John Maynard Keynes, 1st Baron Keynes, CB (pronounced /ˈkeɪnz/) (5 June 1883 – 21 April 1946) was a British economist whose ideas have been a central influence on modern macroeconomics, both in theory and practice. He advocated interventionist government policy, by which governments would use fiscal and monetary measures to mitigate the adverse effects of business cycles, economic recessions, and depressions. His ideas are the basis for the school of thought known as Keynesian economics, and its various offshoots. In the 1930s, Keynes spearheaded a revolution in economic thinking, overturning the older ideas of neoclassical economics that held that free markets would automatically provide full employment as long as workers were flexible in their wage demands. Following the outbreak of World War II Keynes's ideas concerning economic policy were adopted by leading Western economies. During the 1950s and 1960s, the success of Keynesian economics was so resounding that almost all capitalist governments adopted its policy recommendations. Keynes's influence waned in the 1970s, partly as a result of problems that began to afflict the Anglo-American economies from the start of the decade, and partly due to critiques from Milton Friedman and other economists who were pessimistic about the ability of governments to regulate the business cycle with fiscal policy.[1] However, the advent of the global financial crisis in 2007 has caused a resurgence in Keynesian thought. Keynesian economics has provided the theoretical underpinning for the plans of President Barack Obama, Prime Minister Gordon Brown and other global leaders to ease the recession.[2] In 1999, Time Magazine named Keynes one of the 100 Most Important People of the 20th Century and reported that, "His radical idea that governments should spend money they don't have may have saved capitalism".[3] Keynes is widely considered the father of modern macroeconomics, and by commentators such as John Sloman, the most influential economist of the 20th century.[4][5][6] In addition to being an economist, Keynes was also a civil servant, a patron of the arts, a director of the Bank of England, an advisor to several charitable trusts, a writer, a private investor, an art collector, and a farmer. Of towering stature, Keynes stood at six foot, six inches. John Maynard Keynes was born in Cambridge to a middle class family. His father, John Neville Keynes, was a lecturer at Cambridge University and his mother Florence Ada Keynes a local social reformer. Keynes was the first born, and was followed by two more children - Geoffrey Keynes in 1887 and Margaret Neville Keynes in 1890. According to economist and biographer Robert Skidelsky, Keynes' parents were loving and attentive, but not smotheringly so. They remained in the same house throughout their lives, where the children were always welcome to return. Keynes would receive considerable support from his father; including expert coaching to help him pass his scholarship exams and financial help both as a young man and when he was nearly wiped out at the onset of Great Depression in 1929. Keynes' mother made her children's interests her own, and according to Skidelsky, "because she could grow up with her children, they never outgrew home".[7] Keynes had his early education at home and in kindergarten. He attended St Faith's preparatory school as a day pupil from 1892-1897. Teachers described Keynes as brilliant, but on occasion, careless and lacking in determination. His health was often poor during this period, leading to several long absences. Keynes won a scholarship to study at Eton, where he displayed talent in a wide range of subjects, particularly mathematics, classics and history. Despite his middle class background, Keynes mixed easily with upper class pupils. In 1902 Keynes left Eton for King's College, Cambridge, to study mathematics. The famous Alfred Marshall begged Keynes to become an economist,[8] although Keynes's own inclinations drew him towards philosophy – especially the ethical system of G.E. Moore. Keynes was an active member of the semi-secretive Cambridge Apostles society, a debating club largely reserved for the brightest students. Like many members, Keynes retained a bond to the club after graduating and continued to attend occasional meetings throughout his life. Before leaving Cambridge, Keynes became the President of the Cambridge University Liberal Club. In May 1904 he received a first class B.A. in mathematics. Aside from a few months spent on holidays with family and friends, Keynes continued to involve himself with the university over the next two years. He took part in debates, further studied philosophy and attended economics lectures informally as a graduate student. He also studied for his 1905 Tripos and 1906 Civil Service exams. The economist Harry Johnson wrote that the optimism imparted by Keynes's early life is key to understanding his later thinking.[9] Keynes was always confident he could find a solution to whatever problem he turned his attention to, and retained a lasting faith in the ability of government officials to do good.[10] Keynes optimism was also cultural, in two senses – he was of the last generation raised by an empire still at the height of its power, in its own eyes and by much of the world (at least outwardly) seen as preeminent in both power and benevolence. Keynes was also of the last generation who felt entitled to govern by culture, rather than by expertise. According to Skidelsky, the sense of cultural unity current in Britain from the 19th century to the end of World War I, provided the well educated a framework with which to set various spheres of knowledge in relation to each other and to life, enabling them to confidently draw from different fields when addressing practical problems.[7] Keynes's Civil Service career began in October 1906, as a clerk in the India Office. He enjoyed his work at first, but by 1908 had become bored and resigned his position to return to Cambridge and work on probability theory, at first privately funded only by two Dons at the university – his father and the economist Arthur Pigou. In 1909 Keynes's published his first professional economics article in the Economics Journal, about the effect of a recent global economic downturn on India[11] Also in 1909, Keynes accepted a lectureship in economics funded personally by Alfred Marshall. Keynes's earnings rose further as he began to take on pupils for private tuition, and on being elected a fellow. In 1911 Keynes was made editor of the Economic Journal. By 1913 he had published his first book, Indian Currency and Finance. He was then appointed to the Royal Commission on Indian Currency and Finance[12] – the same topic as his book – where Keynes showed considerable talent at applying economic theory to practical problems. The British Government called on Keynes's expertise during the First World War. While he did not formally re-join the civil service in 1914, Keynes traveled to London at the government's request a few days before hostilities started. Bankers had been pushing for the suspension of specie payments – the convertibility of bank notes into gold – but with Keynes's help the Chancellor of the Exchequer (then Lloyd George) was persuaded that this would be a bad idea, as it would hurt the future reputation of the city if payments were suspended before absolutely necessary. In January 1915 Keynes took up an official government position at the Treasury. Among his responsibilities were the design of terms of credit between Britain and its continental allies during the war, and the acquisition of scarce currencies. According to economist Robert Lekachman, Keynes's "nerve and mastery became legendary" due to his performance of these duties, as in the case where he managed to assemble — with difficulty — a small supply of Spanish pesetas. The secretary of the Treasury was delighted to hear Keynes had amassed enough to provide a temporary solution for the British Government. But Keynes did not hand the pesetas over, he sold them all to break the market: his boldness paid off, as pesetas then became much less scarce and expensive.[13] In the 1917 King's Birthday Honours, Keynes was appointed Companion of the Order of the Bath for his wartime work,[14] and his success led to the appointment that would have a huge effect on Keynes's life and career; Keynes was appointed financial representative for the Treasury to the 1919 Versailles peace conference. He was also appointed Officer of the Belgian Order of Leopold.[15] Keynes's experience at Versailles was influential in shaping his future outlook, yet it was not a successful one for him. Keynes's main interest had been in trying to prevent Germany's compensation payments being set so high it would traumatize innocent German people, damage the nation's ability to pay and sharply limit her ability to buy exports from other countries - thus hurting not just Germany's own economy but that of the wider world. Unfortunately for Keynes, conservative powers in the coalition that emerged from the 1918 coupon election were able to ensure both Keynes himself and the Treasury were largely excluded from formal high-level talks concerning reparations. Their place was taken by the Heavenly Twins - the Judge Lord Sumner and the Banker Lord Cunliffe whose nickname derived from the "astronomically" high war compensation they wanted to demand from Germany. Keynes was forced to try to exert influence mostly from behind the scenes. The three principal players at Versailles were Britain's Lloyd George, France's Clemenceau and America's President Wilson.[16] It was only Lloyd George to whom Keynes had much direct access; until the 1918 election he had some sympathy with Keynes's view but while campaigning had found his speeches were only well-received by the public if he promised to harshly punish Germany, and had therefore committed to extracting high payments. Lloyd George did however win some loyalty from Keynes with his actions at the Paris conference by intervening against the French to ensure the dispatch of much-needed food supplies to German civilians. Clemenceau also pushed for high reparations; generally France argued for an even more severe settlement than Britain. Wilson initially favoured relatively lenient treatment of Germany – he feared too harsh conditions could foment the rise of extremism, and wanted Germany to be left sufficient capital to pay for imports. To Keynes's dismay, Lloyd George and Clemenceau were able to pressure Wilson to agree to very high repayments being imposed. Towards the end of the conference, Keynes came up with a plan that he argued would not only help Germany and other impoverished central European powers but also be good for the world economy as a whole. It involved the writing down of war debts which would have the effect of increasing international trade all round. Lloyd George agreed it might be acceptable to the British electorate. However America was against it, the US then being the largest creditor and by this time Wilson had started to believe in the merits of a harsh peace as a warning to future aggressors. So despite his best efforts, the end result of the conference was a treaty which disgusted Keynes both on moral and economic grounds, and led to his resignation from the Treasury.[17]