The Price of Peace by Zachary D. Carter (Review)
My single semester of macroeconomics did not provide a tremendous foundation for the subject, but I always perked up when the economics majors were speaking during law school. Their collective perspective seemed to have a rationality to it that seemed both interesting and persuasive. Despite my passing interest during grad school, economics is not a subject I am naturally drawn to, which makes a biography of John Maynard Keynes an unlikely reading selection. Still, when a friend of mine insisted I needed to check out Zachary Carter’s book, I was happy to give it a read, and I’m glad I did.
Carter takes a subject that may seem dry on its face and fleshes out the man and the subject in an interesting and accessible manner. I happened to be reading The Price of Peace right as inflation rates began rising around the world. Carter’s accessible writing made the current events far easier to understand and more interesting, as well. Knowing more about John Maynard Keynes and his outsized influence on modern economics is a helpful framework to gain understanding of the world around us and why we so often conflate economics and politics. For this reason alone, I recommend The Price of Peace, but I will also attest that Keynes was an intriguing character who is worth exploring independent of his accomplishments.
One slight critique starts with my disappointment when biographies don’t begin with the subject’s early life. The same disappointment exists here. I would have preferred that Carter started at the beginning. The alternative choice to begin discussing, “The Apostles”—the Cambridge group of which Keynes was a part—was provocative and insightful. Yet I still would prefer to know more about what shaped Keynes’s earliest days. This quibble is a small one but one worth noting for those considering the book.
Here are some of the interesting points I took from Zachary D. Carter’s biography of Keynes:
One assumption in the early economic world of Keynes was man’s rationality. Yet his experience propping up England’s economy during WWI have him insight that countered the idea of market rationalism. Instead, Keynes believed, “The fluctuations of markets did not express the accumulated wisdom of rational actors pursuing their own self-interest but the judgments of flawed men attempting to navigate an uncertain future. Market stability depended not so much on supply and demand finding an equilibrium as it did on political power maintaining order, legitimacy, and confidence.” Keynes placed more weight on “spontaneous optimism” rather than a rational, mathematical equation.
One Keynes theory is that inflation operates as a tax—salaries can’t keep up with the amount of money in circulation so buying power decreases. In Economic Consequences of the Peace, Keynes wrote that “by a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” He continued that “there is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.” This idea makes it clearer why the Federal Reserve is raising interest rates in such a sizable manner.
I enjoyed learning about the British perspective on American finance of WWI, including a recap of John Pierpont Morgan and Thomas Lamont, who I learned about in Ron Chernow’s excellent book, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance. If The Price of Peace proves interesting to any readers, I recommend House of Morgan as a complementary book.
I have read plenty about the factors and world leaders that shaped WWI and the years leading up to the conflict. Yet this biography on Keynes offers insight into the post-environment leaders that wrestled with the concepts of classical liberalism, autonomy, and how it fit together with imperialism—the dominant government structure of the day. Keynes had an up-close view of how Britain’s leaders operated, and it changed what he saw in imperialism. No longer did he see Great Britain as the model of democracy. Instead, he saw his country’s imperialistic approach as a thirst for conquest and power.
When Keynes wrote, The Economic Consequences of the Peace, he communicated the intertwined nature of politics and economics. He criticized the Treaty of Versailles and called for Europe to take a more lenient approach to Germany in forgiving debts and reparations. He presciently argued that doing so was the only pathway to achieve stable economic conditions across the globe.
It was interesting learning the origins of Keynesian thought on government programming and spending during recessions or times of significant unrest. The closeup of how Keynes’s original ideas played out in England makes their application today all the more insightful.
Carter framed the introduction to Keynes’s seminal work, The General Theory of Employment, Interest and Money, in a most interesting manner. Carter had already introduced Keynes as an effective and accessible writer with numerous examples of popular journalism. Yet Employment, Interest and Money is not an example of effective and accessible writing. Keynes took a page from lawyers in making his grand theory as inaccessible as possible—a cypher that only the brilliant could unpack. At its heart, Keynes posited that prosperity is not a given in society and requires intentional leadership—usage of power—to guide how society functions in order for the system to thrive. The other element of the Keynes theory was how he explained the effect of uncertainty on the economy.
Keynes’s critique of The Road to Serfdom was satisfying, since it was the same concern I had as Carter described the thesis: both Keynesian economics and laissez-faire economics can lead to totalitarianism. Friedrich von Hayek argued that moving an inch away from laissez-faire policies toward Keynesian ideals set nations on a pathway to totalitarianism. Yet Hayek conceded that the extreme of a laissez-faire system was not possible without describing what line should be drawn. It seems like this philosophy leads to what we often see in today’s republican politicians: “if I don’t like it, it’s socialism.” Such an approach leads to constant hand-wringing without cogent solutions on how to properly balance economic freedoms with economic structure. Keynes further specified that economic planning and moral education would be the best safeguard against uncertainty and militaristic nationalism.
British economist Joan Robinson—Keynes’s peer in the field—was helpful in better understanding Keynes’s General Theory and how Keynesian ideas evolved after his death. Carter summarized Robinson’s conclusions like this: “The point of the General Theory had been to restore human agency to economic theory. Keynes forced economists to grapple ‘with life lived in time.’ Systems didn't immediately snap to equilibrium. People made choices based on expectations about an uncertain future. Decisions like whether to save or spend, or whether to buy new factory equipment or lay off workers, were never obviously rational or irrational in the moment, because long-term consequences could not be predicted.”
Carter also provided a helpful juxtaposition of Keynes and Milton Friedman: “For Keynes, economic freedom included a guarantee of material security and the basic ingredients of Bloomsbury good life.” Friedman’s view on freedom and economics was different. He “believed that freedom was to be found not in humanity's capacity for self-government but in the ability of each individual to participate in a market. The only legitimate role for government was to establish the institutions necessary for free-market capitalism.” Relatedly, Carter’s summary of Friedman’s fear of low interest rates and spiraling inflation was timely and helpful given the current inflationary concerns.
As suggested above, I have no great foundation in the field of economics. But it is hard to be an engaged citizen without some understanding of how global economics fits together and influences daily life. Zachary Carter’s exploration of John Maynard Keynes helps put the pieces of economics together in a clearer picture, and he does so by using an individual who was both significant and interesting while exerting his influence.
