In 1906, Keynes began his career in civil service as a clerk at the India Office. Though he enjoyed his work initially, he got bored by 1908 and resigned from his duty to return to Cambridge. At Cambridge, he began to work on probability theory.
In 1909, Keynes published his first professional economics article in the ‘Economics Journal’, on the effect of a global economic downturn on India. The same year, he accepted the post of a lecturer in economics offered by Marshall.
In 1913, based on his experience at the India Office, Keynes published his first book titled ‘Indian Currency and Finance.’ Following this publication, he was appointed to the Royal Commission on Indian Currency and Finance. At the commission, he reasonably fared well, by applying economic theory to practical problems.
With the onset of the World War I, Keynes was called on by the British government for his expertise. In 1915, he accepted a post at the Treasury. His role included designing the terms of credit between Britain and its continental allies, and acquisition of scarce currencies.
His sharp insight and strong acumen helped him work his ways up to the bureaucracy. In 1919, he was appointed financial representative for the Treasury to the 1919 Versailles peace conference.
His experience at the Versailles peace conference was influential in shaping much of his future life. He was against the burdensome policies that were trolling upon the defeated Germany. He argued that high compensation rates would traumatize innocent Germans and restrict their ability to buy exports thus affecting the economy of the world but his arguments were hardly noted.
John Maynard Keynes returned to Cambridge after resigning from his governmental duties and resumed teaching. Based on his arguments against the compensation imposed on Germans in the damaging Treaty of Versailles, he penned a highly influential book titled, ‘The Economic Consequences of the Peace’ in 1919. The book was highly acclaimed and earned him international fame despite being thought of as anti-establishment.
After the publication of the book, ‘The Economic Consequences of the Peace’, Keynes resigned from his post of a lecturer and stayed on as a fellow of King’s College, dividing his time between Cambridge and London.
In 1921, he published the book, ‘A Treatise on Probability.’ Considered an important work, it laid a philosophical and mathematical foundation of the probability theory. He dedicated much of the 1920s actively contributing to journalism and selling his work domestically and internationally as a financial consultant.
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Though his writings were mostly sceptical, he did not challenge the conventional wisdom that favoured laissez-faire. However, twice his opinions would foreshadow the theoretical revolution that would be triggered in the 1930s: once in 1925 when he opposed Britain’s return to gold standard and the other was before Great Depression when he foretold the unemployment issue faced by workers, labourers and miners.
In 1925, when Winston Churchill re-established the gold standard after being backed by the Treasury and Bank of England, the standard had a depressing effect on Britain’s economy. In response to it, Keynes came up with his work, ‘The Economic Consequences of Mr Churchill’ that finally led to the abandonment of gold standard in 1931.
In 1930, Keynes came up with two volumes of ‘Treatise of Money’ in which he stated that the amount of money saved should not exceed the amount of money invested. This would lead to a rise in unemployment. He in fact stated that the correct course would be to encourage spending and discourage saving.
When the Great Depression was at its peak, Keynes came up with the book, ‘The Means to Prosperity.’ The book contained policies for tackling unemployment in global recession. It contained one of the first mentions of the multiplier effect. Interestingly, though addressed to British government, the book contained advice for other governments as well on tackling global recession.
In 1936, Keynes came up with his magnum opus, titled ‘The General Theory of Unemployment, Interest and Money.’ The book came at a time when the unemployment rate was over 20 per cent in Britain. It was path-breaking in terms of content and revolutionized the economic ideologies of the world. It introduced the notion of aggregate demand as the sum of consumption, investment and government spending. Keynes argued through his book that full employment could be maintained only with the help of government spending.
He argued that full employment could not always be reached by making wages sufficiently low. Unemployment is basically caused if people don’t spend enough money. Lower spending results in demand falling further and a vicious cycle commences which leads to job losses and a further fall in spending.
Keynes’ solution to the problem was that governments should borrow money and boost demand by pushing the money into the economy. Once the economy has recovered and is expanding, governments should pay back the loans.
The General Theory of Unemployment, Interest and Money’ set the foundation of modern macroeconomics. It became a benchmark for future economic thought. His ideas, which are fondly known as Keynesian principles followed one principal rule to reduce unemployment by increasing government spending even if that meant running on deficit budget.
His proposal of government running on budget deficit was highly criticized by certain economics, who accused Keynes of supporting irresponsible governance. However, Keynes made it clear that he was a firm believer in balanced budgets and regarded the proposals for programs of public works during the Great Depression as an exceptional measure to meet the needs of exceptional circumstances.
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With the advent of the World War II, Keynes came to be regarded as the most influential economist in Britain. In 1937, he suffered from a severe heart attack. Two years later, he returned to teaching at the Cambridge.
Meanwhile, he penned an influential book on war finances ‘How to Pay for the War.’ Published in 1940, the book insisted that the war effort should be financed by higher taxation and compulsory saving rather than deficit spending so as to avoid inflation.
In 1941, John Maynard Keynes filled up a vacancy in the Court of Directors of the Bank of England and carried out a full term from the following April. Later in June 1942, he was rewarded for his service with a hereditary peerage in the King's Birthday Honours. The same year, he was made a member of the House of Lords.
During the World War II, he played an influential role in the negotiations that shaped the post-war international economic order. He served as the leader of the British delegation and chairman of the World Bank commission in the 1944 Bretton Woods conference. He argued for a radical system for the management of currencies, proposed the creation of a common world unit of currency, and oversaw the establishment of new global institutions - World Bank and International Monetary Fund.
Keynes’ health deteriorated heavily during the post-war days. However, despite his failing health, he continued to represent United Kingdom in international negotiations. Just before his death, he successfully obtained new and outstanding debts for the rebuilding of British economy in preferential terms.
Personal Life & Legacy
John Maynard Keynes entered into a romantic relationship with Lydia Lopokova, a well-known Russian ballerina and one of the stars of Sergei Diaghilev's ‘Ballets Russes’ in 1921. The two married in 1925.
Keynes was a bisexual and had an affair with Duncan Grant in his early years. Grant served as his best man at the wedding. Keynes and Lopokova had no children.
He suffered from bad health towards the end of his career. While negotiating for the Anglo-American loan in Savannah, Georgia, in pursuit of favourable terms for UK, he suffered from a series of heart attacks. On returning to England, he suffered from yet another heart attack on April 21, 1946, which caused his death. He was aged 62.
In his lifetime and afterwards, Keynes has been referred to as one of the most influential economists of the 20th century. In 1999, to mark his legacy, ‘TIME’ magazine listed him on the ‘Most Important People of the Century’ list. Britain’s paper, ‘The Economist’ described him as the ‘Britain’s Most Famous 20th Century Economist.