The Conservative Case for Keynesianism

Lord Keynes writes:

The most serious blow to the world economic system after 1973 was the dismantling of the post-WWII Keynesian system that gave us the golden age of capitalism (1945–1973). This attack on the post-war consensus in economics occurred in the 1970s and 1980s when monetarism and then revived New Classical macroeconomics came to dominate the economics profession and public policy. Of course, conservatives like Reagan and Thatcher were leaders in that neoclassical assault. The post-1979 era has been one of neoliberalism, globalization and neoclassical economics. And look how that era has ended: with world-wide financial meltdown and the globe on the verge of depression. Keynesianism pulled us back from the brink.

By contrast, the previous post-WWII economic system was that of the mixed economy with financial regulation, Keynesian macroeconomic management, and even nationalized industries in some countries. Certain versions of the mixed economy – particularly those in social democratic countries in Europe – have probably been the most successful, efficient and humane economic systems humankind has ever devised, systems that have increased wealth tremendously by delivering high employment and maximal use of resources.

Now don’t get me wrong. Perhaps there are better systems – maybe our descendants will be clever enough to discover even more successful ways of managing economies. But one can only note that the demand that modern governments should return to the tried and tested Keynesian system we once had isn’t a particularly “radical” proposal.

One central proposition of conservatism is the idea that we should favour historically successful ways of organising society – methods that are tried and tested – rather than radical and untested systems and policies. While I am not always convinced by this maxim, and I do not regard myself as a conservative, a return to a Keynesian system and effective financial regulation could actually be constructed and defended as a conservative policy.

I wonder what has become of the old-style conservatives with a social conscience who had no fanatical devotion to free market economics. In fact, mainstream conservatives after World War II largely accepted the Keynesian consensus (for how they did in the US, see “Keynesianism in America in the 1940s and 1950s”). After all, why should conservatives necessarily be committed to laissez faire? Conservatives began in the 19th century as the enemies of Classical liberals, the historical proponents of extreme free market economics.

For example, one can point to various types of British Toryism that have been critical of extreme capitalism. The early factory system and its cruelty were attacked by Tory radicals and Tory paternalists of the early 19th century who had a marked anti-capitalist ideology, and they even helped to introduce legislation reforming working conditions in UK factories. Under Thatcher, the Tories were divided over battles between the “Wets” and “Dries.” The former being old-style conservatives like Sir Ian Gilmour and Jim Prior who opposed Thatcher’s monetarism and more extreme free market ideology (Evans 1997: 45).

In regard to Gilmour, I can only say: whatever happened to this type of Tory? I quote from his Guardian obituary: “Ian Gilmour, the liberal Conservative politician, Lord Gilmour of Craigmillar, … died aged 81, served briefly as Edward Heath's defence secretary and for two years as lord privy seal under the less congenial leadership of Margaret Thatcher …. his reputation rests less upon his time in office than on his longer term opposition to Thatcher and Thatcherism. His background as proprietor (1954-67) and editor (1954-59) of the Spectator, and his books, made him a different kind of Tory. He was also one of the most consistent, and constructive opponents of Ricardian free market economics and their social consequences to be found in parliament. …. He first attracted attention with his purchase of the somnolent Spectator in 1954 .... Gilmour’s Spectator was humanitarian in social matters, anti-adventure in foreign affairs and Keynesian in economics.” Edward Pearce, “Obituary: Lord Gilmour of Craigmillar,” Guardian, 24 September 2007.

More interesting still is that the best biography of Keynes there is – a 3-volume work no less – is by the former Tory Robert Skidelsky, who is now an eloquent supporter of Keynesian economics in the UK. Modern conservatism does not necessarily need free market economics, and it could just as easily return to support for Keynesianism. I suspect the coming disasters we will see due to austerity and neoliberalism will teach the mainstream conservatives this lesson – what they in fact once learned but have forgotten.

Lord Skidelsky was a founding and finishing member of the SDP who went on to resign from the Conservative front bench in order to oppose the bombing of Kosovo and whose latest book is entitled Keynes: The Return of the Master. He is also active in Balanced Migration, which is co-chaired by a Labour MP, Frank Field. Other participants include a leading Co-operative MP, a veteran trade union leader, a prominent Muslim peer, a former Socialist Campaign Group MP (the widow of another and the mother of a third), a London-based Kurdish journalist, and a figure who resigned from the Blair Government in order to act as its critical friend before opposing the invasion of Iraq.