Universal Man: The Seven Lives of John Maynard Keynes. Richard Davenport-Hines

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СКАЧАТЬ He operated, until after Marshall’s death in 1924, as a pragmatist who relied on his mastery of detail and adaptive intuitions.

      Keynes was elected to a prize fellowship at King’s on 16 March 1909. He returned to historic beauty, to old friends, to imposing dignity, to observances and amenities that he prized beyond measure. Soon he was allotted the rooms above the gatehouse leading from King’s Lane to Webb’s Court, where he stayed until his death. Arthur Benson began to meet him at college dinners in Cambridge: ‘so much nicer & simpler & more humorous & charming than he used to be when younger’. Keynes went again to dine at Magdalene in 1913. ‘A very intelligent creature’, Benson wrote after a long talk ‘about coercion – religious, parental, social. He took rather extravagant views of liberty, but no doubt believes that people are as reasonable as himself.’7

      In 1913 Keynes was appointed a member of the Royal Commission investigating Indian Finance and Currency. He owed his nomination to his mentor Edwin Montagu, who was then Under-Secretary at the India Office. ‘He was one of those who suffer violent fluctuations of mood, quickly passing from reckless courage and self-assertion to abject panic and dejection – always dramatizing life and his part in it,’ Keynes wrote of Montagu. ‘At one moment he would be Emperor of the East, riding upon an elephant, clothed in rhetoric and glory, but at the next a beggar in the dust of the road, crying for alms but murmuring under his breath cynical and outrageous wit.’ The high-strung affinity between the two men was crucial to Keynes’s precocious influence.8

      No one outside Cambridge knew the name of Keynes at this time. The Royal Commission provided his first experience of being a professional economist exercising his influence on public affairs. It added an accretion of new contacts to those he had already made through Eton and Cambridge. His fellow Commissioners influenced and remembered him. He learnt the mannerisms, responsibilities and benefits of being a private man exerting public influence. The Commission’s chairman was Austen Chamberlain, who had recently failed in his bid to become leader of the Conservative party and was to recur at intervals in Keynes’s life for the next quarter-century. The secretary of the Commission was Basil Blackett of the Treasury. Sir Robert Chalmers, the then Permanent Secretary of the Treasury, was another colleague. Keynes impressed these men by his close questioning of witnesses, and by his meticulous approach. He mastered a welter of detail about the institutions and intricacies of India’s financial and monetary system, the sub-continent’s seasonal flows and crop variations, and the multitude of influences on transactions between England and India.

      One of the Commissioners was a leading Calcutta merchant and industrialist called Sir Ernest Cable, who had recently acquired the Lindridge estate, near Bishopsteignton in Devon. Lord Cable, as he was to become, together with Keynes, prepared a scheme for the formation of a state central bank in India which was printed as an appendix to the main report and aroused wider interest. Keynes spent a week staying with Cable at Lindridge, during 1913, finalizing their bank proposal. Their discussions gave a far-reaching prompt to Keynes’s thinking. Cable often complained that in India there was a huge discrepancy between savings and investment, and criticized the high rates of interest caused by people who did not lend their resources. He urged that the Indian public, instead of hoarding large amounts of sterile wealth, must be induced to fructify their stockpiles of gold and silver by investing in public works, railway-building and industrial enterprises. There can be small doubt that Keynes imbibed Lord Cable’s opinion for future use.9

      In November 1913 Archduke Franz Ferdinand (heir-presumptive to the Austrian and Hungarian thrones) was peppered with shot by a careless French marquis while shooting as the Duke of Portland’s guest in Nottinghamshire. It would have been better for the world if he had been killed outright, on English soil, in an accident; for seven months later the assassin’s shots that killed him at Sarajevo set Europe stumbling into war. Austria’s belligerent ultimatum to Serbia on 23 July 1914 started a breakdown in London’s financial markets – the foreign exchanges, the discount market and the stock market. Thus began the most severe financial crisis, worse than those of 1866 or 2007–8, ever to hit the City of London. In this emergency Keynes, at the age of thirty-one, made a decisive intervention.10

      The problem was that foreigners could not meet their liabilities in London. After Austria’s declaration of war on Serbia on Tuesday 28 July, the continental bourses shut; on Thursday 30 July a London stockbroking firm, which specialized in business with Germany, failed; and there was no doubt that other firms would be hammered because they could not get the sums due to them from Berlin or Paris for previous purchases. Therefore, on Friday 31 July, the London Stock Exchange closed in order to forestall further insolvencies: it did not reopen until 4 January 1915. Keynes regretted this closure, which he felt would have been avoidable if bankers had been less selfish and myopic in extending credit to stockbrokers. Newsreel photographers who went to capture pictures of gloom or panic outside the Stock Exchange and Bank of England were taunted by City workers brandishing their hats and sticks with defiant optimism, and were chased off. These images have been mistaken since as signs of jubilation in the City at the imminence of European war.

      The devil take the hindmost was the spirit of the times. Apprehensive of insolvency, the joint-stock banks began cashing their notes for gold at the Bank of England, and on Friday 31 July began (in Keynes’s words) ‘the suicidal policy of making difficulties all over the country in paying out gold coin even to old customers who wanted £5 or £10 for petty cash, endeavouring to fob them off with Bank notes or silver’. This was folly, because the banks had gold, but insufficient £1 notes. ‘Nothing could have been so well calculated to inspire the public with distrust or even panic, and to arouse in them the ancient instinct of hoarding.’ Yet it was not the public running to the banks that caused the internal drain on gold, Keynes judged, but the joint-stock bankers’ run on the Bank of England, which took three days to cut the Bank’s gold reserve from £17.5 million to £11 million.11

      The bankers devoted their weekend to cries of panic and despair. On Saturday 1 August a deputation of them called on Asquith and Lloyd George, the Prime Minister and Chancellor of the Exchequer, urging the suspension of the Bank Charter Act which obliged them to trade paper currency for gold (‘specie payments’). Their heads were in such a muddle that they could not distinguish between suspending specie payments and the more momentous outright suspension of the Bank Charter Act. Lloyd George was disposed to concur with the bankers, but the Treasury and Bank of England demurred. As one interim holding measure, a month’s moratorium on payments of bills of exchange was decreed.

      This was the Saturday when war was declared between Russia and Germany. Money was owed in London from all over world. Foreign remittances to London had broken down. Few capitalists could export goods, move holdings of gold or renew loans. In Keynes’s words, ‘just as the Stock Exchange was deranged by the failure of foreign debtors to remit what they were owing, so also the banks and discount houses, which had indirectly lent short money abroad, found their calculations utterly confounded by their inability to get this money back when they wanted it’. He deplored the precipitous way that the joint-stock banks recalled loans that they had made to London’s bill brokers and discount houses for money owed by foreign buyers in London. The debts on these bills of exchange stood at £350 million. Once foreign debtors had defaulted, London’s acceptance and discount markets juddered to a halt.12

      At King’s on Sunday 2 August Keynes received a letter from Basil Blackett of the Treasury. ‘I wanted to pick your brains for your country’s benefit and thought you might enjoy the process,’ wrote Blackett. ‘The Joint Stock Banks have made absolute fools of themselves and behaved very badly.’ He hinted that a meeting on Monday might be too late. Rather than entrain for London, on a bank-holiday Sunday when services were disrupted, Keynes persuaded his brother-in-law Vivian Hill to hurtle him to London in the side-car СКАЧАТЬ