John Maynard Keynes
The British economist who argued governments should spend to fight slumps, founding modern macroeconomics and shaping the postwar financial order.
John Maynard Keynes changed the basic question of economics from 'how do markets clear?' to 'what happens when they don't?' Before him, the orthodoxy held that a free economy always tends back toward full employment, so a government facing mass unemployment should mostly wait. Keynes argued that the wait could be lethal, that an economy could get stuck in a slump for years, and that the cure was for the government to step in and spend. That single reversal founded modern macroeconomics and still frames every argument over stimulus and austerity.
The prophet of Versailles
Keynes made his name young. As a Treasury delegate at the 1919 Paris Peace Conference, he watched the victors load Germany with reparations it could not pay, resigned in disgust, and fired off The Economic Consequences of the Peace. The book was a sensation and a warning: crushing Germany economically, he wrote, would breed poverty, resentment, and eventually another war. Within a generation he was proved horribly right. It also set the Keynes method: theory in the service of a concrete political emergency.
The General Theory
His masterwork arrived in 1936, in the wreckage of the Great Depression. The General Theory of Employment, Interest and Money argued that total spending, what he called aggregate demand, drives output and jobs, and that demand can collapse and stay collapsed because one person's spending is another person's income. In that trap, cutting wages or waiting for markets to heal only deepens the hole. The answer was for the state to fill the gap: cut interest rates, and when that fails, spend directly to put people back to work. It was a revolutionary claim, that a capitalist economy could fail for years and needed active management to be saved from itself.
Architect of the postwar order
In 1944 a sick and aging Keynes led the British delegation to Bretton Woods, the conference that designed the postwar financial system. He wanted an ambitious global central bank issuing its own reserve currency, which he called bancor, to keep trade in balance. He lost. The United States held the money and the leverage, and the American negotiator Harry Dexter White won a dollar-centered system instead. Keynes still shaped the institutions that emerged, the IMF and the World Bank, and the delegates rose in a standing ovation as he left the final session. He died less than two years later, in April 1946, worn out at 62.
Governments spent the next half-century arguing about him. Postwar leaders embraced Keynesian demand management; the inflation of the 1970s brought a backlash; the 2008 crash sent finance ministers scrambling back to his playbook overnight. Whenever an economy seizes up and someone asks whether the government should spend its way out, they are still, whether they know it or not, arguing with a Cambridge don who died in 1946.