Still, Keynes’s central propositions are now in full harness. A falling interest rate will not itself stimulate adequate investment. Economies can bounce along in supposed equilibrium with high unemployment, unused capacity, and feeble investment. Credit must be force-fed, demand must be stimulated, and this requires the government to spend.
Because of Keynes, the nation will probably avert the worst of economic possibilities. If it does, many of Keynes’s natural antagonists will soon forget why. They will say that the economy mostly adjusted on its own. They will say new levels of debt were not worth it. They will say that government intervention may well “crowd out” private investment. And they will again be wrong.
Clarke’s book is not exhaustive, but he has made a contribution to the sociology of knowledge—to the way great ideas are created—that often eludes many of those who write about and sometimes worship Keynes. However blessed he may have been with talents and the wherewithal to live a lofty and privileged life, Keynes always kept his feet on the ground. He was not a prisoner of pretty, quantifiable economic models but of the hard and dirty facts and a certain abiding common sense about how consumers and savers, businesses and investors, actually made decisions. After steering the British economy through the Depression, he developed sensible policies to finance the war effort, then worked with the U.S. to establish a new postwar currency system. If we had followed Keynes’s advice more closely on matters of international currency, we may well have avoided much of what is happening today.
But that is another story. Clarke has written more than a primer about the man who, it is again proven, got the economy more right than anyone else. And whose reputation is likely to live on for another century.