Monday, 16 April 2012

Economist of the Decade: 1930s


A man for all seasons
Arguably, Economics as a subject was born perhaps much earlier than the Eighteenth Century; in Plato's Republic there is mention of the specialisation of labour and production within a society; in Aristotle's Politics, money was a means as opposed to an end: "[money] is worthless [...] not useful as a means to any of the necessities of life". The compound etymology of Economics comes from the Greek Oikonomia; from the transliteration of Oikos and Nomos, translated into 'house' and 'rule', respectively.

However, I shall focus on the subject in its present evolution from the Scottish Enlightenment. I will start with the 1930s; a decade which for all intents and purposes has been more instrumental in creating the world as we know it today than any other decade. Without the unfortunate descent into global fratricide and economic depression at either ends of the 1930s, a counterfactual world would be entirely unrecognisable.

When The General Theory on Employment, Interest and Money was published in 1936, Lord John Maynard Keynes was already an intellectual giant. In his magisterial three volume biography of Keynes, Lord Robert Skidelsky describes the man as occupying that frontier area where economic theory met philosophy, morality, culture, finance, and the arts. Keynes as a man was described by his wife, Lydia Lopokova, a famous russian ballerina, as "more than an economist"; Keynes described her as "my bubbling brook of surprises".

Keynes occupied a world which had suffered already from a calamitous global war and was slowly descending into the chasms of another. Economics as a subject was drained of all the economic realities of unemployment, suffering and pervasive destitution. Keynes had a relatively low opinion of the subject, the "purpose of economics [...] was to solve the economic problem [...] so that mankind could live wisely, agreeably and well". Keynes saw the subject as a means as opposed to an end in and of itself. The "end" was the Aristotelian "good life" as expounded by his intellectual mentor at Cambridge, G.E. Moore.

During the Great Depression, in the early part of the decade, Keynes' tour de force against Classical Economics, which continues to squatter in some form or the other to this day, as inadequate in describing the downturn, decried the belief that supply always creates its own demand. Governments need to step in to prevent persistent unemployment and manage demand during downturns.

However, Lord Skidelsky insists the "centrepiece of Keynes' theory [...] is the existence of inescapable uncertainty about the future". In uncertainty, consumers delay their spending plans; companies halt their capital expenditures; the "animal spirits" become depressed. Entirely free market economies are inherently unstable which require stabilisation. Keynes' General Theory was a reduction of his long standing beliefs of the deleterious effects of business expectations, connections between uncertainty and money, and economic disturbances stemming from finance and moving into the real economy.

Lord John Maynard Keynes is my Economist for the 1930s. His impact on the subject and economic policy since has been prodigious. At the conclusion of World War II, Keynes laboured for a stable and rule-based International Monetary System. Keynes passed away on April the 21st, 1946, after a long battle against heart disease; he was Britain's 'de facto Chancellor of the Exchequer' for much of his later life. Lionel Robbins wrote of Keynes: "He gave up his life for his country [and economics], as surely as if he had fallen on the field of battle".