The End of Laissez-Faire: The Economic Consequences of the Peace by John Maynard KeynesJohn Maynard Keynes (1883-1946) was the most influential economist of the first half of the twentieth century. During both world wars he was an adviser to the British treasury, and his theory of government stimulation of the economy through deficit spending influenced Franklin D. Roosevelts New Deal administration. The mass unemployment caused by the Great Depression inspired his most famous work, General Theory of Employment, Interest and Money (1935-36).
Keynes first gained widespread prominence immediately following World War I, when he attended the Versailles peace conference as an economic adviser to British Prime Minister David Lloyd George. Disgusted with the harshly punitive and unrealistic provisions of the Versailles Treaty, as well as the political chicanery and general incompetence of the chief participants, he published The Economic Consequences of the Peace in 1919. This book gained a good deal of notoriety because of its withering portraits of both French premier Georges Clemenceau and U.S. President Woodrow Wilson. Keynes described Clemenceau as motivated only by shortsighted nationalistic goals and vindictiveness, which aimed at crippling Germany for generations no matter what the consequences to the rest of Europe. He found fault with Wilson for his ivory tower idealism, lack of diplomatic savvy, and unfamiliarity with the political realities of Europe. This ineffectual combination ultimately dashed his best hopes for a League of Nations and a just resolution to the war in Europe. In a point-by-point analysis Keynes makes clear the ruinous consequences of the treaty to all of Europe and proposes substantial modifications. Unfortunately, few appreciated Keynes’s prescience, and he saw his worst fears realized in the rise of Hitler and the devastation of World War II.
In The End of Laissez-Faire (1926) he presents a brief historical review of laissez-faire economic policy. Though he agrees in principle that a marketplace of free individuals pursuing their own self-interest without government interference has a better chance of improving society’s economic situation than socialist alternatives, he suggests that government can play a constructive role in protecting individuals from the worst harms of capitalism’s cycles, especially as concerns unemployment. Other useful government functions are the dissemination of information relating to business conditions, encouraging savings and investment along nationally productive channels, and forming a national policy about the size of population.
Keynes’s brilliant mind and lucid writing are evident on every page. Both of these works are still well worth reading for his many stimulating ideas and profound knowledge of economics.
John Maynard Keynes
Proponents of laissez faire argue for a complete separation of government from the economic sector. Laissez-faire capitalism started being practiced in the midth century, and was further popularized by Adam Smith 's book The Wealth of Nations. The term laissez-faire likely originated in a meeting that took place around between powerful French Controller-General of Finances Jean-Baptiste Colbert and a group of French businessmen headed by M. Le Gendre. When the eager mercantilist minister asked how the French state could be of service to the merchants and help promote their commerce, Le Gendre replied simply: "Laissez-nous faire" "Leave it to us" or "Let us do [it]", the French verb not having to take an object. Laissez faire, morbleu!
This is Mises's review of J. A review of a lecture given by John M. Keynes in Berlin. It makes a sharp critique of liberalism and capitalism; it rejects the free private ownership of the means of production, but wishes nonetheless not to be socialist. Rather, it recommends as the solution a middle point between private ownership of the means of production, on the one hand, and social ownership, on the other; that is, private property regulated through social control. The state would not undertake this social control; instead "semi-autonomous corporate bodies within framework of the state" would do it, hence "a certain return to medieval forms of independent autonomies.
K eynes pronounced his famous discourse on the End of Laissez-faire in It has been a long time a-dying. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear-sighted than when they act separately. As the depression dragged on, the failure of the system to employ a large part of its means for any end at all became more and more painfully obvious.
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November John Maynard Keynes, known friend of Virginia Woolf, gives the speech, The End of Laissez-Faire , addressing topics that he later reintroduces in a series of essays in In his speech and series of essays, Keynes challenges the long-held approach of laissez-faire, a hands off, government approach to economic policy. Instead, Keynes poses that the State, the government, should take a more active role in stimulating the economy when it experiences recession periods in the business cycle. He believes that it is the duty of the government to cushion the population, especially those who become unemployed as a result of a recession period, through some sort of stimulus. He also believes that the State should act in a way that encourages savings and investment amongst the population.
Winning the war of ideas will be vital if we ever hope to implement such a successful program again. Many thinking people are surprised that the lessons of the Great Depression have been so easily forgotten as the rich world struggles to get economies back on track after the worst recession since the s. Keynes himself would have been surprised, because he thought the end of laissez-faire economics was well on its way even before the Great Depression. But laissez-faire rose again with a vengeance under the articulate, if simplistic, preachings of Milton Friedman. It remains a guiding principle today partly because of the very allure of its simple core principle.