Keynes hayek by Nicholas Wapshott, WW Norton, 2011, 382 pp.
In one of those delightful coincidences that history sometimes throws up, two of the greatest economists of the 20th century took turns on the roof of Kings College to guard the Nazi planes attempting to bombard the venerable ivory towers of Cambridge University. The Nazi bombers never came. Yet in 1942, when John Maynard Keynes and Frederick Hayek took their turns as rooftop firefighters, they used those quiet hours to plan for the new economic order that everyone expected to dominate the postwar world.
Keynes at the time was working for the Chancellor of the Exchequer. A rich man, he did not receive a salary, instead he considered his work as the nobility obliges. Hayek also would have liked nothing more than to contribute to the war effort. However, as an Austrian, he was not trusted and his numerous efforts to land a government job were rebuffed.
So, as Keynes plunged into the war effort, Hayek planned another battle, which he called the “war of ideas.” During the 1930s, Keynesian economics had become orthodoxy, in which government preparedness demands were seen as the best way to deal with economic downturns. That meant governments pumping money into the economy, printing more as needed to stimulate the need for goods and services. In the wake of the Great Depression, this remedy was adopted by many Western governments and historians who believed that Keynes’s economic ideas would lift the world out of the Depression. Hayek, however, disagreed. During the 1930s, he participated in battles with Keynes, in which he argued that markets, if allowed to function freely, would solve the peaks and troughs of the economy. Furthermore, he argued that government interference had worsened and prolonged the Depression.
In the wake of the global financial crisis, debates about the role of governments in managing the economy could not be more relevant. In Keynes Hayek, Nicholas Wapshott not only repeats many of the arguments between Hayek and Keynes, but also brings these two men to life. The image it offers throws up some surprises.
Keynes was a complex character, whose fickle intellect overwhelmed those he knew. Even Hayek was intimidated by Keynes. Recalling their first meeting, Hayek explained: “He had a habit of going like a steamroller on a young man who opposed him. But if you faced him, he respected you for the rest of your life. We stayed, although we differed.” in economics, friends to the end. “Hayek clashed with Keynes and they became unlikely friends. And so, although Hayek regarded Keynes as a mediocre economist, he was in awe of his intellect, even expressing admiration for his books for” their frankness. and independence of thought. ”Although Keynes died in 1946, Hayek continued to wage his war of ideas, and by the 1980s neo-liberals, who embraced Hayek’s free-market ideas, were on the rise in both London and Washington. Since the beginning of the global financial crisis, the conflict between the ideas of these two great economists has taken on new relevance.
Wapshott’s book strips away the mythologies that have grown up around these two men, promoted by ideologies of the left and right. We found that Keynes did support the free market and believed that governments should only intervene in extraordinary circumstances. He excelled in business and his investments made him a very wealthy man. Hayek, on the other hand, never worked outside of the academy and had no hope of managing his financial affairs.
For me, perhaps the most surprising discovery was that Hayek was not opposed to welfare, and had he been alive today, he might even have supported “Obamacare.” Writing in 1944 in The path of servitudeHayek commented that wealthy nations can afford to provide their citizens with “a comprehensive social insurance system to cover those common life hazards that few can make adequate provision for.”
Wapshott does an excellent job bringing both men to life. While it takes little to show Keynes as a larger-than-life figure, the author has done an outstanding job of finding interesting anecdotes about Hayek, who is a much duller character. Although the author tries to be unbiased, Keynes is really the star of this book.
If the book has a fault, it is the lack of attention to Keynes’s contribution to Bretton Woods, to which Wapshott devotes only half a dozen pages. Neither is Hayek’s reaction to Keynes’s model of a new economic order mentioned. In light of the expansion of globalization, Wapshott did not discuss the last chapter of The path of servitude it is entitled “The perspectives of the international order.” It’s inexplicable
Wapshott also does not describe how Hayek helped forge a generation of ideological warriors who defended free market economics and overturned Keynesian orthodoxy. While Wapshott mentions the Mont Pelerin Society, he refuses to account for Hayek’s influence on Antony Fisher, who created a model for a neoliberal think tank that was replicated in the US, UK, and other countries. Westerners and to be credited with inspiring the free market policies of Ronald Reagan and Margaret Thatcher.
At the end of the book we see that Hayek lived in the ivory tower of theories, which caused his ideas to be poorly adapted to the world of practical politics. As long as he lived to see the neoliberal revolutions of Thatcher and Reagan, he never took credit for them. Too purist, he felt his ideas were never taken seriously. On the other hand, Keynes was the maximum pragmatist. When asked about his inconsistency, Keynes replied, “When the facts change, I change my mind. What do you do, sir?” Now that we live in an uncertain world where circumstances are constantly evolving, I think I’d rather have a dose of Keynes’s pragmatism than one of Hayek’s purist economic recipes.
