‘“NO-ONE WILL EVER WANT ANOTHER WAR AFTER THIS one,”’ noted an anonymous article of 1916 attributed to Keynes: ‘you can hear this said in any club or in any railway carriage, among any group of men who let their imagination touch, ever so momentarily, on the awful dull realities of the present conflict.’ The sentiment against another war seemed universal. ‘It is not enough to say that the Germans are not like ourselves, that a generation’s systematic indoctrination at school, at the university, in the army, wherever bellicose mystics could get at them, of false ideas of the inevitability and glory of war, have made them much more warlike.’ Common humanity meant that ‘there is already, in all the belligerent countries, a deep-rooted hatred of war, before which even the Kaisers and Junkers will have to bow’. It was this optimistic view, certainly, that Keynes upheld until 1933. He recognized Germany’s withdrawal from the Disarmament Conference at Geneva and from the League of Nations in that year as decisive blows against European peace. ‘The hideous dilemma is presented – allowing them to call our bluff and re-arm as and when they choose with what results one can imagine, or the horror of a preventive war,’ he commented. The next turning-point was, he judged, the Foreign Office’s ‘cowardly’ response to the Italian invasion of Abyssinia, culminating in the Hoare–Laval Pact of December 1935, which he decried as ‘the gravest and most disastrous error of policy’.1

Keynes liked to define an anti-semite as someone who disliked Jews unreasonably. In common with most of his nationality and generation, he had a thoughtless prejudice against what he found to be antipathetic manners and appearances, which was intensified by Bloomsbury’s fastidiousness. The endemic anti-Jewish feeling of Edwardian England is chronicled in Anthony Julius’s Trials of the Diaspora (2010), where various remarks by Keynes are quoted and contextualized. Although Edwardian Liberal parliamentary leaders had sought to minimize the impact of the Conservatives’ Aliens Act of 1905, which targeted east European Jewish immigrants, Edwardian radicalism was permeated by antisemitism derived, at least partly, from loathing of the influence of Johannesburg mining millionaires on the South African war. Keynes was tinged with this Edwardian radical tendency. His marriage to a Russian, in whom the bigotry of the Tsarist regime had been ingrained in girlhood, perpetuated this blight on his character. Their banter together included automatic jibes about the Jews: he considered Judaism as a subject for harsh, superior humour. ‘I smelt it,’ he told Lopokova in 1924 after hearing that the Gluckstein family, which owned Lyons Corner House, had bought the Café Royal where his Tuesday Club held its monthly dinners. Keynes had no hostile theory about the Jews, but enjoyed offering amateur psychology to explain mental traits that he generalized as Jewish. Jewish people whom he knew seldom met his preconceptions. ‘The nicest, and the only talented person I saw in all Berlin,’ he wrote after meeting Einstein in 1926, ‘except perhaps old Fuerstenberg, the banker whom Lydia liked so much, and Kurt Singer, two foot by five, the mystical economist from Hamburg.’ Carl Fürstenberg, Einstein and Singer were Jewish, he noted; ‘my dear Melchior is a Jew too’, and yet he felt that if he lived in Germany, ‘I might turn anti-Semite.’ He still remained enough of an Edwardian to regard immigrants from eastern Europe as schemers who outwitted less nimble-minded natives and polluted their environment: ‘It is not agreeable to see a civilisation so under the ugly thumbs of its impure Jews who have all the money and the power and the brains,’ he said of Weimar Germany.2

Keynes’s callous flippancies disappeared with the advent of Hitler. Nazi racial hatreds revolted him from the first. ‘To our generation Einstein has been made to become a double symbol – a symbol of the mind … and a symbol of the brave and generous outcast,’ he wrote in 1933 soon after the physicist had been forced into exile. ‘It is not an accident that the Nazi lads vent a particular fury against him. He does truly stand for what they most dislike – intellectualist, individualist, super-nationalist, pacifist, inky, plump … How should they know the glory of the free-ranging intellect and soft objective sympathy and smiling innocence of heart, to which power and money and violence, drink and blood and pomp, mean absolutely nothing?’³

The English loved peace more than they hated fascism, Keynes warned New Statesman readers in 1936, and no party would be elected that had peace secondary in its programme. The fact that ‘the brigand powers’, as he called Mussolini’s Italy and Hitler’s Germany, were readier to go to war than the English made their bluster more menacing. He advocated the amassing of armaments against the totalitarian bullies without making guarantees on their use. Liberals of his generation never forgot that in 1914 Asquith’s government had been forced into declaring war on Germany by the treaty commitments by which it was tied. There had been no immediate German threat to the British Isles then; still less any need to rush the unready, ill-armed British Expeditionary Force, later known as the ‘Old Contemptibles’, into its costly shambles on mainland Europe. A deferred declaration of war, made when England was directly threatened, after its troops and armaments had been increased, and once Germany had begun to commit mistakes because its armies of occupation were overstretched, might have proved more effective.

Germany and Italy were spending a fortune on ‘intensive propaganda to persuade the rest of the world that they are the enemies of the human race’, Keynes noted in 1937, yet not even their Japanese allies thrilled to their crooning. ‘They appear to be morbid, pathological, diseased. I gravely doubt their technical efficiency and expect that every sort of idiocy is going on behind the scenes.’ Although it was ‘humiliating to have to take so much lip’ from Hitler and Mussolini, ‘life and history are made up of short runs’, and peace should be prolonged ‘hour by hour, day by day, for as long as we can’. Implicitly recalling the errors of 1914, Keynes felt sure in 1937 that ‘time and chance are with us’, and urged that ‘Britain should build up its naval strength and wait for the dictators to make mistakes’. Characteristically, too, he was depressed by the ‘stale debating points, and personal jibes’ of Labour speakers in the parliamentary debate following Anthony Eden’s resignation as Foreign Secretary.4

The deterioration of European stability coincided with the collapse of Keynes’s health. In 1937 he became dangerously ill with bacterial endocarditis, caused by septic tonsils disseminating bacteria which attacked his heart valves. From 18 June to 25 September he was treated at a costly sanatorium called Ruthin Castle in north Wales – ‘a strange mixture of first-class medicine and first-class humbug’, he decided. His poisoned tonsils were smeared with arsenic and iodine, but there was no outright cure for this condition until the invention of antibiotics. ‘Maynard … needs rest,’ his wife wrote from Ruthin: ‘his throat in view of his tonsils, drips, drips poison into his system and gives him long rises in temperature; as he is 53 they are reluctant to operate, but treat his throat with weed-killer’. The course of his illness was monitored not only by his friends but by the wider intelligentsia. ‘Mr Keynes is unwell, in a nursing home,’ Isaiah Berlin reported to Felix Frankfurter in August 1937. ‘If people visit him he opens by saying he hasn’t a minute to spare. The bed overflows with periodicals. Round him are rooms in which corpulent peers are trying to lose weight. The bulletins of their competitive activity are reported to Mr Keynes daily. He refers to them as the elephants.’5

After leaving Ruthin, Keynes spent most of the ensuing year convalescing at Tilton. His wife’s cosseting delighted him, although he chafed at an invalid life. He spent half his day either in bed or on a couch. A writing-board helped him to work for two or three hours each morning. The talk of visitors over-excited him, and their departures left him demoralized. It was not only his wife’s fierce, single-minded and devoted protection that prolonged his life and enabled him to resume work. In March 1939 he became the patient of János Plesch, a Hungarian Jewish exile, who combined medical work at the progressive Peckham Health Centre with a private practice in Mayfair. Plesch was ardent, charming, funny, unafraid of contradicting himself to patients, and never prone to aggrandize his expertise with Latin mumbo-jumbo. ‘The Rabbi’ and ‘the Ogre’ were the nicknames that Maynard and Lydia Keynes bestowed on him. Plesch issued orders: a saltless diet to reduce body fluids; an icebag to be put above Keynes’s heart for three hours a day; less valetudinarian rest. He prescribed medicines too: opium pills; and – decisively – after finding that Keynes’s throat was still swarming with streptococci, one of the newly discovered sulpha drugs, Prontosil. The injections of Prontosil made Keynes feel desperately ill, but cleaned his throat of the green streptococci, and revived his strength. Prontosil however had no effect on the bacteria lodged in his heart valves, which were bound to foreshorten his life. Keynes certainly surmised that his life expectancy was poor.

Keynes’s recuperation lifted his optimism about world events. In mid-August, for the first time in over two years, he was able to walk from Tilton to the top of Firle Beacon. Mogs Gage, whose husband owned the Firle estate and leased Tilton to Keynes, heartened her mother Ettie Desborough at about this time: ‘We lunched with Keynes today, who says there will be no war. And that anyway the Germans will find it difficult to get along the single track roads in Poland, & that there are so few roads at all.’ Keynes was always buoyant, never sinkable.6

After Germany’s invasion of Poland forced England’s declaration of war on 3 September 1939, Keynes seized on price policy and exchange control as urgent topics. He and other veteran economist-administrators who called themselves ‘the Old Dogs’ – William Beveridge, Hubert Henderson, Walter Layton and Arthur Salter – met regularly at 46 Gordon Square to concert their influence on the war effort. The Old Dogs were kept in touch by Robert Boothby with an all-party committee of MPs organized by a Liberal, Clement Davies. ‘Keynes sometimes pursued a little too far the iridescent bubble of a new idea for its intrinsic beauty,’ concluded Salter, who was Independent MP for Oxford University. ‘You sometimes felt you had to class Keynes’ doctrines by their year like a vintage wine … his caustic, and sometimes cynical, wit was, in some sense, a form of self-protection against an exceptionally sensitive temperament and the wounds of frustrated idealism.’ Salter conjured up his friend in a series of exotic, minatory images. Keynes had ‘feline grace, with something in his aura of a wizard’s magnetism’, he said. ‘In argument a disputant felt, as with Socrates, the numbing influence of a basilisk’s eye.’ Alternately, with his long limbs and ‘beady eyes’, he resembled an ‘intelligent and dangerous spider. But his voice was melodious, penetrating, persuasive, a perfect medium for his beguiling eloquence.’7

It became clear in November 1939 that Sir John Withers, the Conservative MP for Cambridge University, was dying. It had been Withers who, realizing that the college had shed its Old Etonian cohesion, had started the King’s College Association and compiled a biographical register of its members. Keynes, the pre-eminent Kingsman, was asked by the chairman of the University Conservative Committee to stand as an unopposed Independent at the anticipated by-election. He was assured by Plesch that he was strong enough for parliamentary life; but (as before, when solicited as a candidate in the 1920s) he decided that the House of Commons was not his arena. Withers died in December, and at the ensuing by-election Keynes’s brother-in-law A. V. Hill was elected Independent MP for the constituency. Hill saw his task as representing scientific expertise during a period of rapidly innovative technological warfare, and retired from parliament at the first post-war general election.

Another Cambridge episode diverted Keynes. Armistice Day, on 11 November each year, had become by the 1930s, for undergraduates ostensibly collecting donations for Poppy Day, an occasion for drunken ragging and intimidation. The mood on the streets around the colleges was, in Keynes’s words, ‘so hateful’ that many Fellows remained in their precincts all day. Each year, as a culminating rite, the Poppy Day ringleaders, inflamed by alcohol, tried to break through the stage door of the Arts Theatre in order to raid its restaurant for booze. On 11 November 1939 the brawling was so nasty that the theatre manager was injured, and his wife insulted and frightened. Hearing the disturbance, outside his flat in St Edward’s Passage, Keynes went to investigate, but, because of the wartime black-out, he found it hard to see what the mob was doing. Afterwards he strove to get undergraduate participation in future Poppy Days prohibited.8

On 14 and 15 November Keynes published in The Times his momentous articles ‘Paying for the War’. He approached war finance not as an orthodox balancer of budgets, but with the aim of balancing total income with total demand. He recommended a large cut in general consumption in order to divert resources to the war effort: unless this was achieved by rationing and taxation there would be inflation. He therefore proposed that a graduated percentage of all incomes above a stipulated minimum should be paid to the government, partly as direct taxes, partly as compulsory savings. Some of this levy would be used to discharge income tax and surtax obligations. The rest would be credited to interest-bearing individual accounts in the Post Office Savings Bank, and would become repayable after the war in instalments. Keynes estimated that the levy would yield £400 million more than existing direct taxation. His proposed forced saving provoked abuse from Lord Beaverbrook’s Daily Express. Keynes’s recommendations were incomprehensible to Arthur Greenwood, deputy leader of the Labour party, who nevertheless accepted £100 in return for giving his name to a vituperative article written by a Beaverbrook dogs-body who likened Keynes’s scheme to Hitlerism.

The great persuader was back on top form. Prompted by the publisher-politician Harold Macmillan, Keynes revised his November articles, and in February 1940 published How to Pay for the War. In it, he offered the sop of a post-war capital levy to appease his Labour critics (this levy presaging an annual wealth tax). He recommended measures to help poor households and publicized the notion of the ‘iron ration’ – a list of necessities at low, fixed prices affordable by people with low incomes. Most Labour leaders were sympathetic to these revised proposals, but Beaverbrook remained irreconcilable. As the controls of the war economy grew inexorable, Keynes, as a true Liberal, resisted socialist regulation pursued by fiscal means. ‘Even in war we cannot afford to dispense altogether with the economic incentive to effort – which a too exclusive financing by taxation would involve,’ he warned in How to Pay for the War. ‘We have already got dangerously near to this in the case of the entrepreneurs and we must not make the same mistake with the working classes. There is a fatal family resemblance between bureaucracies in Moscow, Berlin and Whitehall; and we must be careful.’9

So far Keynes had dispensed advice and clarified opinions while striving not to meddle. But his status changed after Chamberlain was displaced as Prime Minister by Churchill in May 1940. A nondescript solicitor called Sir Kingsley Wood was installed as Chancellor of the Exchequer. Keynes was appointed in June by Wood to his Consultative Council, and in August he was allotted an office in the Treasury with access to official papers. His earliest discussions concerned the government’s undertaking to bear the cost of wartime destruction, which was formalized in the War Damage Act of 1941. Soon he roamed over subjects that interested him, pushed them on the attention of ministers, and proffered advice about what should be done. By the autumn of 1940, fortified by his walks between Gordon Square and the Treasury, he often worked twelve hours a day. He spoke of the Treasury as having returned to his ‘old home’.

‘This has been very much a dons’ war,’ Isaiah Berlin wrote from the British Embassy in Washington in 1944. Arthur Salter, Gladstone Professor of Political Theory at Oxford, headed the British Shipping Mission in Washington; Oliver Franks, Professor of Moral Philosophy at Glasgow, ran the Ministry of Supply with the Oxford economist Robert Hall among his coadjutors; another Oxford economics don, John Maud, was at the Ministry of Food; Hubert Henderson and Dennis Robertson both became advisers at the Treasury; Richard Kahn was valued in the Board of Trade and Ministry of Production; Lionel Robbins headed the economic section at the Cabinet Office; and other academics commanded tactical positions. The methodical efficiency of the Oxbridge dons destroyed their ‘reputation for starry-eyed incompetence once and for all’, said Berlin. ‘Nobody is so fiercely bureaucratic, or so stern with soldiers and regular civil servants, as the don disguised as temporary government official armed with an indestructible superiority complex.’10

Keynes’s position was unique. As Sir Richard Hopkins of the Treasury explained, ‘He was not a minister, but he was a friend of ministers. He was not a civil servant, but he was a friend of civil servants. He was also a critic of both, and, if need be, a castigator.’ Keynes held conferences in his rooms that resembled seminar classes for colleagues, and was a forceful presence in meetings at the Treasury and with other departments. He illuminated discussions ‘by the sudden flash of a forgotten fact’, said Hopkins, listened as well as instructed, and thus affected decisions in many spheres: ‘that influence was not the less weighty if it cannot be precisely weighed’.¹¹

Another colleague described his voracity for paperwork: ‘He sat in daily at the Treasury for long hours. He saw every important paper that the Treasury produced or that was wandering through the Treasury. Many he put away for reference, and out of any heap of papers in one of his locked drawers Keynes could unerringly pull out the one he wanted.’ He had a knack of remembering what suited him, and sometimes invented facts that supported his arguments. Documents for him were tools for his intuition as well as part of his mental filing-system: ‘He was increasingly impressed with the necessity of allowing the whole stream of official work to stream through his consciousness if he wanted to produce any economic plan whose structure would resist informed criticism.’ There was a sensual element to his use of official dossiers as there was to his collection of rare books. ‘On the many journeys he made abroad he took care to receive and read regularly the most important of the current papers reaching the Treasury. The feel and touch of things was to him a large part of the area of government.’12

At the Treasury, Keynes was a member of the Chancellor of the Exchequer’s budget committee. Wood’s first budget of July 1940 increased the standard rate of taxation from seven shillings and sixpence in the pound to eight shillings and sixpence, which, when combined with a top surtax rate of nine shillings and sixpence in the pound, gave a top marginal tax rate of 90 per cent (eighteen shillings in the pound). This was heavier taxation than Keynes thought necessary, but proved insufficient to curb inflation in the government’s short-term debt. A new fiscal instrument, purchase tax, was levied on luxury articles. To satisfy the Labour members of Churchill’s all-party wartime coalition, excess profits tax, which had been fixed at 60 per cent in September 1939, was hiked to 100 per cent, despite warnings from Treasury officials that such a punitive rate removed the incentive for businesses to economize on resources or take risks with new investment.

At first, as protection from aerial bombardment, Keynes slept at night in a bunk bed in the basement at 46 Gordon Square. The Blitz of London began on 7 September 1940. Eleven days later, on 18 September, while he and his niece, with his chauffeur, cook and housemaid, were eating a duck from Fortnum & Mason, a landmine exploded outside. The shuttered windows saved them from flying glass, but the front door was blown from its hinges. Keynes was luckier than Josiah Stamp, who, some months later, was killed alongside his wife and son when a bomb fell on the air-raid shelter in his garden. Keynes shifted his base to Tilton, which he left by motor-car at eight every morning for the Treasury, and to which he returned by about 8.30 each evening. Because of strict petrol rationing, there were few private vehicles on the roads, from which signposts had been stripped in case of a German parachute invasion. The buildings that he passed were battened down, and the lush landscape of Sussex and Surrey had been turned to war production. As to his bombed London district, it was pictured by Graham Greene: ‘the untidy gaps between the Bloomsbury houses – a flat fireplace halfway up a wall, like the painted fireplace in a cheap doll’s house, and lots of mirrors and green wall-papers, and from round a corner of the sunny afternoon the sound of glass being swept up, like the lazy noise of the sea on a shingled beach’.13

While Wood’s 1941 war budget was being formulated, Keynes convinced the Treasury to use national income accounting to estimate the additional revenue that must be raised if there was to be no inflation, and to discard the traditional practice of confining the budget to a balance of government revenue and expenditure. Two younger economists, James Meade and Richard Stone, both destined for high influence, prepared estimates of national income intended to make budget calculations more intelligible. The duo huddled in a cubby-hole with a single desk. Stone crouched by a corner of the desk with a quill pen and hand calculator, while Meade cranked the calculator’s handle. By these quaint means they produced, with encouragement from Keynes, the first double-entry social accounts for any country, which were utilized in framing the ‘Keynesian’ budget of April 1941 and were published with it. Although Keynes, using national income analysis, estimated that upwards of £300 million could be raised in additional taxation, Wood opted to aim at £250 million after Churchill criticized the tax proposals as onerous.

Keynes hailed this budget, with its accompanying paperwork, as ‘a revolution in public finance’. It sought, for the first time, to restrain inflation by raising taxation to make civilian expenditure equal to the goods and services available. The standard rate of income tax was raised to ten shillings in the pound, bringing a top marginal rate of nineteen shillings and sixpence. The number of people liable to pay income tax was increased, because income and personal allowances were reduced. This amounted to forced saving through taxation, as propounded by Keynes in his November 1939 articles in The Times. In order to make this extension of direct taxation more palatable, Keynes’s idea of post-war credits was adopted. The thinking was that post-war credits could be repaid to prevent a post-war slump, such as had occurred in 1920–1; but inflationary pressure after 1945 created a very different situation from that envisaged by Keynes.14

Britain was financially crippled by the war against the Nazis, yet hoped to remain a world power, whereas most Americans wanted to dismantle the British Empire. In this conflicting situation Roosevelt, in December 1940, unveiled the Lend-Lease programme, whereby American goods were to be supplied to Britain without cash payment. For this consideration, Britain was to be stripped of its dollar assets and to relinquish export markets. After stout resistance in the US Congress, the Lend-Lease Act was passed in March 1941. In the ensuing fire-sale, Courtauld’s American subsidiary, the Viscose Corporation, the most profitable English holding in north America, was sold to an American banking consortium for $54 million – about half what it was worth. Roosevelt’s Treasury Secretary, Henry Morgenthau, had a secondary war aim, after defeating Nazi Germany, of impoverishing British imperialism and of reducing the reach of the City of London in post-war finance. Morgenthau’s tactics drove Keynes to complain in March that US officials were hustling England as if it was the humblest, most feckless Balkan nation.

‘How the English hate being rescued by the Americans,’ reflected Charles Ritchie of the Canadian High Commission in London in April.

They know they must swallow it, but God how it sticks in their throats. The Americans are thoroughly justified in their suspicions of the English, and the English I think are justified in their belief that they are superior to the Americans. They have still the steadiness, stoicism and self-discipline that make for a ruling race, but what will these qualities avail them if the tide of history and economics has turned against them? How will the volatile, generous, imaginative, spoiled and impatient Americans manage … the after-war world?

This was a question that would come to dominate the last years of Keynes’s working life. The history of his wartime dealings with Washington officials combines stupendous Anglo-American cooperation with shocking Anglo-American miscomprehension and annoyance. The two powers had incompatible global aims; there was never any doubt which nation would prevail; and English envy of American supremacy, coupled with dismay at the British Empire’s irreversible decline, led to trenchant complaints. Depiction of the strains in the Atlantic alliance cannot be shirked, even if the tensions of the 1940s still have the power to arouse resentment.15

It was decided to send Keynes to Washington as an envoy charged with improving Anglo-American handling of Lend-Lease. On 2 May, flanked by his wife whose vigilance protected his health, he left Poole harbour by flying-boat for Estoril in Portugal. Two other distinguished men were waiting in Estoril for the next leg of the flying-boat’s trip to America. Both were travelling to New York, like Keynes, to put England’s case to American friends and to the American public. One was A. L. Goodhart, scion of a rich New York family, who, when he had gone to Cambridge as an undergraduate in 1912, had opted to read law rather than economics after being advised against having Keynes as his tutor: Goodhart was currently Professor of Jurisprudence at Oxford. The other traveller was also a jurist, Lord Greene, the Master of the Rolls and quondam Fellow of All Souls. The trio went in the evening to Estoril casino where Keynes and Greene, following a carefully planned system, lost steadily while Goodhart, a novice, recouped their depleted finances. As they left the casino, Keynes explained that ‘a player’s success depended more on intuition than intelligence’. Casino-owners had little to fear, Keynes knew, from gamblers who felt they were indulging in a logical activity, subject to deductive reason and capable of systematization, but should beware of those who played without long-term principles. From Estoril an American Clipper flew this party westward, with stopovers in the Azores and Bermuda, and despite engine-trouble which forced the machine to turn back.16

Keynes’s dealings in Washington were bumpy, especially with Morgenthau, a sullen man who suspected that the purpose of the Englishman’s mission was to wreck the Viscose deal. Although Keynes met officials, he never visited Congress, and knew few legislators. He was exasperated by the American reliance on telephones, by interminable discussions without documentation, and by the dependence on lawyers. He trusted intuitions, and objected to lawyers because they codified human experience, treated intuitive thinking as hazardous, were paid to find pitfalls, inhibited their clients, propagated dehumanizing legalese and busied themselves making good sense illegal. On 28 July he lost his temper when the Americans sought a binding declaration from the British government of non-discrimination in post-war trade and equal tariff treatment of all countries. This became Article VII of the Lend-Lease agreement, which was devised by the American to hasten the dismantling of the British Empire by prohibiting imperial tariff preference and thus unravelling imperial economic unity. In England the business community warned that the renunciation of post-war trade barriers and exchange regulations, as required by Article VII, would expose their post-war domestic market to a flood of cheap imports. The substance of Article VII was nevertheless soon agreed between Churchill and Roosevelt.

Decision-taking in London government departments followed a strict procedure based on the circulating file: officials wrote policy papers, prepared summaries and recommended decisions in a file that rose through the ministry in strict hierarchical order, with each official suggesting revisions, minuting their concurrence or disagreement with proposals, until the file finally reached the political head of the department who signed it off. Keynes, who had a preternatural mastery of documentation, liked this methodical, hierarchical, paper-bound system, which seemed to eliminate random intrusions from policy-making. After returning to England in August, Keynes vented his frustrations with Washington procedures. As the diplomat Oliver Harvey noted, ‘he gave most amusing description of chaotic conditions of work of U.S. Government departments – each department letting down the other – no coordination and no overriding authority – no records or written descriptions are kept of anything – all oral and all that can be repudiated’. This three-month sojourn in the USA set the pattern for his later visits. In Robert Skidelsky’s summary, the relentless round of fencing discussions with American officials, ‘the crippling workload imposed by overambitious schedules, the small size of the British delegations, the fact that he doubled the roles of expert and plenipotentiary, his constant need to refer back to London – all tended to leave him exhausted, baffled, angry and frustrated’. Keynes’s consequent impatience, condescension and sarcasm were as maddening to American negotiators as were their informalities with paperwork to him.17

Keynes became a director of the Bank of England in September 1941 (filling the vacancy created by the bomb that destroyed Josiah Stamp’s air-raid shelter). This appointment confirmed his transition from outspoken and unwelcome outsider to reputable and trusted insider to whom there was no longer any reflex of resistance. ‘A Director as such has, as you know, no more knowledge of or influence over policy than the man in the moon,’ he wrote to Falk, ‘so you might argue that I am putting on a muzzle for nothing. But for the war I am muzzled anyhow by having returned to the old home [the Treasury]. And anything one can do in the near future can only be from the inside.’ He found the balance of sympathies and policies in Whitehall was shifting towards his own.18

Keynes and his wife spent most weekends in Cambridge, returning on crowded trains on Friday evening, so that he could attend College Council on Saturdays and transact bursarial business. It was counter-intuitive of them to live in the Sussex countryside on weekdays, and to spend a long weekend in town. In war conditions it was also a test of fortitude. Keynes proved hardier than Sir John Clapham, the King’s economic historian, who was depleted by the delays, discomforts and black-out of his wartime commuting from Cambridge to the Bank of England, where he was official historian, and to the British Academy, where he was president. Clapham died of heart failure, in mid-sentence, in a train compartment carrying him south for another day of meetings in London.

During the war year Keynes was too tired and overworked to make new friends. With his London dining-clubs suspended, he valued more than ever the good talk and familiar companions at King’s high table: even with rationed food. He and his wife also attended concerts, plays and talks in the evenings. ‘Maynard Keynes didn’t approve of Morgan Foster’s lecture on Virginia Woolf, which he said was in baby language,’ Edward Marsh reported from Cambridge in 1942 a year after Woolf had drowned herself. That weekend there was a concert of madrigals sung on a floating platform moored under the bridge at King’s, the river lined with canoes and punts, crowds sitting on the banks, in a joyful interlude from wartime hardships. To the delight of his mother, Keynes succeeded Lord Eltisley as High Steward of the Borough of Cambridge in 1943: he was twenty-ninth holder of the sinecure, which had been instituted in 1529. His predecessors included Francis Bacon, Oliver Cromwell, Clarendon, Macaulay and various ceremonially imposing dukes. His successor, after his death, was G. M. Trevelyan.19

‘I am getting too elderly to have any fresh ideas well in advance of the times,’ Keynes complained in 1942 aged fifty-nine. ‘I have run as fast as I could and am now out of breath. If practical forces catch one up, what can one do about it?’ Nevertheless, during dinner at King’s, he continued to send out whizzing sparks like a Catherine wheel. On a typical occasion he advocated the segmentation of Germany into the kingdoms, principalities and grand duchies which had existed before unification, proposed the creation of an enlarged Habsburg state comprising Austria, Slovakia and Serbia, and predicted that the German population would be evicted from east Prussia, control of which would be transferred to Poland: ‘then Russia could have the Baltic Republics, which anyhow couldn’t be denied to her’. He ended with the words, ‘So it will be our role to save Europe from Germany, Russia and America, which will take us all our time.’ Given all that followed in Washington, it is notable that he thought England’s post-war task was to save Europeans from US hegemony as well as Nazi conquest or Soviet occupation.²⁰

In June 1942 Keynes was gazetted with a barony: Lord Keynes was the title he took, with Tilton as his territorial designation. He was the forerunner of numerous economist peers, including Beveridge (1946), Layton (1947), Robbins (1959), Kahn (1965), Balogh (1968), Kaldor (1974), Jackson (Barbara Ward; 1976), Bauer (1983), Peston (1987), Desai (1991), Eatwell (1992) and Layard (2000). The enlistment of economic experts in the parliamentary management of the state, which he had presaged in his criticisms of inexpert political bungling in The Economic Consequences of the Peace, began with him. ‘I dare to speak for the much-abused so-called experts,’ he told his fellow peers in a parliamentary debate. ‘I even venture sometimes to prefer them, without intending any disrespect, to politicians. The common love of truth, bred of a scientific habit of mind, is the closest of bonds.’ Once (at Cambridge in 1924) Keynes had declaimed at election hustings against the hereditary prerogatives of the House of Lords; but by 1942 he had hopes of the Upper Chamber becoming a Senate of wise men (women were excluded from sitting in the House of Lords until 1958).21

As an Eton boy Keynes had a passionate phase of interest in medievalism and genealogy. Now he diverted himself in discordant correspondence with Sir Gerald Wollaston, Garter King of Arms, about the design of the supporting figures on either side of his heraldic shield. Keynes wished to commemorate the two institutions that most mattered to him by taking scholars of Eton and King’s as his supporters. However, Wollaston vetoed the Eton scholar from sporting a top-hat, as Keynes had requested, and tried to stop the King’s scholar from wearing a mortar-board. Keynes was dissatisfied by the sketches made by the College of Arms’ heraldic artist: he complained that the Eton scholar resembled ‘a tawny Scot’ and had too lined a face for his age. ‘The King’s undergraduate is dreadfully old and worried-looking, and appears, though rather ambiguously, to wear a fluffy moustache.’ Keynes arranged for Quentin Bell, who was working as his pig-man at Tilton, to redraw the heraldic design, with more boyish-faced supporters. In the event, the Eton scholar was permitted by Wollaston to hold a book in his hand and the King’s scholar to wear a cap and gown. Keynes took as his motto, Me Tutore Tutus Eris, meaning ‘Under my tutelage you will be safe’: the phrase is derived from ‘me duce tutus eris’ in Ovid’s Ars Amatoria, with the literal meaning ‘with me as a leader you will be safe’. If all this seems recondite midway through the century of the common man, it is notable that the peak year in English heraldic history for the registering or granting of coats-of-arms was 1945 – the year of the Labour general election landslide. There are backlashes even in heraldry.22

‘Here I am back again in the Treasury like a recurring decimal – but with one great difference,’ Keynes replied to a Labour frontbencher’s congratulations on his peerage. ‘In 1918 most people’s only idea was to get back to pre-1914. No-one today feels like that about 1939. This will make an enormous difference when we get down to it.’ Forces were mustering in many institutions to promote Keynesian policies – not least in the Church of England. Keynes invited William Temple, who was enthroned as Archbishop of Canterbury in 1942, to address the Tuesday Club on Christian notions of post-war capitalism. He had first met Temple nearly forty years earlier when they spoke against each other at a university debating contest in which Keynes represented Cambridge and Temple spoke for Oxford. Although Keynes objected to signing portentous, ineffectual, round-robin letters, he had made an exception for one organized in 1934 by Temple beseeching Hitler to stop the brutality of the concentration camps (Hitler refused to receive it, but his special adviser on foreign relations, Joachim von Ribbentrop, sent a formal acknowledgement). Thereafter Keynes maintained contacts with Temple, who was Archbishop of York before his promotion to Canterbury.²³

‘Economics, more properly called political economy, is a side of ethics,’ Keynes wrote to Temple from the Treasury in 1941. ‘Marshall used always to insist that it was through ethics he arrived at political economy, and I would claim myself in this, as in other respects, to be a pupil of his.’ He was then helping Temple to write Christianity and the Social Order, which sold 139,000 copies after its publication by Penguin in 1942. It is a lucid, rousing tract written with the doughty optimism and practical compassion of Keynesian enlightenment. Keynes made numerous suggestions, read the galley-proofs and convinced Temple to add an appendix which is indispensable reading for those interested in his influence. Overall, the Archbishop urged that there should be a five-day working week and guaranteed minimum standards in housing, education, employment and holiday-allowances. Although both he and Keynes foreshortened their lives by choosing to overwork, they recognized that civilized and free lives preclude excessive working-hours and oppressive conditions of work, and allow respite from the tensions of work. Rested minds and valued recreations were priorities for Keynesian capitalism. Guarantees of free speech and free assembly were part of Temple’s programme – as were regional devolution and worker-nominated directors on boards of companies. He called for the nationalization not only of the Bank of England but of the joint-stock banks. He wanted public ownership of land development sites; security of tenure for tenants; restrictions on borrowings secured on property.24

Christianity and the Social Order, although forgotten by secularized historians, is one of the foundation piers of the welfare state and perhaps the most-read Keynesian tract of all. After the Beveridge scheme for post-war social security and unemployment benefits proposals was published in a government white paper, Temple observed that this was the first time that the spirit of Christian ethics had been embodied in an act of parliament. Violet Bonham Carter lunched with Keynes shortly after publication of Christianity and the Social Order: ‘very well and excellent company’, she found him. If Churchill perished, the only man with the authority to succeed him, said Keynes, was Archbishop Temple, with his support of state planning and of Beveridge’s proposals.25

The Treasury was wary about post-war levels of unemployment, and therefore about the level of national income. Consequently its senior men resisted Beveridge’s project as unaffordable. Keynes felt more sanguine than them about employment prospects, was robust in his support of Beveridge’s scheme, and helped to make the costing estimates for the welfare system more acceptable to his department. The Treasury remained so uneasy, however, that its officials besought Keynes not to use his maiden speech in the House of Lords in May 1943 to welcome the Beveridge proposals as good value. He complied, like the loyal Treasury man that he had become, and instead spoke about his proposed International Clearing Union. This maiden speech proved an expository triumph as well as inspiriting. ‘I sat wrapt in admiration at the lucidity, the clarity and indeed the gems of economic wisdom,’ Lord Melchett of ICI said afterwards: Keynes had been, since 1919, ‘a beacon of light in an extremely dark world’.²⁶

‘The optimistic view’, Keynes wrote to a Treasury colleague in June 1943, ‘which I am charged with maintaining is by no means intended as a prophecy of what is certain to happen.’ His set of ideas to maintain employment was hypothetical; but he maintained that only his hypothesis gave a chance of survival to capitalist initiative. If it transpired that ‘free enterprise is incapable of dealing with the problem of structural unemployment’, then solutions based on competition and profit would be jettisoned in favour of socialist controls. However, he still believed ‘that something like free enterprise can be made to work. I think we ought to have a good try at it.’ Although Keynes had little part in drafting the momentous government policy document on unemployment issued in 1944, with its opening declaration accepting government responsibility for maintaining ‘a high and stable level of employment after the war’, it was as Keynesian as Christianity and the Social Order. Both documents showed how Keynes’s notions had turned from heresy to the ruling authority in ten years.27

From the autumn of 1941, Keynes worked at creating a post-war global capitalist economy that avoided the instabilities, fluctuations, excesses and failures of the pre-war system. He envisaged a post-war international monetary system, which would supersede the gold standard and impose a system of permanent regulations to manage the divergent needs, conflicts and weaknesses of the world’s national economies. With Treasury colleagues, he devised a scheme to enable money that was earned by selling goods in one country to be spent on purchasing the products of any other country. All else in the proposals was ancillary to that object. The Keynes scheme, as it became generally known, was first published in April 1943. It proposed that an International Clearing Union would issue a universal currency valid for trade transactions across the world to an amount totalling an equivalent in gold of US $26 billion. Creditor nations (pre-eminently the USA, which was the only nation in the world that was neither impoverished nor deep in deficit) would allocate funds, and debtor nations would reduce or settle their debts. The expansion of world trade would be financed by deploying the surpluses of creditor nations to enable debtor nations to meet their needs. It was a characteristically Keynesian scheme, with expansion providing a keynote.

The Keynes scheme was published simultaneously with American counter-proposals, which were designated the White plan – named after its progenitor Harry Dexter White. White’s alternative was a Stabilization Fund capitalized at $5 billion to issue loans accompanied by a world bank to finance post-war reconstruction capitalized at $10 billion. His mechanisms were designed to benefit American power. The war, as he saw, gave an unrepeatable chance to install the US dollar as the global currency: so much so that he pressed for the dollar to be the sole money used by the liberation forces, Allied as well as American, when they occupied Europe, and recommended the over-valuation of European currencies so that liberated citizens preferred to use the dollar. White’s plan fitted the US Treasury aim of reorienting the world’s financial centre from the City of London.

Harry Dexter White – the son of Jewish Lithuanians – had worked for years in his family’s hardware store before wartime military service widened his aspirations. He was teaching economics at a minor liberal arts college in Appleton, Wisconsin when he was recruited to Washington in 1934. Probably in the following year he began working for Soviet Russian agents – providing documents and advice – although his economic thinking was more Keynesian than Marxist. He never shed the manners of the hardware store: he resembled a shop assistant who was so determined not to be servile that he browbeat customers on the other side of the counter. Lionel Robbins reported that, at a monetary meeting held in 1943 in a Washington room with noisy air-conditioning, White ‘shouted all day like a man directing the movements of a ship without a rudder in a hurricane’.28

The artificial currency for the multilateral clearing system was called ‘Bancor’ in the Keynes proposals and ‘Unitas’ in the White scheme. ‘Bancor? Unitas? Both of them in my opinion are rotten bad names, but we racked our brains without success to find a better,’ Keynes told the House of Lords. ‘What would your Lordships say to dolphin? A dolphin swims, like trade, from shore to shore. But the handsome beast, I am afraid, also goes up and down, fluctuates, and that is not at all what we require.’ Another possibility mooted by Keynes was bezant, the gold unit of Byzantium and the world’s previous international currency. Even in the greatest world affairs, he seemed to say, people must be allowed verbal frivolity. He also stressed that interim versions of the new arrangements must be published and debated. ‘The economic structure of the post-war world cannot be built in secret,’ he said in the Lords. Democracy’s hallmark was ‘the consciousness of consent’.29

In September 1943 Keynes and his wife traversed the Atlantic on the Queen Mary to discuss the monetary rules of the reconstructed post-war global economy. His first speech, on 21 September, at a plenary session in Washington, appealed for a unified approach both to reducing unemployment and to improving standards of living. ‘I have never heard him better – more brilliant, more persuasive, wittier or more truly moving,’ commented James Meade. Keynes’s priority was to agree a plan which Congress might accept: he expected the negotiations to end by adopting White’s scheme with subordinate English modifications. Nevertheless, the different Anglo-American traditions of managing meetings, accentuated by jarring personalities, led to daily clashes. ‘What absolute Bedlam these discussions are!’ Meade exclaimed after a fortnight. ‘Keynes and White sit next each other, each flanked by a long row of his own supporters. Without any agenda or any prepared idea of what is going to be discussed they go for each other in a strident duet of discord which after a crescendo of abuse on either side leads up to a chaotic adjournment.’³⁰

Keynes’s summary of White strove to be fair. ‘He is over-bearing, a bad colleague, always trying to bounce you, with harsh rasping voice, aesthetically oppressive in mind and manner; he has not the faintest conception how to behave or observe the rules of civilised intercourse,’ he reported in October 1943. ‘At the same time, I have a very great respect and even liking for him. In many ways he is the best man here. A very able and devoted public servant, carrying an immense burden of responsibility and initiative.’ Keynes concluded that the best way to influence White was ‘to respect his purpose, arouse his intellectual interest … and to tell him off very frankly and firmly when he has gone off the rails of relevant argument’. But White and other Americans often experienced this approach as disdainful or snubbing. It was for this reason that White called Keynes to his face ‘Your Highness’, and sneered to English officials that their leader pissed perfume. The university backgrounds of leading English negotiators inclined them to behave to their American counterparts like examiners giving marks on term papers or writing job-references for their students. Their patronizing, donnish approach, unconscious though it may have been, was typified by Lionel Robbins in 1943 assessing the US Assistant Secretary of State Dean Acheson, who had attended both Yale and Harvard Law School, as ‘amiable, able, but decidedly not alpha’. Americans, too, had their prejudices: a consultant at the State Department warned Robbins (son of a Middlesex smallholder) that London sent to Washington ‘too many Englishmen with the wrong sort of accent. Why didn’t we send more people from the North and from Scotland – they went down so much better.’31

It was common to both London and Washington that the post-war international monetary system must stabilize exchange rates, promote international financial cooperation, prohibit currency devaluations intended to weaken other economies, halt arbitrary changes in the value of currencies and discourage destabilizing short-term speculation. A managed global financial system would replace the unregulated, destructive disarray of pre-war years. The rules about currency values would be enforced by a body that came to be known as the International Monetary Fund. The complementary body to finance post-war reconstruction came to be called the World Bank. The notion of an artificial currency – be it bancor, dolphin or bezant – was discarded. Ultimately, despite their committee-room antics and outcries, White and Keynes agreed a Joint Statement of intentions in which American wishes prevailed. It was to the credit of these two incompatible men that, during a global war, they persuaded two imperial powers, whose long-term interests were irreconcilable, to reform global capitalism along lines that were not only interventionist and cooperative, but idealistic about human fulfilment. They wanted governments to guarantee economic security and material comforts to their citizens. They sought fixed but adjustable exchange rates, which would enable governments to pursue domestic aims (such as welfare programmes) without impairing their international competitiveness.

Violet Bonham Carter recorded an ‘amusing lunch with Keynes and Lydia’ in January 1944. During a rationed, makeshift meal at a restaurant in Charlotte Street, Antoine’s, which was popular with the literary intelligentsia, he praised the US Ambassador in London, John Winant, and similar Ivy Leaguers with their distinctive mid-Atlantic twang known as Park Avenue lockjaw, but regretted that ‘they have ceased to represent or control the country’. America’s new rulers aroused in him patrician unease. Their mobility unsettled him, and their lack of historical background diminished their authority in government, he felt. ‘With no roots anywhere and no power to stay in one house even for as long as 3 months,’ so he told Bonham Carter, ‘America has no future in the long run.’ This remark may seem absurd seventy years later, but it shows how some English leaders expected that American supremacy could not endure because, although this new super-power was the richest in history, it lacked the heritage and rooted traditions for world leadership. It had long been a refrain of Keynes’s that instability jeopardized the capitalist system more grievously than inequitable distribution of wealth or resources. Restiveness seemed destabilizing to him. By 1944 his parents had lived in the same house in Harvey Road for sixty years. This tenure was a matter of pride to every Keynes, who felt confident in their parts and imbued with authority by such continuities, and doubted the staying-power of callow families who moved every few years.32

The first quarter of 1944, following Keynes’s return to England, was dominated by his defence of the commitments made in the Joint Statement. There was resistance by the Bank of England, which felt threatened by the notion of a World Bank, and fear at the Treasury about expense and limitations in their prerogatives. There were attacks in Cabinet, led by the irresponsible troublemaker Beaverbrook, and from motley parliamentarians spurred by dislike of all things American. On 23 May Keynes gave a robust defence of the Joint Agreement, and indeed of the constructive generosity of the United States, in the House of Lords. He warned against ‘little Englandism’, which pretended that ‘this small country’ could survive by ‘a system of bilateral and barter agreements’, or by ‘keeping to itself in a harsh and unfriendly world’. It seemed to him that ‘those who talk this way’ were ‘pretty near frenzy’ in their nationalism. Moreover, the Anglo-American proposals for international monetary cooperation would adjust the instabilities that ‘before the war did more than any other single factor to destroy the world’s economic balance and to prepare a seed-bed for foul growths’. The commitments undertaken would be liberating and enriching – not constricting.

Sometimes alone, in popular articles in the press, in pamphlets, in dozens of letters to The Times, in textbooks, in enormous and obscure treatises, I have spent my strength to persuade my countrymen and the world at large to change their traditional doctrines and, by taking better thought, to remove the curse of unemployment. Was it not I, when many of to-day’s iconoclasts were still worshippers of the Calf, who wrote that ‘Gold is a barbarous relic’? Am I so faithless, so forgetful, so senile that, at the very moment of triumph of these ideas when, with gathering momentum, Governments, parliaments, banks, the press, the public, and even economists, have at last accepted these new doctrines, I go off to help forge new chains to hold us fast in the old dungeons? I trust, my Lords, that you will not believe it.33

As the sequel to the Joint Statement, Roosevelt invited non-Axis states to the United Nations Monetary and Financial Conference, which was convened for 1 July 1944 with the task of agreeing the forms of the proposed new global institutions. Keynes had long suffered during American summers. ‘One sweats all day and the dirt sticks to one’s face,’ he had complained after a visit in 1934. ‘The nights are as hot as the days. Nobody sleeps. Everyone is kept on the go all day long.’ He insisted that the conference must be held somewhere cooler than the federal capital. The Mount Washington Hotel in the White Mountains of New Hampshire was accordingly selected as the location of the conference. The hotel had its own electricity plant, post-office, golf-course, church, beauty-parlour, barber-shop, bowling-alley and cinema, but had been closed for two years. There was pandemonium in readying it before finance ministers, economic experts and journalist hordes converged by train at an adjacent village called Bretton Woods.³⁴

First there were preliminary sessions in Atlantic City, where Keynes dominated the Anglo-American meeting about the World Bank on 24 June. ‘Keynes was in his most lucid and persuasive mood; and the effect was irresistible,’ Robbins recorded. ‘Keynes must be one of the most remarkable men who ever lived – the quick logic, the birdlike swoop of intuition, the vivid fancy, the wide vision, above all the incomparable sense of the fitness of words.’ Only Churchill surpassed him, Robbins reckoned; but Keynes achieved his effects without the Prime Minister’s grandiloquence. ‘He uses the classical style of our life and language, it is true, but it is shot through with something which is not traditional, a unique unearthly quality of which one can only say that it is pure genius.’35

At Bretton Woods there were speeches of mind-numbing orotundity, hours of deadly boredom, parades of egomania, interminable but necessary procedural rigmaroles, bargaining, schisms, mediation, sub-committees, informal parleys, crashing disorganization, incidents of comic absurdity, grumpiness, tale-telling and much else. None of this signified as much as the tenacity, dedication, subtlety and patience of the leading delegations. Keynes’s part in the conference is detailed in the Royal Economic Society’s edition of his works. His activities are narrated by Skidelsky particularly, but also by Moggridge, in their biographies. Specialist studies by Richard Gardner, Benn Steil, Ed Conway and others provide further analysis. Countless memoirs and histories illumine its side-lines and personalities. Here only a summary is needed.

At Bretton Woods, Keynes faced his greatest test yet. There had not been so lively, supple and technically masterful a negotiator since the days of Talleyrand. Yet he faced manifold obstacles. The American press and many Congressmen feared that the United States would be duped into subsidizing a pauperized world by a delegation that was more astute than their own experts. They decried the bailing out of bankrupt Britain, with American money, or the financing of improved social services, under the guise of stabilizing currencies. Many of the Bretton Woods delegates did not speak or understand the conference language of English, and were uncomprehending of global monetary and banking techniques in any argot. Keynes described the insupportable workload to Wood’s successor as Chancellor of Exchequer, his fellow Tuesday Clubber Sir John Anderson. ‘It is as though, in the course of three or four weeks, one had to accomplish the preliminary work of many interdepartmental and Cabinet committees, the job of the Parliamentary draftsmen, and the passage through several Houses of Parliament of two intricate measures of major dimensions.’ Discussions involved ‘up to 200 persons in rooms with bad acoustics, shouting through microphones, many of those present, often including the Chairman, with an imperfect knowledge of English.’ All this had to be borne by a man with cardiac disease. Keynes had one evening of prostration in Atlantic City, two in the first week at Bretton Woods, then three more attacks. His health teetered on a precipice.36

White chaired Commission I on the International Monetary Fund, and Keynes chaired Commission II on the International Bank. Keynes had so eager a mind, and such command of the subject, that he hurtled through the agenda ahead of everyone else, and aroused resentment from the plodders and those relying on translators. Yet his speech at the closing banquet on 22 July, after agreement had been reached on the International Monetary Fund and World Bank, had delegates standing in tribute and applauding like thunder. One passage praised those present for performing combined ‘tasks appropriate to the economist, to the financier, to the politician, to the journalist, to the propagandist, to the lawyer, to the statesman – even, I think, to the prophet and to the soothsayer’. It was perhaps after flying back in August that Keynes said, ‘When I come home, I don’t come home to England, I come home to Europe.’³⁷

After only a month in Whitehall and Tilton, a new round of negotiations for Stage II of Lend-Lease required Keynes and his wife to return to America on the Île de France liner in September. They remained there for two and a half months, until 6 December. Keynes sought $3 billion on the military side, and got $2.8 billion, which seemed an excellent outcome. His negotiating team did not, however, get near their target of $3 billion for non-military items. The English wished to resume exporting on 1 January 1945, but the Americans insisted that export freedom could not be contemplated before victory over Germany. Nor could Keynes wrest from the Americans the desired guarantee that Lend-Lease would continue for a year after the end of the war. Frank Lee, a member of the Treasury delegation in Washington, praised his ‘matchless chief’ in December 1944: ‘occasionally he over-played his hand and occasionally wore himself out struggling for points which were not worth winning. But in general he was an inspiration to us all … His industry was prodigious, his resilience and continual optimism were a constant wonder to those of us more inclined to pessimism, while I doubt whether he has ever written or spoken with more lucidity and charm.’ Lee was sure that the London delegation could never have reached $3 billion without ‘Maynard’s inspired leadership’.38

Hitler killed himself on 30 April 1945, and the German capitulation was signed in Berlin on 8 May. Vanessa and Clive Bell, with Duncan Grant, attended the two-stage Victory festivities at Tilton, as she recounted. First there was a dinner party. ‘Chicken, champagne and very good red wine so it was most enjoyable,’ she wrote with quivers of anti-royalist resentment. ‘I was a bit shocked to find that afterwards we were expected to listen to the King’s speech [on the radio]. All the retainers were led in and everything was so solemn that after the first moments of hysteria induced by His Majesty’s stutter I nearly went to sleep.’ To her relief the solemnities were broken by ‘wild shrieks from Lydia’ when a puppy dashed into the room, and cannoned about before settling on Vanessa Bell and nipping her exuberantly. ‘Maynard,’ she continued, ‘because he’s a lord, has become completely feudal and does all the right things. We had to drink His Majesty’s health.’ Then, with the black-out curtains lifted, the party opened windows and saw bonfires, distant fireworks and even, they fancied, the lights of London. On the following night the Bells and Grant returned to Tilton, where the farmworkers were assembled with bevies of small boys. Beer and cheese were handed round. Lydia Keynes danced and recited, there was a sing-song, in which Quentin Bell struck a hit with an American trade union recruitment anthem. A straw figure of Hitler with a lurid papier-mâché head was then put on trial, with Keynes presiding as judge, Quentin Bell prosecuting and Grant as defending counsel jabbering in broken English and grimacing like a fiend. Finally Hitler’s effigy was carried in a torchlight procession to the top of the hill behind the house where it was burnt on a bonfire.39

Keynes spent the weekend of 18–21 May at King’s, where a conference of Canadian diplomats and financial experts met to discuss the post-war transition. One evening, after dinner, they strolled over the bridge across the Cam, past the punts and swans, and into the Fellows’ Garden on the other side of Queen’s Road. The gardens were heavy with blossom, and the variegated colours, textures and shapes of the trees and shrubs looked breathtaking. The Canadians congratulated Keynes on the artistry of the place. ‘Yes, it is beautiful,’ Keynes replied, ‘and we want to keep it, you know. That’s why you’re here!’ King’s, for him, remained the acme of English civilization.⁴⁰

On 26 July Clement Attlee’s newly elected Labour government replaced Churchill’s caretaker national government. As a member of the House of Lords Keynes had no vote in the general election: he donated £25 to the Liberal party’s fighting-fund, and spoke of their candidates as ‘Funnies’. Few of the incoming Labour ministers understood the country’s predicament as the world’s greatest debtor nation, which was committed to full employment and prodigal in its overseas expenditure. They trusted instead to the rectitude of their crusade for social justice vanquishing heathen ill-wishers. In a memorandum of 13 August, Keynes advised the Cabinet that Britain was overspending its income by £2,100 million a year – of which £1,100 million was supplied by Lend-Lease. ‘The more or less sudden drying up of these sources of assistance shortly after the end of the Japanese war will put us in an almost desperate plight,’ he predicted. ‘The gay and successful fashion in which we undertake liabilities all over the world and slop money out to the importunate represents an over-playing of our hand, the possibility of which will come to an end quite suddenly and in the near future unless we obtain a new source of assistance.’ He advised the government to anticipate national bankruptcy, enforce an austerity programme and defer its social and economic reforms. US economic support would have to be sought as a gift, even at the risk of the Americans imposing conditions detrimental to British trade. ‘Beyond question we are entering into the age of abundance. All the more reason not to mess things up and endanger the prizes of victory.’41

On 20 August, following the use of atomic weapons to force Japan’s surrender, Washington declared the immediate severance of Lend-Lease: no further goods would be supplied; those already ordered must be paid for. The abruptness of this cancellation, without prior consultation, added insult to the fell blow. At an emergency meeting in the Cabinet Room on 23 August Keynes sounded so optimistic that Ernest Bevin, the Foreign Secretary, fancied that he could hear the money jingling in Keynes’s pocket. The moral case for the United States making an outright gift to Britain in recompense for its wartime sacrifices, and the practical advantages for the United States in treating Britain munificently as a means of hastening the return of world prosperity, seemed to Keynes unassailable. It was decided that he and the British Ambassador to the USA, who was on furlough in England, should hurry to Washington to meet the crisis. ‘Keynes and Halifax are off to the USA,’ noted a Conservative backbencher, ‘2 Etonians to the rescue of the Labour Party!’ Keynes, despite his resilience in the Cabinet Room, recognized that he faced his trickiest negotiations with limited chances of success. On 27 August he and his wife left Southampton on a Canadian troopship accompanied by one official each from the Board of Trade, Foreign Office and Treasury.42

The Foreign Office man was Bevin’s principal economic adviser, Edmund Hall-Patch: one of those idiosyncratic talents who were then cherished in the English civil service. Hall-Patch’s father had been majordomo at the British legation in Brussels before becoming verger of Brompton Oratory. While playing in the band in a Paris cabaret in 1919 Hall-Patch was spotted by a Treasury official who thought his linguistic gifts were wasted as a musician and got him a job with the Supreme Allied Economic Council. He was financial adviser to the government of Siam during the 1920s, and learnt to speak Thai. He went in 1932 to America, where he supported himself as saxophonist in a speakeasy; then became a riding-instructor in London. He visited Romania in 1934 as part of a League of Nations commission; was next recruited to the Treasury, and became its financial commissioner responsible for China, Japan and the Far East. Like Keynes he was charming and pleasure-loving. It was said of him, as it might be of Keynes, that it was ‘surprising that with his sceptical and traditional cast of mind, Hall-Patch often seemed a pioneer and even a rebel involved in great changes’. Unlike Keynes he was a mordant pessimist, whose dire forebodings became a laughing-matter. ‘Send for ’All-Patch: ’e’ll make yer flesh creep,’ Bevin used to say. Hall-Patch urged that Britain’s future lay with Europe: not in the bogus notions of a special relationship with the USA or economic autarky with the Commonwealth. ‘He was a very private person and cultivated an air of myth,’ wrote an ambassador named Lord Henniker. ‘He tended to appear and disappear like a magician … His dress – slightly theatrical and antique, with stocks and stick-pins – an inscrutable air behind thick spectacles, and a tendency to break suddenly into French, all added to the enigma.’43

In August 1945 the American literary intellectual Malcolm Cowley contemplated his country’s future after the atomic bombing of Japan. ‘In the short run we’re living in the great imperial republic of the twentieth century, we’ll be rich, we’ll all have three automobiles, we’ll have to have them, by law, whether or not we want to sleep with Mae West we’ll have to sleep with her, we’ll eat too much and then take expensive cures to be slenderized.’ More unsettling to Cowley, though, than capitalist nirvana was the perilous insularity underlying the sudden ending of Lend-Lease: ‘we had god damn better well have sympathy and imagination, for now we’re on the top of the heap and all the envy of an envious world is going to be directed at us – and the world will whoop when the first atom bomb falls on New York’. Generally, though, the Truman administration’s termination of Lend-Lease was popular, Isaiah Berlin reported from Washington in September. ‘Although regrets have been widely expressed over the abrupt handling of the affair, there has also been, especially in the Middle West, fiery indignation at what is viewed as our ingratitude in criticizing this move. The idea that America is used as a Santa Claus by an ungrateful and largely undeserving world still flourishes luxuriantly here.’⁴⁴

Keynes’s double triumphs of 1944 – at Bretton Woods and in the second stage of Lend-Lease negotiations – buoyed him too high when he approached the difficulties of 1945. Morgenthau had resigned, White’s influence was receding, and when he reached America in September he faced William Clayton, Assistant Secretary of State for Economic Affairs, and Fred Vinson, Morgenthau’s replacement as Secretary of the Treasury. Clayton, who had left school at thirteen and became the world’s biggest cotton trader (shifting his base from Oklahoma City to Texas), was judged by the Washington Embassy to be efficient, lucid and congenial. Vinson, a crony of the new President Truman, had been born in the county gaol at Louisa, Kentucky, where his father was warden, and worked as a professional baseball player before setting up as a lawyer and getting elected to Congress. The Embassy in Washington regarded him as slow-thinking but sensible, liberal-minded and well disposed towards the English. Partly to disguise his awkwardness with new ideas, he was prone to cracker-barrel speechifying.

Lord Halifax and Lord Keynes went to Washington hoping to persuade the US to accept a moral obligation to rescue their nation with a grant-in-aid, or at worst an interest-free loan, as a reward for defending world freedom. On 25 September Clayton and Vinson met them, without State Department cognizance, to clarify that neither Washington officials nor the American public would entertain claims for special treatment based on past sacrifices. Still less were they attracted by the argument that American generosity would enable England to join Washington in shaping world commerce and currency on sound lines. ‘This led to some rather tense exchanges,’ reported Hall-Patch, who warned London that ‘Congress & the outside world are blanketed in an impenetrable fog … of downright hostility.’ At another meeting between Clayton and Vinson on one side, with Keynes and Halifax on the other, Keynes erupted in exasperation: ‘why do you persecute us like this?’ Halifax was more nonchalant about these exasperations: ‘a man who tried to flick off everything that might be a nuisance’, Isaiah Berlin called him.45

Attlee’s inexperienced government blundered in its approach. Although Washington had insisted that an Anglo-American trade agreement must precede any request to Congress for financial aid to Britain, ministers did not include trade negotiators in the delegation sent to the USA. After Keynes’s expositions in September of his country’s predicament, the financial talks stalled until the expert commercial negotiators arrived at the end of the month. There was later another delay of a fortnight while the negotiators awaited further instructions from the Cabinet in London. During each hiatus feelings in Congress and in the American press grew more anti-English. A swift visit to Washington by Attlee was no help to the financial negotiators.

Keynes never ceased to be an Apostle whose beliefs governed his actions. Virginia Woolf had categorized him as ‘a moralist’, and his political sense was overborne by his sense of morality in 1945. He believed that his country was a virtuous global power, which had fought a just war against the evil of the totalitarian brigands. The injustice seemed inordinate to Keynes, as to his compatriots, that the nation which had battled and ultimately vanquished the Nazis should in consequence be so ruined in its finances as to be emasculated as a world power. Few in Whitehall or Westminster could face the truth that the victors were bust: in some quarters it seemed treasonable to think it. It must be stressed that in 1945–6 Keynes was not craving imperial greatness. He was a Liberal who cherished freedom, believed that competition was invigorating, opposed collectivism and regarded state controls as tantamount to communism. He dreaded the British Isles succumbing to a fortress mentality, retreating within a shrunken and insignificant sterling bloc, cowering behind closed borders, closed minds and customs barriers except with nations that had conceded bilateral trade agreements.46

‘The “smoked-filled room” technique with no witnesses and no record is a form of negotiation which is only possible if you are supremely confident that the people with whom you are dealing are powerful enough to put through what they agree with you,’ Hall-Patch warned in November. He had been shaken by Marriner Eccles, chairman of the Federal Reserve Bank, insisting on ‘safeguards’ against American money being ‘used to raise your standard of living or to meet military expenditure’. It seemed ‘fantastic’ to Hall-Patch in 1945 that his country would ever submit control of its standard of living or defence budget to foreign lenders. Yet the stipulation by Eccles, whose policy outlook had been described by a New York banker as ‘curried Keynes’, seems reasonable. Hall-Patch’s touchiness at Eccles’s proviso was a measure of how ill adapted to post-war realities were the tired, fraught negotiators from London.47

Throughout the 1920s and 1930s Keynes had decried the inefficiencies in capitalism that occurred when data was ill coordinated and decisions were taken without full information. Output fell and unemployment rose because of administrative obfuscation, as he insisted on many occasions. The negotiating procedure in Washington, with its dependence on imprecise and disorganized data, therefore infuriated him as inimical to efficiency. ‘Life here for the past three weeks or longer has been absolute hell,’ he reported to a Treasury official on 21 November.

Everything that we think we have settled with the Top Committee is then transmitted by them inaccurately to experts and lawyers, who have not been present at the discussion. The latter work without consultation with us and produce to their own top lads something which bears not the slightest resemblance to what we have agreed. Then it is adopted by the American Top Committee and hurled at us in what looks very like an ultimatum. We then in a series of exasperated meetings have to throw out as much as possible.

This frustrating cycle of confusion happened ‘time after time after time’.⁴⁸

Keynes, in addition to leading negotiations with the Americans, had to negotiate on a second front with Attlee’s Cabinet and Treasury officials in London. He persevered, often with a splash of gaiety that rallied his delegation colleagues; but his exasperation, irritability and jibes often nettled the Americans, and his troubles with London were almost worse. These difficulties arose despite the fact that no one apart from him had the expertise or subtlety to negotiate such intricate technicalities or the self-reliance to face such momentous global issues without flinching. ‘His nature was protean,’ said a Canadian financial adviser who saw much of Keynes during 1945. ‘He could be magisterial, analytic, scornful, withering, contemptuous, insinuating, persuasive.’49

In September, with ministerial authority, Keynes had agreed to the American demand for full sterling convertibility by the end of 1946. In November Hugh Dalton, Labour’s Chancellor of the Exchequer, and Attlee’s Cabinet had a belated realization of what this meant, and foresaw a crisis a year hence with a headlong exodus of funds from London. Dalton sought to rescind this undertaking on sterling convertibility, but the Americans had no reason to budge. Relations between Dalton and Keynes belied accusations that people wearing the same school tie stick together in class complicity. They had been within a few years of one another at both Eton and King’s. They had been interviewed together by the Berlin sexologist Magnus Hirschfeld about the gay scene in Edwardian Cambridge. They also exemplified the informed disdain with which ambitious people who have been educated together often view each other. Dalton did not find Keynes as impressive as the world did, or as authoritative as Keynes thought himself. Keynes reciprocated: he remembered Dalton as a vehement undergraduate supporter of Imperial Preference until converted to socialism, while drunk, by Rupert Brooke, on whom he had sexual designs.

During November, Keynes reached the verge of collapse and resignation. Bank of England and Treasury officials felt that they were wrestling with his views as much as with the Americans. Finally, the Cabinet Secretary, Sir Edward Bridges, went to Washington to conclude the Anglo-American negotiations. Bridges vindicated Keynes’s position by recommending Attlee’s Cabinet to accept similar terms to those previously reached. At this critical juncture the Cabinet still baulked at the commitment to sterling convertibility, but the Americans would do no more than agree to defer conversion until 1947. If the American terms had been refused, Attlee’s government would have been unsustainable. Intolerable austerity, amounting to starvation, would have ensued. Without American rescue-money, it would have been impossible for Labour to nationalize the iron and steel industries, coal-mining, electricity and transport – a socialist experiment that was to fail because of recurrent political meddling, the elimination of individual incentives and initiative, underinvestment, market insensitivity and weakened management. The social security system inaugurated by Beveridge’s proposals, which Keynes prized, would have been long deferred if the American terms had been refused. The nationalization and attempted standardization of the abundant existing welfare services – the self-funding and self-governing hospitals, the local-authority clinics, independent charities, local poor relief boards, private insurance schemes, friendly societies and state insurance benefits – which in 1946–8 created the National Health Service would not have been viable. Participation by the Attlee government in the Bretton Woods agreement would have collapsed. This would have renewed the instabilities of pre-war international finance: as Keynes always emphasized, the great vulnerability of the capitalist system is not its inequities or injustices but its instability.

The loan agreement was signed on 6 December. The US granted the UK a line of credit of $3,750,000,000 (equivalent to £1,100,000,000, or to $56 billion in 2014 values) at interest of 2 per cent. Britain was to begin the interest payments in 1951, with provision for fifty annual repayment instalments, which could be deferred in any financial year if British finances were parlous. The American debt was finally liquidated by the transfer of $83.25 million in 2006 when Tony Blair was Prime Minister and George W. Bush was President. In addition, $650 million (about six-sevenths of the outstanding Lend-Lease account) was cancelled by the Americans: Keynes thought this concession was handsome, and felt dismay at the ingratitude with which it was received by his compatriots.

Keynes could never decide whether he might have obtained better terms if Roosevelt had still been alive. ‘If he had been in full health and at the height of his political power, the answer would probably be Yes,’ he told Kingsley Martin. ‘Suppose Winston had survived [in power] too, undoubtedly there would have been brisk messages from one to the other, and very probably Roosevelt would have used his authority to get us better terms.’ But he fancied that Congress would have rejected any such terms, and that those which had now been obtained were the utmost that was politically practicable. If the negotiations had collapsed without a loan agreement, he doubted if ‘the Labour Government could have lasted a year’, and suspected that this foreknowledge might have motivated ‘some of those who seemed so complacent at the idea of things breaking down’ – for example in the Bank of England (which was facing nationalization by the Labour government). ‘It would have been a real disaster if, for the second time, a Labour Government should be destroyed by an external financial situation, for which they scarcely could be regarded as primarily responsible.’ He equally doubted ‘if the poor, silly Cabinet caught a glimpse of that … probability … even out of the corner of their eyes’. He was driven by the knowledge that ‘a permanent splitting up of the world into separate economic blocs, of which ours would be far the weakest, founded on sand and almost certain to collapse within a brief period, would have been a major disaster’.50

On 11 December Keynes and his colleagues embarked on the liner Queen Elizabeth heading for Southampton. Most of the others were so exhausted by their recent labours that they spent their days as well as nights asleep. Keynes liked to relax on Atlantic voyages by absorbing himself in such nineteenth-century masterpieces as Walter Scott’s The Heart of Midlothian, Charles Reade’s The Cloister and the Hearth and Sir George Trevelyan’s The Life and Letters of Lord Macaulay. But on the Queen Elizabeth he had little respite from the toxins of fatigue. The news from England was dismaying. Government speeches recommending the agreement were lukewarm. Ministers were failing to rebut misrepresentations, and indeed sometimes misunderstood the terms. None urged the advantages for the world in Anglo-American cooperation. It was exasperating when Robert Boothby in the House of Commons dubbed the loan agreement reached by Keynes and Bridges ‘an economic Munich’ – a capitulation by weakling appeasers of an overweening power – and added that the British Empire had been sold for a packet of cigarettes. ‘This is the greatest economic defeat we have ever had,’ declared Boothby. ‘Lord Keynes is a siren beckoning us to our doom from the murky bogs of Bretton Woods.’⁵¹

‘In the press at large, all the tadpoles and tapers who had sucked up to Keynes in the past were now accusing him of betraying our interests,’ recalled Robbins, who was travelling with him. He lay in his cabin receiving, with mounting scorn and anger, wires from the liner’s radio operators summarizing the newspaper and parliamentary misrepresentations of his efforts and the loan settlement. Sometimes, although all exercise now overtaxed his heart, he crept along to the radio room to collect the latest mortifying calumnies. Then, lying down again in his state-room, he prepared for the political fight that awaited him in England. He sharpened the phrases, and polished the arguments, with which he intended to vanquish his detractors.52

Keynes reached Southampton on 17 December, the opening day of the House of Lords debate on the loan and the Bretton Woods agreements. After visiting Gordon Square, he attended five hours of the debate, which opened with a weak presentation of the government’s case by an elderly member of Attlee’s Cabinet, Lord Pethick-Lawrence. After the destruction of the House of Commons by German bombs in 1941, MPs had occupied the House of Lords debating chamber, and the peers shifted to improvised accommodation in the royal robing-room. There, on 18 December, Keynes gave his masterly speech. ‘The smaller chamber’, recalled Lord Hailsham, who was present, ‘was admirably suited to hear Lord Keynes’s quiet but beautifully modulated voice.’ Lord Addison thought it ‘a brilliant, penetrating discourse, to which it was a joy to listen, and which I am sure will be a perpetual inspiration to read’. Lord Samuel agreed that this was Keynes’s greatest oration. ‘Although he looked so ill after his return from his labours in America, he spoke with much energy. That speech was a model of cogent argument, illuminated by brilliance and by wit, and it had a profound effect at a critical moment.’ This debate in the royal robing-room was the last time that Bertrand Russell saw Keynes. Many peers were dubious about the Anglo-American agreement when Keynes rose to speak, recalled Russell, ‘but when he had finished there remained hardly any doubters except Lord Beaverbrook and two cousins of mine with a passion for being in the minority. Having only just landed from the Atlantic, the effort he made must have been terrific.’⁵³

In this superlative parliamentary performance, Keynes made clear, as no one had dared do before, that the free world had entered a period of American hegemony, and that his own country was broke. ‘The Americans – and are they wrong? – find a postmortem on relative services and sacrifices amongst the leading allies extremely distasteful.’ They found it ‘more practical and more realistic – to use two favourite American expressions – to think in terms of the future and to work out what credits, of what amount and upon what terms, will do most service in reconstructing the post-war world’. The United States was a business nation, where money-making seemed a moral duty: ‘the American Administration and the American people’ accordingly directed their efforts ‘towards influencing the future and not towards pensioning the past’. Keynes spoke of his own feelings and position. ‘I shall never so long as I live cease to regret that this is not an interest-free loan. The charging of interest is out of tune with the underlying realities. It is based on a false analogy.’ Nevertheless, he told the Lords, ‘a point comes when in a matter of this kind one has to take No for an answer … it is not for a foreigner to weigh up the cross-currents, political forces and general sentiments which determine what is possible and what is impossible in the complex and highly charged atmosphere of that great democracy’. Throughout his time in Washington, ‘there was not a single Administration measure of the first importance that Congress did not either reject, remodel, or put on one side’. He asked: ‘Is it not putting our claim and legitimate expectations a little too high to regard these proposals, on top of Lend-Lease, as anything but an act of unprecedented liberality? Has any country ever treated another country like this, in time of peace, for the purpose of rebuilding the other’s strength and restoring its competitive position?’54

Many peers spoke against the agreement or regretted American conduct. Lord Portsmouth, from whom Keynes had bought his cache of Isaac Newton manuscripts, regretted ‘the mournful masochism of those who have supported the bill’. It showed the swift changes overcoming England that a High Tory agriculturalist now used, by reflex, the jargon of sexual psychology in the House of Lords. Portsmouth and the Duke of Bedford spoke for rural England, and there was telling resistance from businessmen. Lord Piercy, a former personal assistant to Attlee and head of the wartime Petroleum Mission in Washington who had been ennobled weeks earlier, expressed the widespread belief ‘that this loan should have been a gift’. The motor-car and aero-engine manufacturer Lord Kenilworth complained about American ruthlessness, as represented by the price paid for Courtauld’s Viscose subsidiary. ‘We fought at Dunkirk,’ said Lord Woolton, formerly managing director of a department store and now chairman of the Conservative party, ‘but to-day we are surrendering what I conceive to be our just rights. We are surrendering them to the power of the dollar, because those responsible for the affairs of this country do not dare to retreat on the economic fastnesses of the Empire.’ If Britain was the largest debtor nation in history, the USA ‘had become rich beyond her dreams’. He supported Keynes’s call ‘for rightful restitution of the dollars we paid in advance of what became a common cause’.55

Above all the newspaper magnate Lord Beaverbrook, who had the touchy parvenu’s dislike of the upper chamber, where there was no automatic deference to self-made millionaires, launched a vehement attack on the American loan. He denied that the country was in such financial straits that it needed foreign loans for assistance, and produced a string of figures about sterling balances and import values to justify his assertion. Keynes interrupted Beaverbrook’s talk of millions with a deadly interjection: ‘in a long and rugged life spent in the statistical jungle, I have never heard statistics so phoney’ (the official parliamentary record, Hansard, euphemistically printed the last word as ‘funny’). Beaverbrook retorted that Keynes ‘has been derelict in duty’, and was culpable for the British Empire ‘being needlessly and wantonly and wickedly thrown away’. There were many abstentions in the Lords division, but ninety votes for the agreement, and only eight votes against.56

After resting at Tilton, Keynes resumed Treasury work, albeit with mistrust of his ministers and antipathy between him and Dalton. Years before he had explained his Liberalism in terms which still held for him in 1946. ‘The political problem of mankind is to combine three things: economic efficiency, social justice, and individual liberty. The first needs criticism, precaution and technical knowledge; the second, an unselfish and enthusiastic spirit, which loves the ordinary man; the third, tolerance, breadth, appreciation of the excellencies of variety and independence, which prefers, above everything, to give unhindered opportunity to the exceptional and the aspiring.’ In theory, at least, socialists loved their fellow men, although their internecine strife suggested difficulties in practice; but ‘the great party of the proletariat’, as Keynes called Labour, had little interest, he judged, in fostering individual rather than collective aspirations, opportunities, excellence. The political prospects did not please.⁵⁷

‘The time has come’, Keynes confided to Halifax on New Year’s Day of 1946, ‘for me to slip out of the Treasury, if not suddenly, at least steadily.’ He was not attuned to the Labour administration: ‘I shall not last long in this galère … so I had better go … quietly and friendly.’ He deprecated the proposed spending on overseas and military commitments of £700 million for 1946 against £925 million from the Loan. He warned of a forced retreat in these engagements unless there was a swift, voluntary, planned modification. The number of forces outside Europe should be halved, and the burden of feeding hungry Germans should be lifted. His criticisms of the London government and of public opinion were no less severe than his strictures on the Washington administration and on popular sentiments in the USA. ‘The mixed chauvinism and universal benevolence of the F.O. and other departments, and the weakness of the Chancellor in these matters, are slopping away on everybody and everything in the world except the poor Englishman the fruits of our American loan,’ he warned on 29 January. The irresponsible level of expenditure was not premeditated. ‘No-one knows what is happening … The Ministers, I am told, are reluctant to read their official papers and reach half the ramshackle decisions, particularly on overseas affairs, in the absence of anyone who really knows what it is all about.’ Outside government, too, ‘England is sticky with self-pity and not prepared to accept peacefully and wisely the fact that her position and her resources are not what they once were.’58

In March Keynes attended the inaugural meetings of the board of governors of the International Monetary Fund and of the World Bank at Wilmington Island, Savannah. He made believe that something pleasant must happen in Savannah’s balmy air and bright colours, which offered an antidote to damp, cold London with its weary, drab, sickly, tetchy inhabitants. The location, structure and personnel of the IMF and World Bank were to be settled at Savannah. Keynes wanted to divert the Americans from their decision to locate both institutions in Washington, where they would seem mere appendages of the US government, rather than in New York; but the Americans had organized an assorted bloc of voters who gave large majorities to all of their wishes.

The Americans wished to appoint full-time executive directors, supported by a battery of expert technical staff, to the International Monetary Fund. The proposed salaries exceeded, in Keynes’s view, their burden of work and responsibilities. He urged that the directors should be part-timers, holding posts with their national banks or governments, backed by about thirty full-time staff (as opposed to 300 as contemplated by the Americans). Part of the difference was that Keynes still hankered for his model of an International Credit Union, acting as an international lender of last resort, with a bias towards expansion, whereas the Americans wanted an interventionist body which coordinated monetary policies globally, and implemented ambitious financial schemes. Keynes understood that his resistance to the American proposals on remuneration and staffing was doomed to fail. ‘They plainly intend to force their own conceptions on the rest of us,’ he told Richard Kahn on 13 March. ‘The result is the institutions look like becoming American concerns, run by gigantic American staffs, with the rest of us very much on the side-lines.’ The only negative vote recorded at Savannah was by Keynes’s delegation against the salary provisions. He was resoundingly outvoted by the American bloc in all his last efforts to curb US hegemony.59

There was anguish from the old Empire in recession at the new imperium in the making. The mismatch between American and English officialdom had far deeper causes than Keynes’s superiority complex. The Washington Embassy’s important despatch to the Foreign Office, which was sent as a final assessment of the Savannah conference, showed either painful confusion in English diplomatic readings of the Americans or the gaping incompatibilities in the Washington administration’s approach. Written in the accents of traditional diplomacy, and signed by Halifax, the despatch reported that the proceedings at Savannah ‘confirmed the prevalent American tendency to view international problems in emotional terms (the turgid sentimentality of the opening and closing speeches was oppressive to the point of suffocation)’. Then Halifax’s despatch either contradicted itself or identified a contradictory characteristic of the Washington administration: having asserted that Americans were too emotive, it accused them of simultaneously pretending to scientific infallibility. The Savannah conference, continued the Washington Embassy, ‘also showed how prone are the American officials of the State Department and the Treasury to view the financial problems of the world from the vacuum of a statistical laboratory in Washington, and how wedded they are to the idea that the solution of these problems can be found by a collection of highly qualified economists and statisticians “following trends” from Washington’. The conflicts, disappointments and even odium between old statecraft and new were to continue in both London and Washington for decades.60

The negotiations over Lend-Lease, American post-war rescue loans and global financial institutions showed repeatedly that London’s trust in a special Anglo-American relationship, on a fair and equal footing, was naive. The United States was intent on world leadership, and saw its London allies as useful but not needing much respect. There were parallel experiences with the Anglo-American nuclear partnership, which was agreed in 1943, but from which English scientists were excluded by the US authorities for the first crucial year (during which the Americans overtook their allies in expertise). The English were finally ejected, unceremoniously, from American collaboration by the McMahon Act of 1946, which prohibited the sharing of technological information with foreign allies.

Keynes knew that his strenuous efforts were killing him. Although exhausted beyond measure, his indomitable will-power and his wife’s loving protection kept him alive. On 19 March, on a long, buffeting train carrying him to Washington, he collapsed after walking through swaying carriages on his way to the restaurant car; and collapsed again, giddy and swirling, on his first attempt to return to his compartment. During a turbulent Atlantic crossing he caught a stomach bug in an insalubrious cabin, which had previously been used for the transport of the brides of American soldiers and their babies.

Keynes returned to England as a champion. He had done more than any other single person to create the world institutions whereby currency, external investment, reconstruction, international trade would be managed. He stood at the summit of his prestige. No intellectual had stamped so indelible a mark upon his age; no economist had left such footprints on policy. He was peerless in developing technical theory, explaining it to doubters and applying it to practical business. He had, too, done more than anyone to secure state funding for the arts at a time when private patronage was at its nadir. In doing so, he had upheld civilized values in a decade of lowest barbarism. He helped to provide cultural abundance and discrimination for the coming years of penny-pinching austerity and gimcrack populism. He had also given voice to those who wished to protect English landscape and urban environments from money-grabbing speculators and brutish developers: in the twenty years after his death, many rural amenities were preserved, although many towns and cities were despoiled.

Fame turned Keynes into an epithet. He lived long enough to see the emergence of a school of economists known as Keynesian, and to joke in his intimate circle that Maynard Keynes was not a Keynesian. Already the adjective ‘Keynesian’ was being applied to describe policies that had been implemented in European industrialized democracies and by the Roosevelt administration without any debt in ideas to him or to his General Theory. Although Keynes is nowadays identified with deficit finance, as a wartime Treasury official he opposed his government going into debt in order to maintain individual levels of consumption: ‘the ordinary Budget should be balanced at all times’, in his own words. ‘If serious unemployment does develop, deficit financing is absolutely certain to happen, and I should like to keep free to object hereafter to the more objectionable forms of it,’ he warned Treasury colleagues in 1943. Deficit finance seemed to him a ‘rather desperate expedient’. He deplored profligacy. He proposed the use of counter-cyclical demand management policies during periods of economic depression and higher unemployment, but affirmed that in ordinary times the budget should always be balanced. Despite recommending public-works programmes to stimulate aggregate demand, he remained a good enough Liberal to oppose ever-increasing government deficits.61

In the years after his death some economists invoked Keynes’s name as a Good Fairy blessing their own ideas, while others claimed to know what he would recommend to solve the quandaries of later times. This was often spurious stuff. If he had lived into the late twentieth century (his father died in 1949 aged ninety-seven, his mother in 1958 just before her own ninety-seventh birthday, his sister Margaret in 1974 aged eighty-nine, his brother Geoffrey at ninety-five in 1982), his ideas would have developed and transmuted: he was, after all, both brilliant and brave in having second thoughts. He did not believe in mental standstills. He knew that most of his ideas had only a transitive value. The recognition that previous systems of thought, including one’s own, have miscarried or are inadequate was the mainspring of his intellectual vigour. Under the influence of Keynes’s revisions, the thinking of his peers, the policies of governments, the expectations of consumers, the economic situations of industrialized economies and the scope of possible improvisations towards prosperity would all have developed in ways that can only be guessed at hazard. Keynes’s underlying principles of life are more distinct. In 1938 he endorsed a remark of the eighteenth-century Anglican clergyman and moral philosopher William Paley: ‘although we speak of communities as of sentient beings; although we ascribe to them happiness and misery, desires, interests, and passions; nothing really exists or feels but individuals’. This belief in the primacy of individual effort, self-respect and fulfilment was the ineradicable core of his economic thinking.⁶²

During a fortnight in London, after his return from Savannah, Keynes felt exigent and perplexing business pressing hard on him. Towards the end he attended a performance of John Gielgud’s production, with Cecil Beaton’s decor, of Oscar Wilde’s Lady Windermere’s Fan: a valiant flourish of flamboyance in the dismal London scene; and an apt play for Keynes, who was so intellectually debonair. One line of Wilde’s, though, proclaiming ‘the astounding stupidity of optimism’, is the antithesis of all that Keynes believed and personified. For him pessimism and anxiety were degradations, like everything that constricted human choices and hopes. Optimism was generous and therefore intelligent, because it enriched, expanded and enhanced life.

After enjoying Wilde’s play, Keynes went to Tilton. There, for a week, he toiled on official papers, drafted a post-budget memorandum, inspected his farm, read in the garden, welcomed his mother on a holiday visit, planned to write about his long-dead lover Lytton Strachey for the Memoir Club, and inveighed against Labour’s decision to include long-distance road-hauliers alongside the railway companies in the nationalization of transport. Then, on the morning of Easter Sunday 21 April, in the downstairs boot-room by the front door where he slept at night so as to avoid the strain of mounting the stairs, as Lopokova brought him a cup of tea in bed, he had a final heart attack. He died within three minutes before his wife’s eyes – held in the arms of his mother who had hurried to the room at the sound of her cries.63

Keynes was a sunny man who never iced over. Napoleon’s last words in The Dynasts provide his immediate epitaph:

               Great men are meteors that consume themselves

               To light the earth. This is my burnt-out hour.

Selflessness killed Keynes. In 1944–5 he had the choice of conserving his life, or of sacrificing himself by overwork. With altruism in his heart he chose to dissipate the last remnants of his strength in public service. For the national good he signed, as it were, his own death warrant. He took a heroic course.

Lydia Lopokova and Keynes on their balcony overlooking Gordon Square in 1940. Her protective love and gaiety kept him alive, and enabled his greatest accomplishments. (© Hulton-Deutsch Collection/CORBIS)