to think that I accuse America of having provided Britain with such 'niggardly' lend-lease help that it destroyed Britain as a great power. He refutes this by saying that even had the United States paid for the whole of Britain's wartime import surplus, Britain would have been too weak to have become the post-war leader of the western alliance. The proposition he attributes to me is nowhere to be found in this book, and the counterargument is therefore irrelevant.

What I do say is that the United States demanded that in return for lend-lease Britain pledge itself to abandon its imperial preference and sterling area systems, and that the way Washington managed the flow of lend-lease supplies had the effect, and possibly the intention, of leaving Britain dependent on US help after the war on whatever terms America chose to impose. Rather than deal with this argument, DeLong simply sets up an Aunt Sally to knock down.

DeLong claims that I widen the differences between the Keynes and White plans for post-war monetary reconstruction 'to an immense gulf' in order to dramatise the conflict between the two sides, whereas he is struck by the 'extraordinary similarities between the two plans'.... But... Keynes's Clearing Bank was, in effect, to be the central manager of global aggregate demand... White's IMF was conceived as a modest monetary add-on to a revamped gold standard. This was not a trivial technical disagreement..... The triumph of the White Plan... might well have led back to the 'bloc economics' and trade and currency wars of the 1930s had not the United States, starting with Marshall Aid, pumped large quantities of extra spending power into the 'free' world economy for geopolitical reasons.... In 1940, it was British vulnerability which threw it into the arms of the United States. America did not fail its fellow-democracy; but also used the occasion to settle old scores, and secure pole position in the post-war international order...

First--this 'Churchill's War', 'Keynes's War' business. 50 million people died in Churchill's (actually Hitler's) War. Zero people died in Keynes's War. To use the same word--war--for both is, in my view, a significant error: Hitler's War was a real war. Keynes's War was a metaphorical war. It's important to maintain distinctions between metaphor and reality, and not to elide them. Second, Skidelsky claims that I misrepresent him when I say that he "accuse[s] America of having provided Britain with such 'niggardly' lend-lease help that it destroyed Britain as a great power" and on the next page writes of how the United States used World War II to "...settle old scores [with Britain], and secure pole position in the post-war international order." Surely this is a difference of degree only?

Third, when I as an economist call something "technical" I am not calling it "trivial"... But why go on? Someone who makes sure to underline that the Marshall Plan was undertaken "for geopolitical reasons" reveals ignorance of American motivations.** A richer and more productive Britain after World War II would have been a better trading partner for America--as well as a better intermediate bulwark against Stalin. For Skidelsky to claim even implicitly that only "geopolitical reasons" impelled American post-WWII aid to make Britain grow faster reveals a misapprehension of what Truman, Marshall, Acheson, Vandenberg, and company were about: in their view (and mine) America tries to do good, and does well thereby. It's as false to reality to characterize the motivations behind the Marshall Plan as simply "geopolitical" as to characterize them as simply "altruistic."

And by the time one has made sure to put scare quotes around the "free" in "free world" to indicate that the post-WWII U.S. Atlantic Alliance was the "so-called free world" or the "not really free world" or the "world the Americans insist that we call free, and we have no choice but to humor them"--by this time one has passed out of reasonable argument and into silly anti-Americanism. And--face it--there is such a strain in Skidelsky. But--as I wrote in my review--it does not greatly mar what is a truly great work.

Moreover, I think Skidelsky, at bottom, agrees with me that he got the balance of his biography wrong in his theme of mourning how Keynes lost 'Keynes's War' against America and so lost for Britain "both Empire and greatness." The opening of the American edition strikes a very different note from the opening of the British edition. In the opening to the British edition Keynes, fighting for Britain, "fought to preserve Britain as a great power against the United States." In the opening to the American edition, he is fighting for something else. The beginning of the new preface reads:

'Fighting for Freedom' is a better subtitle for the American edition of this book than is its British subtitle 'Fighting for Britain'. It identifies the supreme value for which both Britain and the United States fought. The victory of freedom--requiring the defeat of Hitler's Germany and, a little later, Imperial Japan--was the overriding war aim of the Anglo-American alliance forged in the Second World War. Keynes fully accepted this, and all his actions have to be seen in that context.

For there is one other difference between the British and the American editions of volume III: the American edition has a new title: _John Maynard Keynes, 1937-1946: Fighting for Freedom_. John Maynard Keynes is no longer fighting a 'war' against America on behalf of British imperial power. Instead, he is--in his own sphere--fighting the real war against Hitler for freedom for the world, and fighting to win the peace as well by successfully building an institutional framework that gave the world economy the fastest generation of economic growth it has ever experienced. This is a much better cause for Keynes to fight for. This is a much better description of what was really going on. So I am very, very pleased by Robert Skidelsky's change of his book's title.


*The Entire Preface is:

'Fighting for Freedom' is a better subtitle for the American edition of this book than is its British subtitle, 'Fighting for Britain'. It identifies the supreme value for which both Britain and the United States fought. The victory of freedom--requiring the defeat of Hitler's Germany and, a little later, Imperial Japan--was the overriding war aim of the Anglo-American alliance forged in the Second World War. Keynes fully accepted this, and all his actions have to be seen in that context.

The British subtitle was designed to remind readers of something else: that national interests do not disappear just because the cause is noble. Britain and America spent much of the war jockeying for post-war position. The battleground of this war was finance. I have called it 'Keynes's War' to distinguish it from 'Churchill's War'--because without Lend-Lease Britain could not have fought Churchill's War, and financial negotiations with the United States took up most of Keynes's time from 1941 till his death in 1946. The plot of this war was simple: America tried to get the highest price, Britain to pay the lowest price, for lend-lease. Keynes summed up this British 'war aim' in a nutshell: 'the retention by us of enough assets to leave us capable of independent action'.

The novelty of my treatment is to place this financial 'war' in the foreground of my narrative, the military war in the background. This seems to be only right, inasmuch as this is a biography of Keynes, not of Churchill. It does not mean that I regard Keynes's War as important as Churchill's War. To say that Britain paid a much higher price than did the United States for victory over Hitler does not mean that it would not have paid an even higher price had it lost.

American readers might be shocked by the revelation in these pages of the bitterness of Anglo-American rivalry. They should not be. Commercial and financial conflict had embittered relations between the two countries in the 1930s, with each one blaming the other for breakdown of the world economy. It was as natural for the United States to use its wartime financial leverage to weaken Britain as a financial and commercial rival as it was for the British to try to minimise or evade the strings attached to American help. But it is not easy to get this message across, first because it shatters the myth of the United front against evil, secondly, becasue Americans tend to believe that their nation is uniquely idealistic, and therefore exempt from calculation of self-interest.

In a bold pre-emptive strike, the American economist Bradford DeLong has posted a rejoinder to my theme on his home Web page (www.j-bradford-delong.net). Essentially he denies or minimises the existence of wartime economic conflict between Britain and the United States. That I argue to the contrary must be due to the fact that I am not an economist, or that I have fallen 'under the influence of a strange and sinister sect of British imperial conservatives...'

DeLong's technique of refutation leaves much to be desired. He seems to think that I accuse America of having provided Britain with such 'niggardly' lend-lease help that it destroyed Britain as a great power. He refutes this by saying that even had the United States paid for the whole of Britain's wartime import surplus, Britain would have been too weak to have become the post-war leader of the western alliance. The proposition he attributes to me is nowhere to be found in thi sbook, and the counterargument is therefore irrelevant.

What I do say is that the United States demanded that in return for lend-lease Britain pledge itself to abandon its imperial preference and sterling area systems, and that the way Washington managed the flow of lend-lease supplies had the effect, and possibly the intention, of leaving Britain dependent on US help after the war on whatever terms America chose to impose. Rather than deal with this argument, DeLong simply sets up an Aunt Sally to knock down.

DeLong claims that I widen the differences between the Keynes and White plans for post-war monetary reconstruction 'to an immense gulf' in order to dramatise the conflict between the two sides, whereas he is struck by the 'extraordinary similarities between the two plans'. He quotes me as writing on p. 245: 'The White and Keynes Plans were based on different concepts... loans out of subscribed capital... [or] overdrafts [created] out of nothing...' But this was Keynes's own view of the essential difference between the two schemes (p. 250-1).

Keynes's Clearing Union was based on his theory of liquidity preference. In a global trading economy mass unemployment, he thought, resulted from the propensity of some countries--particularly the United States--to hoard their surpluses, which forced deflation on the defict countries, leading to a contractionary global spiral. The Keynes Plan was designed to prevent such an outcome by forcing adjustment on surplus countries. Countrieds which accumulated surplus balances would be forced to accept bancor' cheques in payment for their unrequited exports, ie., to accept money created by the global monetary authority as payment for exports which they did not match by corresponding imports. By contrast, the White Plan upheld the orthodox doctrine of debtor adjustment, an d aimed to provide only modest help to deficit countries whilst they put their houses in order. In due course they would be required to contract their demand for imports or to sell more exports in competition with those from surplus countries. Keynes believed that this would not check any pressure towards global recession.

Keynes's Clearing Bank was, in effect, to be the central manager of global aggregate demand, varying the supply of 'bancor' according to the demand for it; White's IMF was conceived as a modest monetary add-on to a revamped gold standard.

This was not a trivial technical disagreement. Keynes and the British Treasury thought that adoption of something like the British Plan was an essential condition of Britain's acceptance of a post-war liberal economic order. That is why they fought so hard for it. The triumph of the White Plan led Keynes back to the view that responsibility for full employment would inevitably remain national, not global. He insisted on inserting into the Bretton Woods agreement clauses which exempted member countries from IMF rules for a prolonged, and potentially indefinite, 'transition' period. This might well have led back to the 'bloc economics' and trade and currency wars of the 1930s had not the United States, starting with Marshall Aid, pumped large quantities of extra spending power into the 'free' world economy for geopolitical reasons.

To be reminded of the realities of alliance politics, even in the case of such close partners as Britain and the United States, is timely in the aftermath of the tragic events of 11 September, when the United States is working to construct a global coalition against terrorism. In 1940, it was British vulnerability which threw it into the arms of the United States. America did not fail its fellow-democracy; but also used the occasion to settle old scores, and secure pole position in the post-war international order. Today, the United States, faced with an unexpected vulnerability, calls in the Old World to redress the balance of the New. It, too, will have to pay a price for victory, though it will not be as high a price as Britain paid.

Keynes was an economist, thinker, and writer or genius who developed the theories he thought the times demanded. During the Second World War, propelled by events onto the field of action, he fought for the British position within the Anglo-American Alliance as a patriot, and, with eloquence and imagination of the highest quality, conjured up a post-war economic order which could combine full employment with liberty. These are the culminating themes of this biography.


**Since the inauguration of Franklin Roosevelt, that is. Hoover Administration economic policy--for example the Smoot-Hawley tariff--was motivated by different, more mercantilist principles.