The War Years
America, Lend-Lease, the IMF, and a Peerage
1939 to 1945
|September 1939||Germany invades Poland and Britain declares war on Germany. World War Two has begun. Keynes, although continuing to suffer ill health, resumes his work in Cambridge and London.|
Keynes attacks the attitude of the intellectual Left to the war, writing in The Times:
"The intelligentsia of the Left were the loudest in demanding that the Nazi aggression should be resisted at all costs. When it comes to a showdown, scarce four weeks have passed before they remember that they are pacifists and write defeatist letters to your columns, leaving the defence of freedom and civilization to Colonel Blimp and the Old School Tie, for whom Three Cheers."
|November 1939||Party politics have more or less ceased and Keynes is offered the (likely to be uncontested) position of Member of Parliament for Cambridge University. He turns this honour down, in order that he can remain aloof from government and take his own individual stance on issues.|
|February 1940||Keynes publishes a small book entitled How to Pay for the War, which sells 35,000 copies. He actively promotes his proposals that interest rates should be kept low and that compulsory saving (deferred pay) should be used as a mechanism to prevent the inflation that occurred during World War One.|
|7 June 1940||Keynes's doctor says he is now, "fit for any moderate activity."|
Enemy aliens are rounded up and sent to the Isle of Man, including a number of academics who have fled Nazi Germany.
They will later be released but meanwhile Keynes writes, "I can remember nothing equal to what is going on for stupidity and callousness."
He writes a stream of letters to various authorities on behalf of internees.
Keynes is given a room in the Treasury and becomes a government economic adviser. He receives no pay for his duties, but now spends most of his time in London in this capacity.
|September 1940||A German bomb falling on London smashes windows in Keynes's house and there's an unexploded bomb in the neighbourhood. Keynes commutes into London for three weeks from his Tilton vacation home.|
|May 1941||Keynes makes the first of several very important visits he will make to America between now and 1946. The good personal relationships he has developed in past visits to America - and he will continue to develop - will make it easier for Keynes to negotiate with America on Britain's behalf. On this occasion, Keynes is concerned mainly with arrangements for Lend-Lease and to explain in detail Britain's financial predicament after two years of war.|
|29 May 1941||Anthony Eden makes an important speech on Britain's war objectives - the economic thrust of which is based on Keynes's ideas.|
Keynes is elected to the Court of the Bank of England.
He has grave concerns for Britain's post-war economy and wonders about the possibility of applying "Keynesian" solutions on a world-scale. He writes his first draft of an international 'Clearing Union' of a non-political character, to aid and support other international institutions concerned with the planning and regulation of the world's economic life.
|1942 - 1944||Keynes is heavily engaged in making proposals for and engaging in discussions about what will later become the International Monetary fund (IMF), the World Bank, and the Breton Woods system for international currency management.|
|1942||Keynes gives his broad support to proposals from Sir William Beveridge for a large-scale expansion of social insurance - later to be called the welfare state and the National Health Service. Keynes is confident the proposals are affordable but persuades Beveridge to cut down on overall costs in the first five years. This results in a postponement of the right to higher pensions until contributions had been accumulated.|
|May 1942||Manchester University makes Keynes an Honorary Doctor of Laws.|
|June 1942||Keynes is awarded a peerage, bringing him a seat in the House of Lords. His title is Baron Keynes of Tilton. He chooses to take a seat with the Liberal Party in the Lords.|
|September 1943||Keynes makes his second wartime visit to the United States, refusing to be deterred by his poor health. He meets Harry Dexter White, Chief International Economist at the U.S. Treasury, who he will cross swords with frequently on the post-war economic settlement. (Harry Dexter White will, years later, be exposed as a Soviet agent.) Whatever Keynes's abilities as a negotiator, Britain's weak economic position means that America holds the trump cards in most negotiations. Nevertheless, close co-operation between the British and Americans on economic matters is established and Keynes manages to shift White's position closer to his own in many important respects.|
|March 1944||Illness prevents Keynes attending an important series of economic meetings with the Dominions - Australia, Canada and New Zealand.|
Keynes sets sail for Bretton Woods for further talks with American negotiators about the post-war economic settlement.
In his journal, one of the British contingent at the talks, Professor Robbins, writes:
"In the late afternoon we had a joint session with the Americans, at which Keynes expounded our views on the Bank. This went very will indeed. Keynes was in his most lucid and persuasive mood: and the effect was irresistible. At such moments, I often find myself thinking that Keynes must be one of the most remarkable men that have ever lived - the quick logic, the birdlike swoop of intuition, the vivid fancy, the wide vision, above all the incomparable sense of the fitness of words, all combine to make something several degrees beyond the limit of ordinary human achievement."
Emmanual Goldenweiser writes of Keynes's chairmanship of the Bank Commission:
"He shone in two respects - in the fact that he is, of course, one of the brightest lights of mankind ... and also by being the world's worst chairman."
Dean Acheson, America's representative tells the Treasury Secretary that Keynes was rushing things, "in a perfectly impossible and outrageous way ... He knows this thing inside out so that when anybody says section 15-C he knows what it is. Nobody else in the room knows. So before you have an opportunity to turn to Section 15-C and see what he is talking about, he says, 'I hear no objection to that', and it is passed. Well, everybody is trying to find 15-C. He then says, we are talking about Section 26-D. Then they begin fiddling around with their papers, and before you find that, it is passed."
Keynes suffers a heart attack while in the United States, but it does not seem too serious.
|September - November 1944||The cost of fighting the war has pushed Britain's external debt to enormous levels. Anticipating the defeat of Germany, Keynes travels to the United States for a fourth time, to negotiate Lend-Lease for the war against Japan after Germany's defeat. He spends over two months in Washington, taking every opportunity to describe Britain's dire financial position to the Americans.|
Churchill has been replaced by Atlee and Roosevelt is dead, replaced by Truman.
The bomb has been dropped on Hiroshima. Keynes is deeply engaged in negotiations with the Americans again.
Fighting the war for six years has bankrupted Britain.
Keynes is engaged in the task of eliciting American assistance to keep Britain solvent in the post-war years, when the Americans may feel less well disposed to helping a country it is no longer fighting shoulder-to-shoulder with.
America announces that Lend-Lease to the United Kingdom has been stopped. Mainstream American opinion is that, with the war over, if the British are not starving, they should not need further assistance.
Keynes will need to fight hard to secure further American assistance for Britain.
Next: Keynes 1945 to 1946 - The World Bank, the IMF, and the End
R.F. Harrod, The Life of John Maynard Keynes, 1951
Robert Skidelsky, John Maynard Keynes 1883 - 1946, 2003