Foreign News: They Called Him Cassandra

The master-economist . . . must be mathematician, historian, statesman, philosopher. . . . He must understand symbols and speak in words. . . . He must study the present in the light of the past for the purposes of the future.

As it must to all men, Death came last week to the softspoken, knife-witted, twinkle-eyed author of this definition, himself a master-economist. John Maynard Keynes, Baron Keynes of Tilton, 62, died of heart disease on Easter Day at his manor of Tilton, Sussex. He had just returned from setting up the World Bank and Fund which he had helped to draft in 1944 at Bretton Woods.

Under his well-cultivated Eton and Cambridge charm, Keynes had the roving, many-sided spirit of an Elizabethan. His interests ranged from banking to the Bloomsbury artistic set, his hobbies from bibliography to the ballet. But the world would remember him as an economist with ideas as seminal as Adam Smith’s.

He was the first to realize that World War I, with its unprecedented mobilization of national economies, had taught countries new economic tricks and controls they would be loth to relinquish. In 1919 he was British financial adviser at Versailles, resigned in mid-conference. The same year, in his eloquent Economic Consequences of the Peace, he told why the peace treaties would be unworkable. So much of what he said then later came true that men began calling him Cassandra.

When depression struck as he had predicted, he proposed that nations “spend their way back to prosperity,” and made an early convert of Franklin D. Roosevelt. Taking as his basis the formula p=mv/t* he then drew the famous Keynesian corollaries: deficit financing to put money in the hands of the unemployed, managed currency, reconstruction of the social system so that more high-velocity money gets into the hands of the poor, who spend it, less low-velocity money into the hands of the rich, who save it.

Official Britain steered clear of Keynes after his 1919 characterization of Lloyd George as a “Welsh witch.” But in the depths of 1940 Churchill summoned him back as economic adviser. In effect, he had run the British Treasury ever since. Elected a director of the Bank of England in 1941, he smiled: “Orthodoxy has at last caught up with me.”

*P is the price level, m the amount of money in circulation, v the velocity at which it circulates and t (for trade) the quantity of things that money buys.