Tanya White reminds us of economist Keynes paths to peace
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The reference to the increased likelihood of international conflict over resources should remind us that it was once - certainly before and during World War 2 - widely taken for granted that there were major economic causes of war, and that economic policies and international economic institutions were important to prevent this and to increase the chances of peace. The economist Keynes, who is being revived today, certainly believed this. It may be in part because of the success of Keynes’ project of post-war prosperity and therefore peace that we have largely lost sight of this - until now. Anyone wanting to think about the economic causes of war and (international and domestic) economic policies for encouraging peace might like to start by reading a book called “John Maynard Keynes and International Relations - Economic Paths to War and Peace”, by Donald Markwell. It’s especially interesting on free trade and peace - really important today!
Comment by Arthur James on 24 November 2008:
The most important lesson from Keynes (as I read Markwell’s book) is the risks to peace from economic nationalism, and the need to pursue international economic cooperation along Keynesian lines that will make free trade possible. As Tanya White suggests, this is crucial today.
Comment by Management on 24 November 2008:
Tanya is considering reviewing Markwells book when she has time, in the meantime she provided a couple of links to other reviews: http://www.politicalreviewnet.com/polrev/reviews/inta/R_0020_5850_614_1007274.asp and http://eh.net/bookreviews/library/1293
Comment by Brian Lee on 26 November 2008:
It seems to me that how the world responds to this global financial and economic crisis is going to help shape the chances of world peace for many years to come. So far, so good. The pledges by G20 and APEC leaders not to resort to protectionism, while giving sort-of coordinated stimulus to their economies, is what we need - though it is a bit alarming that at APEC the pledge against protectionism was only for a year. (I hope these terrible attacks in India don’t derail an economically sensible government there.) It’s good to see some discussion here of what Keynes has to teach us about these issues. What’s that old line? - those who cannot remember the errors of the past are doomed to repeat them?
Comment by Arthur James on 26 November 2008:
It’s very interesting that some of the recent discussions of economic factors in war and peace have referred back to Keynes and his day. Strikingly, Robert Zoellick, President of the World Bank, began a recent speech on - get this - ‘Changing trends in global power and conflict resolution’ - http://www.iiss.org/conferences/global-strategic-review/global-strategic-review-2008/keynote-address/ - this way:
“In 1944, delegates from forty five countries gathered at Bretton Woods, New Hampshire, to consider the economic causes that had led to the World War that was then raging. Their vision was not only to achieve military victory, but also to secure the peace, unlike their predecessors in Paris in 1919.
That generation – like any other – had its parochial attitudes, differences in perspectives, and inability to foresee what was to come. But it perceived one big idea: the nexus among economics, governance, and security.
Those who gathered at Bretton Woods agreed to create the International Bank for Reconstruction and Development, the original institution of what has become the World Bank Group. As the delegates noted, “Programs of reconstruction and development will speed economic progress everywhere, will aid political stability and foster peace.”
(See the Markwell book on “Keynes and International relations” for more detail on this, and the background to it.)
It’s also interesting how much of the proceedings at the conference at which Robert Zoellick spoke - http://www.iiss.org/conferences/global-strategic-review/global-strategic-review-2008/ - were concerned with the potential for international conflict over energy, water, food and other resources, and also how economic development and prosperity could help create peace (e.g. in conflict and post-conflict situations like Iraq and Afghanistan).
I am sure that General Petraeus is as well aware of the importance of this economic dimension as Zoellick is. Has he read Keynes, I wonder?
Comment by Susan Chan on 27 November 2008:
Brian Lee may be too optimistic. Looking at the world from southeast Asia, not much more than 60 years after a world war fought here because of one country feeling excluded by others from resources it considered essential, here are some options -
1. one or more great power tries to monopolize or even get direct physical control of sources of minerals and energy, or even of food (maybe control of energy in central Asia, say, or of iron ore from various countries?), leading to international conflict
2. economic crisis leads to threats to disintegration in China leading to an aggressive regime coming to power, leading to conflict (maybe over Taiwan?)
3. economic crisis leads to an aggressive regime in Moscow (remember that Russia invaded Georgia just before the financial crisis blew up in September)
I could go on, but I don’t want to be any more provocative about particular countries.
Comment by A Singh on 29 November 2008:
Excellent reviews of Markwell’s “JMK and International Relations” provided by Tanya White!
This is a great opener -
“For those who think that economics is a dry, technical subject-and in many cases they are right-this is the book to read.”
The Robert Zoellick speech, in effect, highlights the relevance of Keynes’ thinking about how economic factors can cause or prevent conflict. I think this is a “sleeping” issue in the present turmoil, and Susan Chan shows some of the ways it could awaken. Let’s hope she’s wrong.
Thank you for this discussion.
Comment by Emily Ng on 1 December 2008:
There is also the dimension of what seems today to be called “post-conflict reconstruction”. This is very important in current and likely future US foreign policy - though my hunch is that Susan E Rice will get a better take on it than David Petraeus has.
The stress on post-conflict reconstruction in Dr (Susan, not Condi) Rice’s own expertise, and in the general Obama approach to foreign and security policy, is very timely, and not only because of Afghanistan and Iraq.
An interesting site on this is:
http://www.csis.org/isp/pcr/
and across the pond - http://www.stabilisationunit.gov.uk/
At this time when Keynes is flavor of the month in economic policy, it’s interesting to think how far our approach to post-conflict reconstruction has come since, at and after the Paris Peace Conference of 1919, Keynes had to argue against a veangeful “peace” (on this, see J M Keynes, “The Economic Consequences of the Peace”, 1919, and D Markwell, “John Maynard Keynes and International Relations”, 2006).
Comment by Arthur James on 3 December 2008:
Keynes, “The General Theory”, chapter 24, pages 381-83:
“I have mentioned in passing that the new system might be more favourable to peace than the old has been. It is worth while to repeat and emphasise that aspect.
“War has several causes. Dictators and others such, to whom war offers, in expectation at least, a pleasurable excitement, find it easy to work on the natural bellicosity of their peoples. But, over and above this, facilitating their task of fanning the popular flame, are the economic causes of war, namely, the pressure of population and the competitive struggle for markets. It is the second factor, which probably played a predominant part in the nineteenth century, and might again, that is germane to this discussion.
“I have pointed out in the preceding chapter that, under the system of domestic laissez-faire and an international gold standard such as was orthodox in the latter half of the nineteenth century, there was no means open to a government whereby to mitigate economic distress at home except through the competitive struggle for markets. For all measures helpful to a state of chronic or intermittent under-employment were ruled out, except measures to improve the balance of trade on income account.
“Thus, whilst economists were accustomed to applaud the prevailing international system as furnishing the fruits of the international division of labour and harmonising at the same time the interests of different nations, there lay concealed a less benign influence; and those statesmen were moved by common sense and a correct apprehension of the true course of events, who believed that if a rich, old country were to neglect the struggle for markets its prosperity would droop and fail. But if nations can learn to provide themselves with full employment by their domestic policy (and, we must add, if they can also attain equilibrium in the trend of their population), there need be no important economic forces calculated to set the interest of one country against that of its neighbours. There would still be room for the international division of labour and for international lending in appropriate conditions. But there would no longer be a pressing motive why one country need force its wares on another or repulse the offerings of its neighbour, not because this was necessary to enable it to pay for what it wished to purchase, but with the express object of upsetting the equilibrium of payments so as to develop a balance of trade in its own favour. International trade would cease to be what it is, namely, a desperate expedient to maintain employment at home by forcing sales on foreign markets and restricting purchases, which, if successful, will merely shift the problem of unemployment to the neighbour which is worsted in the struggle, but a willing and unimpeded exchange of goods and services in conditions of mutual advantage.”
The only discussions I know of this and related passages in the GT (including in chapter 23) on Keynes’s belief in economic causes of war and that his economics might help promote peace are:
- Hyman P Minsky, “John Maynard Keynes”, Columbia University Press, 1975, page 159
- Donald Markwell, “John Maynard Keynes and International Relations: Economic Paths to War and Peace”, Oxford University Press, 2006, pages 178-190
Comment by single child on 3 December 2008:
Keynes said “economic causes of war, namely, the pressure of population and the competitive struggle for markets.” We are all aware of the imbalances between importers like the US and exporters like Germany, Japan, China, S. Korea and so on, but there seems to be no public focus on population growth. It must be the third rail of international relations. http://www.gradebook.org/Geography%20Class-Population%20Growth.htm
Comment by A Singh on 4 December 2008:
Thanks for the reference to Hyman Minsky on Keynes on war and peace. It’s only a couple of pars - remmber Minsky was writing in 1975 -
“Conflict among nations
Keynes also believed that ‘if nations can learn to provide themselves with full employment by their domestic policy … there need be no important economic forces calculated to set the interest of one country against that of its neighbours’ (GT, p. 382). Keynes viewed the tensions among the affluent nations of Europe and America as stemming from the felt needs to export in order to protect domestic employment, if not to raise domestic employment by ‘beggar my neighbour’ policies.
For the first twenty-five years after the Second World War, this view of Keynes was borne out by relations among the affluent capitalist countries. Aside from vestiges of past colonialism, such as the Vietnam involvement by first France and then the United States, there was an absence of war and even of serious tensions among the countries that were both capitalist and affluent. The ideological Cold War is not a question of economic conflict. The ability to sustain domestic markets by monetary and fiscal policies eliminated pressures for countries to ‘compete’ for controlled markets or advantageous positions in world trade.”
How relevant is this again today!
The reference to Markwell is also interesting. He gives a detailed account of how Keynes came to write in the General Theory about the effect of his economics on the chances of war and peace. Fascinating that Keynes was responding to a debate in New Statesman on “does capitalism cause war?”
Comment by A Singh on 4 December 2008:
PS I meant to mention, in reply to Single Child, that Minsky says almost nothing about population. Markwell has quite a bit on Keynes’ thinking about population pressure and the chances of war/peace. Thanks again to Arthur James for the references.
Comment by single child on 5 December 2008:
A Singh: Questions-how did Keynes characterize the Korean War involving one affluent capitalistic country and what did or would he say about a planned,probably permanent State participation as principal in capitalism such as China and many other countries and would he encourage the US to buy, keep and manage large or important companies such as GM, banks etc?
Comment by A Singh on 6 December 2008:
Sorry, single child, I don’t know what Keynes thought of the Korean war of 1950-1953 since he died in 1946. But I think that since it arose from a communist country attacking a non-communist one (though South Korea was then very poor), it does not contradict what Hyman Minsky said.
Keynes wanted to save capitalism, but to make it fairer and, above all, more stable and efficient. If this required a good deal of state action, then so be it - but he wanted no more than was needed.
Since Markwell shows that Keynes was strongly anti-Marxist, my guess is that he would have been glad that supposedly “communist” China was becoming increasingly capitalist - but he would have wanted its government to take measures (as they are) to stabilize their economy in an economic storm like now. He would have been pleased that China was increasingly cooperating with other economies - as reflected by its positive role at the G20 and APEC meetings in the last few weeks. China is now an advocate of an open international trading system! This is a huge step forward, isn’t it? Markwell shows that for most of his life Keynes favoured free(ish) trade, and saw this as helping the prospects of peace. So much better for China to be advocating open world trade than trying to create its own exclusive economic bloc. And good on China for trying to prevent an Obama administration falling into protectionism.
I suspect that Keynes would have favoured an auto companies/banks/etc bailout if this was needed to prevent worse economic crisis.
But neither I nor Hyman Minsky (is he still alive?) nor Donald Markwell nor you can know for certain…
Comment by Susan Chan on 6 December 2008:
A Singh - Hyman Minsky is, alas, dead. According to wikipedia - http://en.wikipedia.org/wiki/Hyman_Minsky - he died on October 24, 1996. So he missed the recent revival of interest in his work on Keynes. So did Keynes himself, who died 62 years too early.
But this doesn’t make Keynes’s thinking on the economic aspects of war and peace (or Hyman Minsky’s or Donald Markwell’s exposition and analysis of it) any less relevant!
Comment by single child on 6 December 2008:
Susan/A Singh, both Republican and Democratic US Administrations for decades have marginalized Keynes and now out of fear and failure even a Bush administration has supported Paulson’s plan to prop up at least the financial system. The comments relating to Keynes and Vietnam distracted me about Korea, how embarrassing…
Unrestrained population growth greatly concerns me. So does permanent State ownership over operating businesses such as those central to capitalism, banking, major export manufacturing, energy, others.
It seems we would not want any international operating company such as Microsoft or GM (at least previously) to have public monies granted to it for the purpose of funding and directing major military assets including offensive nuclear weapons. Most certainly that would chill or otherwise skew true negotiations with a small country and every business counter party.
That scenario seems to be equivalent to a state nuclear power with millions of military troops directed by the leadership of a for profit State owned company. Granted the government of the US and all other countries with such capabilities have always protected some “national interests” including citizens and businesses abroad. But in the case of the US they needed to convince a removable elected government to protect them where the voters knowingly provide the funds through taxation.
If any government cannot be replaced by periodic and scheduled real citizen based transfers of leadership with different views, as the US just demonstrated, then it seems to me Keynes would have been as concerned about that explosive conflict of interest as I.
Comment by Arthur James on 10 December 2008:
Sorry that I cannot answer what Single Child says, but I have been puzzling over the passage from Keynes’s “General Theory” that I put up last week, and some of the discussion of this, and …
… here is a puzzle.
1. In the final four pages of “The General Theory”, Keynes devotes two pages to a passage about the effect of his economics on the prospects of war and peace. You’d think that was an important topic, wouldn’t you?
2. Keynes does. He stresses the importance of this, by starting this passage -
“I have mentioned in passing that the new system might be more favourable to peace than the old has been. It is worth while to repeat and emphasise that aspect.”
Keynes says “it is worth while to repeat and emphasise that aspect”.
3. In the index, there appears this entry:
“War -
the Mercantilists on, [page] 348
and future of capitalism, [pages] 380-2″
i.e. “war and [the] future of capitalism”.
What Keynes thought it “worthwhile to repeat and emphasise” about “war and [the] future of capitalism” would seem to be important.
But none of his biographers (it seems) mentions this, and almost no other writing about him mentions it either.
Why is this so?
Two exceptions have been mentioned earlier in this blog, authors about Keynes whose books do discuss this passage - Minsky and Markwell. Prompted by a footnote in Markwell, I can add a third - Don Patinkin, in “Anticipations of the General Theory?” (Basil Blackwell, Oxford, 1982, page 14).
But don’t get too excited. All Patinkin says is this, in a brief account of the final chapter of “The General Theory”:
“Most of the chapter is devoted to the long-run implications of a successful full-employment policy for the accumulation of capital, hence the rate of interest and the distribution of income; for the future of laissez-fair versus state socialism; and for the prospects of war and peace.”
At least that’s six words - “the prospects of war and peace” - more than almost anyone else has written on this!
Minsky devotes half a page to this topic (which A Singh posted here a few days ago), and Markwell gives over about a dozen pages to the context, exposition and analysis of what Keynes had to say about “war and [the future] of capitalism”.
Can anyone explain why almost all economists writing about Keynes, including about the writing of “The General Theory” and specifically about this chapter of “The General Theory”, say nothing about this crucial topic when Keynes himself thought it “worthwhile to repeat and emphasise” it?
Comment by single child on 10 December 2008:
Arthur James: After reading the last chapter of General Theory published in 1936, I suspect the answer to your question has something to do with the following considerations, at least in part, depending on when they were written.
1. While I wholeheartedly agree with the relevance of the frictions and desperation that can come from his two economic causes of war - populations - and struggle for markets - neither of these seem to adequately describe the cause of WW II then brewing. Did he write about the overly punitive treaty from WW I as the initial cause of economic problems in newly democratized Germany during the 1920s-1930s and the dramatic political destruction of that democracy begun in 1932 and accomplished completely by 1934
2. Another possibility might be that his following words end the second to last chapter (24) of General Theory and drawing attention to Page 348 would draw a researchers attention to: [Words in brackets are mine]
“The authoritarian state systems of today [1935?] seem to solve the problem of unemployment at the expense of efficiency and of freedom. [True then, true now in 2008] It is certain that the world will not much longer tolerate the unemployment which, apart from brief intervals of excitement, is associated and in my opinion, inevitably associated with present-day [remember it was almost 1936] capitalistic individualism. [In the 72 years that followed, this has so far been disproved. Indeed in 2008 even nominal, defunct Communism, now are simple authoritarian regimes, have embraced capitalism, however cloaked or regulated.
3. Keyes also said “For my own part, I believe that there is social and psychological justification for significant inequalities of incomes and wealth, but not for such large disparities as exist today.” During the next 72 years, my impressions are that the disparities anywhere in the world are greater than anything he saw. Capitalism has spread since and appears to be the only basis for growth despite known drawbacks.
4. Personally, I think Keyes was brilliant and in his written words astutely summarizes important and opposing considerations before drawing his conclusions. I think were he here today he would make several different conclusions with the new information available to him.
5. Finally, perhaps the most fundamental difference between Keynes 1936 and Keynes 2008, might be that he would no longer hold the view that full employment (however defined but flat lined and with little volatility) also in Chapter 24 - “THE outstanding faults of the economic society in which we live are its failure to provide for full employment…” -let’s call that perfection, and presumably that he meant it to be attainabled for almost everyone in the world almost all of the time. Thus he would no longer stress his conclusions with an impossible standard and inevitably draw conclusions. Wish he were here today.
After all, name any single human endeavor besides any economic system ever practiced, that is even near perfection. And consider nature, it is not perfect in the context of “full employment”, because it is always competitively overproducing, creating cycles of destruction and recreation embedded in the evolutionary process. And maybe sustainability is the measure of success and adaptability and change, even some volatility are the tools and the closest to perfection we can achieve, rather than steady “full employment”.
Every quote of Keynes in this comment was sourced at http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch24.htm
Comment by Laura Harrison on 12 January 2009:
Interesting that Greg Mankiw, in an article in the New York Times, quotes the first edition of Paul Samuelson’s (Keynesian) economics textbook, with regard to the impact of the Depression: “It is not too much to say that the widespread creation of dictatorships and the resulting World War II stemmed in no small measure from the world’s failure to meet this basic economic problem adequately.”
Comment by richard on 12 January 2009:
MAYNARD VERSUS MILTON has been a robust argument since high school. In college Maynard was the darling of the left, and as research and evidence mounted that the NEW DEAL flopped MILTON emerged. Now MAYNARD seems back with a vengence. Personally I have little confidence but hope that the “above all else do no harm” can become an economic and just not a medical ethos. We all shall see.