“A timely, lucid and compelling portrait of a man whose enduring relevance is always heightened when crisis strikes.”—The Wall Street Journal
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At the dawn of World War I, a young academic named John Maynard Keynes hastily folded his long legs into the sidecar of his brother-in-law’s motorcycle for an odd, frantic journey that would change the course of history. Swept away from his placid home at Cambridge University by the currents of the conflict, Keynes found himself thrust into the halls of European treasuries to arrange emergency loans and packed off to America to negotiate the terms of economic combat. The terror and anxiety unleashed by the war would transform him from a comfortable obscurity into the most influential and controversial intellectual of his day—a man whose ideas still retain the power to shock in our own time.
Keynes was not only an economist but the preeminent anti-authoritarian thinker of the twentieth century, one who devoted his life to the belief that art and ideas could conquer war and deprivation. As a moral philosopher, political theorist, and statesman, Keynes led an extraordinary life that took him from intimate turn-of-the-century parties in London’s riotous Bloomsbury art scene to the fevered negotiations in Paris that shaped the Treaty of Versailles, from stock market crashes on two continents to diplomatic breakthroughs in the mountains of New Hampshire to wartime ballet openings at London’s extravagant Covent Garden.
Along the way, Keynes reinvented Enlightenment liberalism to meet the harrowing crises of the twentieth century. In the United States, his ideas became the foundation of a burgeoning economics profession, but they also became a flash point in the broader political struggle of the Cold War, as Keynesian acolytes faced off against conservatives in an intellectual battle for the future of the country—and the world. Though many Keynesian ideas survived the struggle, much of the project to which he devoted his life was lost.
In this riveting biography, veteran journalist Zachary D. Carter unearths the lost legacy of one of history’s most fascinating minds. The Price of Peace revives a forgotten set of ideas about democracy, money, and the good life with transformative implications for today’s debates over inequality and the power politics that shape the global order.
LONGLISTED FOR THE CUNDILL HISTORY PRIZE
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After the Gold Rush
John Maynard Keynes was not an athletic man. Though a spirited debater, he had always suffered from fragile health. Overworked by choice and underexercised out of habit, he had acclimated himself to living in the constant shadow of head colds and influenza attacks. He was thirty-one years old on the first Sunday of August 1914 and had lived nearly all of those years at Cambridge, where, like his father before him, he held a minor academic post. His friend and mentor Bertrand Russell was accustomed to seeing the younger man reviewing figures or buried in papers on weekend afternoons. A King’s College man, Keynes might, in moments of extreme restlessness, calm himself with a walk through the Great Court of Russell’s Trinity College, taking in the turreted medieval towers of King’s Gate, the soaring gothic windows of the chapel built during the reign of Queen Elizabeth, and the steady waters of the fountain designed when William Shakespeare had composed Hamlet. Keynes was a man who savored tradition and contemplation. He was perfectly suited for a life at the timeworn university.
But there was Keynes, hustling down the weathered flagstones that afternoon, tearing past the lush, closely cropped green lawns. Russell stopped his young friend to ask what was wrong. Keynes, with a brusque flutter of words, told him he needed to get to London. “Why don’t you go by train?” the philosopher asked.
“There isn’t time,” Keynes replied to the baffled Russell and hurried along.
There were more curiosities to come. Keynes left the court and approached a motorcycle belonging to his brother-in-law, Vivian Hill. Keynes—who was nearly six feet seven—folded his long legs into the sidecar, and the two proceeded to putter and jostle their way sixty miles to the capital. Their odd, frantic journey would change the fate of the British Empire.
England was in the fifth day of the most violent financial crisis it had ever experienced—one that threatened to tear its economy apart even as the nation’s leaders wrestled over the most momentous diplomatic question of their generation: whether to enter the war breaking out on the European continent. Though none of the foreign policy experts and financial engineers huddled in London recognized it at the time, the economic system that had fed and fueled Europe for the past half century had just come to a sudden, cataclysmic end.
Since the close of the Franco-Prussian War in 1871, the world’s great powers—and many of its minor players—had grown to depend on complex international trade arrangements to provide their citizens with everything from basic foodstuffs to heavy machinery. It was an era of ostentatious prosperity for both the aristocracy and an expanding, increasingly powerful middle class, a period future generations would romanticize with names like “La Belle Époque” and “The Gilded Age.” In England, factory workers spun Egyptian cotton and New Zealand wool into fineries that decorated homes all over the continent. The well-to-do and the up-and-coming adorned themselves with diamonds and ivory from South Africa embedded in settings crafted from gold mined in Australia. In Paris, the Hôtel Ritz served afternoon tea from India, while a new mode of haute cuisine spread through the luxury hotels of Europe, combining ingredients from the New World with what had once been regional specialties of France, Italy, and Germany.
“In this economic Eldorado, in this economic Utopia,” Keynes would later recall, “life offered, at a low cost and with the least trouble, conveniences, comforts, and amenities beyond the compass of the richest and most powerful monarchs of other ages.”
The cultural explosion was the product of empire. England, Spain, France, Germany, Russia, Belgium, the Netherlands, the Ottoman Empire, and even the adolescent United States all deployed military force to cultivate power over the people and resources of other continents. Keynes was aware of the brutalities that accompanied British imperialism, once earning a rebuke from a top official at the India Office for issuing a report that depicted a “coldblooded” British response to a plague that had “terribly ravaged” India. But Keynes did not consider such events an integral element of the world’s economic structure. They were instead unfortunate impurities, flaws that would eventually be distilled away by the engines of progress. “The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of [the] daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life.”
What fascinated Keynes as a young economist was not the manner in which this new material abundance was extracted by European powers but the “the easy flow of capital and trade” among them. All across the continent new financial contracts had been woven into the patterns of global commerce. Companies were accustomed to borrowing money in one country, selling their products in another, and purchasing insurance in yet another. The proud, beating heart of this order was the City of London, the financial district of the British capital, where fully half of the world’s business affairs were financed. Whatever their nationality, the storied banking dynasties of the age—the transcontinental Rothschilds, the French Lazards, the Schröders of Hamburg and the American House of Morgan—all set up critical operations in London, where more than a billion dollars in foreign bonds were issued every year to private enterprise and sovereign governments alike. This financial power had transformed London into the thickest bustling metropolis on the planet, with a population of more than six million, nearly double that of 1861.
For all its complexity, the system London oversaw had enjoyed a remarkable stability. Trading accounts between nations were balanced, capital flows were steady and predictable, and financial disruptions in the Old World were brief affairs, always quickly corrected. Measured against such fabulous symmetries, most members of the leisure class considered even the underbelly of this system—domestic industrial poverty, a twenty-year agricultural depression in America—to be inconsequential. “The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep,” Keynes wrote. “Most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement.”
The new financial reality had spawned its own political ideology. In 1910, the British journalist Norman Angell published The Great Illusion, a book claiming to demonstrate that the international commercial entanglements of the twentieth century had made war economically irrational. No nation, Angell argued, could profit by subjugating another through military conquest. Even the victors would suffer financial harm, whatever the spoils might be.
Angell was wrong—and, worse, misunderstood. His book sold millions of copies, developing a cult following of influential public officials who came to believe that because war was financially counterproductive, it was now a problem of the past. That was not what Angell himself actually preached; “irrational” did not mean “impossible.” But in an age possessed by an ideal of enlightened, rational government, many political leaders came to believe that the prospect of war was becoming “more difficult and improbable” by the day. It was an early version of the doctrine New York Times columnist Thomas L. Friedman would eventually formulate in a bestseller of his own a century later, when he declared that “no two countries that are both part of a major global supply chain . . . will ever fight a war.”
But the unthinkable event had in fact arrived. On July 28, 1914, a teenage Yugoslav nationalist murdered Archduke Franz Ferdinand, the heir to the throne of the Austro-Hungarian Empire, during a visit to Sarajevo, and the empire retaliated by declaring war on Serbia. Armies were now mobilizing from France all the way to Russia. As the thicket of political alliances appeared certain to draw empire upon empire into the looming conflict, the seemingly impregnable payment system that had made London the center of the economic universe abruptly collapsed.
Table of Contents
1 After the Gold Rush 3
2 Blood Money 20
3 Paris and Its Discontents 61
4 Consequences 89
5 From Metaphysics to Money 110
6 Prolegomena to a New Socialism 145
7 The Great Crash 176
8 Phoenix 216
9 The End of Scarcity 246
10 Came the Revolution 276
11 War and Counterrevolution 308
12 Martyr to the Good Life 338
13 The Aristocracy Strikes Back 370
14 The Affluent Society and Its Enemies 395
15 The Beginning of the End 422
16 The Return of the Nineteenth Century 453
17 The Second Gilded Age 484
Selected Bibliography 589