January 2017 newsletter – John Maynard Keynes in King’s College and the General Theory of Employment Interest and Money

This conference was held on October 8 2016 at the University of Cambridge and at King's College, to commemorate the 80th anniversary of The General Theory. Over 120 delegates from around the world attended. The conference was funded by King’s College Development Office and took place in an auditorium where J M Keynes used to lecture 80 years ago. Hélène de Largentaye reports.

The morning session was organised by Jean Michel Massing1 and was dedicated to Keynes’s art and book collections. The afternoon session organised by Hélène de Largentaye2 dealt with The General Theory. A first panel, chaired by James Trevithick3 and Jorg Bibow4, discussed its translations into German (1936) and French (1942), and in a second panel its impact on economic policies in UK, Germany and France.

The German translation
Harald Hagemann5 presented Fritz Waeger’s translation, published by Duncker and Humblot in 1936, the same year as the English original. Keynes was well known and admired in Weimar Germany since his The Economic Consequences of the Peace. His books, Treatise on Money and The General Theory were immediately published in German. In the early 1930s —depression years in Germany — German economists discussed reduction of wages as a remedy against unemployment. Keynes provided suggestions for fighting unemployment through new approaches, involving wages policies (Chapter 19 ‘Changes in Money Wages’) in particular. Harald noted the criticisms made against Keynes — based on his ‘Preface’ to the German edition — that he displayed sympathies for the nationalist-socialist regime, but stressed that Keynes’s immediate activitis in the Academic Assistance Council to support emigré scholars after the Nazis’ rise to power in 1933 and his efforts in 1940 to liberate German emigré economists shut in British internment camps bore proof of his aversion to Nazism.

The French translation
Hélène de Largentaye based her presentation on the 40 letters of correspondence between J M Keynes and Jean de Largentaye (her father) which were bequeathed to the Keynes Archive Centre at King’s College. These letters are a testimony of the collaboration between Keynes and his French translator which started in April 1938 and lasted for 18 months. Jean de Largentaye, an Inspecteur des Finances, was only 35 years old when he started the translation while working in the French Treasury. He discovered that The General Theory provided solutions to the economic problems that Léon Blum’s ‘Popular Front’ government was facing in the context of a rising threat from Nazi Germany. Keynes asked Piero Sraffa, then a lecturer at King’s, to help him supervise the translation. Ghislain Deleplace6 showed how severe Sraffa had sometimes been but he also mentioned various controversies — in particular one about Keynes’s use in Chapter 17 of Sraffa’s notion of ‘commodity-rate of interest’ — where the French translator raised objections that proved relevant.

A peculiarity of the French edition is its lexicon containing definitions of technical terms in French, an initiative which Keynes had first objected to, but which he accepted in the end.

The French edition of The General Theory, was published only in 1942 under the German occupation and it no doubt contributed to the successes of the 25 year period after WWII in terms of quasi-full employment and welfare policies. A revised edition of the French translation was published in 1969 and included a note by the translator — who died the year after — arguing that, due to the credit nature of money, the reconciliation of full employment and price stability was impossible. According to him, only a currency backed by commodities could achieve this reconciliation.

After a short interval, Paul Davidson7 opened the second panel on economic policies over the last thirty years.

‘As if Keynes had never lived’ 
Geoff Tily8 recalled Keynes’s demonstration in his General Theory of how investment is determined both by the long-term interest rate and the marginal efficiency of capital. In order to achieve a high level of economic activity, monetary policy must maintain permanently low real interest rates across the spectrum. After the Volcker shock (1979), real interest rates rose sharply in the 1980s across the world. This meant greatly reduced investment growth and hence aggregate activity. The generally depressed conditions were punctuated by occasional excess — most obviously over the 'dot.com' episode, when expectations of yields on investment became excessive (in the context of the dear rate of interest), and debt inflation was the result. The economy finally caved in only after further speculative excess in the property and financial sectors and in consumer credit.

The scale of monetary and fiscal reform that took place over the 1930s mainly under Roosevelt’s and Keynes’s initiative is not widely recognised. Conversely, in the aftermath of the 2007/08 crisis, finance dictated the terms of its own rescue, involving large-scale mobilisation of central bank and public funds. With economic collapse arrested, austerity has been imposed. As a result, any expansion has been muted; on the global level, private debt remains severely inflated; and economic hardship is increasingly the norm.

In this context the rise of nationalism is unsurprising. Tily contends that Keynes’s analysis — properly understood — remains relevant and still offers the means to an alternative way forward, as it did in the 1930s.

In a lively discussion, Lord Eatwell raised the domestic orientation of the General Theory. Tily responded that the purpose of international architecture was to facilitate the implementation of the domestic conclusions. Since the 1980s, financial globalisation has disarmed domestic policymakers. As in the 1930s, the goal should be to reverse this state of affairs.

How Germany’s anti-Keynesianism has brought Europe to its knees
As Jörg Bibow put it, Germany learned the wrong lessons from its 20th century economic history in its obsession with hyperinflation (in 1922-3), an anxiety which overshadows even the 1929-33 deflation and depression. He showed how the Bundesbank masterminded a ‘monetary mythology’ to bolster its own independent position and anti-inflation bias. The ‘German miracle’ of the 1950s and 60s was not only the result of supply-side policies that Germany’s peculiar ‘ordo-liberalism’ received credit for, but was also due to a covert Keynesian type of demand stimulus — essentially, an export-led growth model — that worked well for (West) Germany as long as its main trading partners behaved differently and had higher inflation rates. By contrast, the instability of the 1970s, featuring a surge in wages and plunge in the terms of trade, were blamed on Keynesianism. A swift return to the old wisdom, occurred in the 1980s with the establishment of the European Monetary System (EMS) and in the 1990s, with the creation of the European Monetary Union (EMU). Jörg showed that the EMU is guilty of a ‘fallacy of composition’ by relying on a model ‘whose working depends on others behaving differently and runs into trouble when all are required to become alike, and like Germany’. Europe’s problems are rooted in this fallacy, he argued, with little hope for a good ending to it all.

When, why and how France gave up Keynesian policies 
In this session, Renaud du Tertre9 and Hélène de Largentaye presented the 62 year period (1954-2016) as a succession of three different ‘growth regimes’, using a concept invented by the French regulation school which completes Keynesian short-term analyses by bringing in institutional features explaining long-term trends.

First, came the ‘Fordist growth regime’ (1954-1973) marked by strong state involvement and weak exposure to global markets. High growth rates of real wages fuelled aggregate demand which reached a level guaranteeing quasi-full employment. It ended with the collapse of the Bretton Woods system (1971) and the first oil shock (1973).

The second phase was an 18-year era of chaos and ruptures (1974-1992). Fixed exchange rates were abandoned and inflation accelerated but in 1983, policymakers chose to fully take part in the European integration process including the ‘European single market’ and a future monetary union. This meant losing monetary autonomy without setting up an appropriate coordination of fiscal policy at the European level. After 1985, banks and capital markets were deregulated and public companies were privatised. These domestic choices, clearly at odds with those of the previous period, sowed the seeds for a ‘neo-liberal’ era.

The last period (1993-2016), characteristic of a ‘neo-liberal growth regime’, started with a severe recession triggered by the 1992-93 European Monetary System crisis. Global financialisation, liberalisation and European ordo-liberalism became the key-words of this period marked by slow and unstable GDP growth and a record high unemployment rate of nearly 10 per cent.

Renaud and Hélène argued that the solution to France's problems can only come by transposing Keynesian policies at the Eurozone level, hopefully setting up the conditions of a new kind of ‘sustainable development regime’.

Concluding remarks 
According to Paul Davidson, the declining impact of The General Theory on policy in the last three decades is due to the fact that few people have read, and even fewer have understood it. Contrary to Keynes’s teachings, policy makers have been freeing up financial, product and labour markets thinking that unemployment and recession are due to administered prices and sticky wages. Paul explains why laissez-faire financial markets cannot be efficient: the economic future is uncertain and cannot be predicted via actuarial calculations based on past data, as Keynes showed in his Chapter 17.

Victoria Chick10 suggested that what unified the topics of the conference was the range of ways of thinking, including the non-verbal reasoning that characterises art appreciation, that furnished Keynes’s mind.

After the conference, delegates visited the ‘Keynes in King’s College’ exhibition held in the Audit Room of King’s College. Beneath the beautiful panels painted by Vanessa Bell and Duncan Grant — friends of John Maynard and Lydia Keynes — documents related to the German and the French translations of The General Theory were displayed, as well as books from Maynard’s collection.

Finally, Stephen Keynes, Maynard’s nephew, gave his personal recollections on his uncle, emphasising his artistic and emotional features before contributors and participants sat down to dinner in Kings’ magnificent Hall, in the presence of the Vice Provost, Professor Nicholas Marston.

The conference papers are available at:


1. Department of History of Art, University of Cambridge and Fellow of King’s College

2. Former Secretary General of Conseil d'analyse économique of the French Prime Minister, PhD (Cambridge).

3. Fellow of King’s College.

4. Skidmore College, New York. PhD (Cambridge).

5. University of Hohenheim, Stuttgart and President of the German Keynes Society.

6. Emeritus Professor of Economics, University of Paris 8.

7. Author of Post Keynesian Theory and Policy (Edward Elgar, 2015).

8. TUC, London and author of Keynes Betrayed (Palgrave, 2010).

9. Associate Professor, University of Paris 7.

10. Emeritus Professor of Economics, University College, London.