Philip Kobina Baidoo, Jr. And Hitler's Mein Kampf 2

JOHN MAYNAR KEYNES & “THE ECONOMIC CONSEUQUENCES OF THE PEACE”

We should begin by stressing that the ideas John Maynard Keynes developed in his book “The Economic Consequences of the Peace” played contributed to the formulation of the Marshall Plan. The Marshall Plan in turn contributed to the reconstruction of Europe and economic growth in post-war Europe and the Greek Economic Miracle (1950-1973), among other notable achievements across Europe and the world. They also contributed to the founding of the Bretton Woods System (IMF/World Bank) on the basis of Keynes’ proposed International Clearing Union. These and other ideas developed in “The General Theory of Unemployment, Inflation and Money” also contributed to the greatest economic growth (in human history) experienced around the world in post-Second World War.

The next question is: Was Keynes correct in his assessment of the peace that imposed reparations on Germany in the larger context of his predictions? It depends. French economist Etienne Mantoux challenged some of Keynes’ dire predictions in a book, “The Carthaginian Peace Or the Economic Consequences of Mr. Keynes,” a critique of “The Economic Consequences of the Peace.” Mantoux’s critique may have formed the basis of Mr. Baidoo’s arguments questioning the arguments of Keynes. If that is the case, then, Mr. Baidoo grossly misread both Mantoux and Keynes and other literature on the subject. Even so, there is not enough internal evidence in his articles to show he had critically read both men.

And here is why:
Generally, Keynes made his dire predictions contingent upon the heavy reparations imposed on Germany in the context where Germany’s development and growth suffered on account of paying off the reparations. In this context he predicted the production capacities of specific German industries going down, some of which turned out to be the reverse instead, in the particular instance where Germany’s payment of reparations dwindled her national coffers. Keynes’ experience working with the Treasury would inform his predictions. And yet there are good reasons to explain away Mantoux’s criticism of “The Economic Consequences of the Peace” which Mr. Baidoo’s articles did not even attempt delving into. In other words there is a proper context for Keynes’ “miscalculated” predictions, which is, that, as we pointed out previously, he made his predictions in the particular situation where Germany’s payment of reparations ate deeply into her national coffers, draining it and stifling domestic economic growth.

The late Canadian economist Harry G. Johnson considered Germany’s situation, namely the preceding phenomenon, in terms of two important theories: “The classical transfer problem” and “taxable capacity.” The former describes a situation where Germany’s ability to pay off the reparations burden was to be evaluated in terms of whether or not she incurred unnecessary hardship while the latter refers to a situation where that unnecessary hardship potentially eroded Germany’s sources of revenue. The two may seem to share the concept of counterfactual conditional. Keynes perceived the German reparations burden generally in terms of these two concepts. Keynes went further to lend testable models of mathematical sophistication to these concepts. The following citation explains what Johnson and Keynes meant by “taxable capacity” and “the classical transfer problem” (H History):

“The treaty that began to emerge was a thinly veiled Carthaginian Peace, an agreement that accomplished Clemenceau’s hope to crush France’s old rival. According to its terms, Germany was to relinquish 10 percent of its territory. It was to be disarmed, and its overseas empire taken over by the Allies. Most detrimental to Germany’s immediate future, however, was the confiscation of its foreign financial holdings and its merchant carrier fleet. The German economy, already devastated by the war, was thus further crippled, and the stiff war reparations demanded ensured that it would not soon return to its feet. A final reparations figure was not agreed upon in the treaty, but estimates placed the amount in excess of $30 billion, far beyond Germany’s capacity to pay. Germany would be subject to invasion if it fell behind on payments.”

It was in this context that Keynes suggested to Lloyd George, the British Prime Minister at the time, what some refer to as the “Keynes Plan,” of which Prime Minister George approved, that Germany be given considerable loans to offset some of the negative reparations impact on the German economy, such as buying materials and food. Prime Minister George endorsed the “Keynes Plan” because he had great respect for Keynes on account of his expert management of British finances during the war and his work on the Indian currency. Prime Minister George also had great respect for Keynes because his employment at the Treasury made it more respectable and stronger. From here we can look at other dimensions of the reparations controversy. However, President Woodrow Wilson rejected the “Keynes Plan” fearing congressional disapproval. South African statesman General Jan Smuts, the only Allied leader at the peace conference to present a formal objection to the treaty, said it [the treaty] “would do grave injury to the industrial revival of Europe.”

That was also the basis for Keynes’ objections. Few people know it was on Smut’s advice that Keynes wrote “The Economic Consequences of the Peace.” Keynes would write the following prophetic indictment of the treaty in his book: “If we aim at the impoverishment of Central Europe, vengeance, I dare say, will not limp. Nothing can then delay for very long the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the later German war will fade into nothing, and which will destroy, whoever is victor, the civilisation and the progress of our generation…”

Contrast the afore-cited quotation with the following in the same book: “I cannot leave this subject as though its just treatment wholly depended either on our own pledges or on economic facts. The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable, –abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilised life of Europe.”

The above quotation represents a fuller restatement of Smut’s “would do grave injury to the industrial revival of Europe.” But, then again, having provided the background to the treaty we can proceed to examine the critique of Mantoux. The late British and South-African economist, a professor of economics at Cape Town, Cambridge and Oxford, wrote of post-First World War Germany:

“The liquidity of the banking system was also greatly improved by the funds received abroad, although the banks were following a risky strategy to the extent that they relied on short-term deposits to make long-term loans. The massive foreign borrowing contributed to Germany’s industrial rationalization and revival, notably in the coal, iron, and steel, electrical and chemical industries. However, only 40 percent of the long-term foreign capital issued in Germany in 1924-30 was taken by private enterprises, the remainder going to various public and semi-public bodies, such as the cities and municipalities. This enabled the local bodies to make substantial investments, partly in public utilities, urban transport, and housing, partly in social, cultural, and sporting facilities…”

Feinstein was, indeed, one of the critics of Mantoux and furthermore, among other statements of fact, the afore-cited quotation serves as a serious indictment of the latter’s reasoning in connection with Keynes’ ‘The Economic Consequences of the Peace.” What is more, the coal, steel, and iron industries represented some of those industries whose production capacities Keynes’ believed would drop in accordance with his mathematical calculations dealing with the German reparations payment. We are all clear by now that Mr. Baidoo did not mention Feinstein in his articles. But this omission is not our primary headache. The question is: What is Feinstein saying?

Feinstein is implying here that investment of massive foreign capital in Germany following the First World War contributed to the reversal of Keynes’ dire predictions, hence the revival of Germany’s coal, iron, and steel, electrical and chemical industries.

We also see the state playing a big role in reviving industries and contributing to development and growth, contrary to what doctrinaire proponents of free market fundamentalism would have us believe. That notwithstanding, Feinstein discovered the missing link in Mantoux’s critique. But even then, given Feinstein’s analytic intervention, one would have expected Mr. Baidoo to have advanced a counterfactual argument in which he speculated on Keynes’ dire predictions in the absence of capital flows into Germany. In other words, Mr. Baidoo should have conducted his critique of “The Economic Consequences of the Peace” and its internal projections in the context of “the classical transfer problem” and “taxable capacity.” In the final analysis, Keynes was familiar with Germany’s economic strength at the time and constructed his dire projections on that account.

The irony is that it was the same Keynes whose intervention on Europe’s behalf that Germany eventually came to be in a position antithetical to his projections. It was Keynes whose formal requests to the United States ended up bringing capital flow and investments to Europe, Germany included, after the First World War leading to the growth and development we saw in Germany, a fact already alluded to by Feinstein. Put simply, Keynes’ successful intervention would eventually come to neutralize his dire projections. But that does not in any way undermine the credibility of “The Economic Consequences of the Peace.” Keynes’ enviable track record at the Treasury offers deeper insights his analytic prowess as far as economic and mathematical projections go. In all, it goes without saying that Keynes’ criticism of the reparations burden imposed on Germany may have been the cause of Wall Street injecting capital flows into post-war Germany.

Thus Keynes’ vision and Feinstein’s analysis, at least in theory and practice, weaken or invalidate Mantoux’s critique of Keynes.

We are implying here that Keynes’ projections were strategically self-correcting even with Mantoux’s hyperbolic incantations of seeming factualness, as well as that in one sense Feinstein’s measured critique of Mantoux with economic data and well-reasoned arguments resolves the seeming paradox which may have entangled Mantoux and bypassed Mr. Baidoo’s questionable, limping intellect. The level of cascading serial critique assumes a circular character, with Keynes critiquing the United States, France and Britain, with Mantoux and others critiquing Keynes, and with Feinstein, McIntosh, Douglas and others critiquing Mantoux. Where does the circular critiquing begin and where does it end? It may be that the circular character of critique exists because economics is not an exact science. We also see a repeat of this circular character in instances where Adam Smith critiqued mercantilism, Karl Marx critiqued Adam Smith, Keynes critiqued Smith and Marx, Milton Friedman critiqued Keynes, Paul Krugman and neo-Keynesians critique Friedman…

Yet Keynes stands tall among these economists in the latter half of the 20th century and 21st century. Of the men on the list only Smith was a moral philosopher rather than an economist. This distinction is very important. The distinction notwithstanding, economic projections are always designed with and without a set of known and or unknown variables, with their possibilities of observable outcomes on macroeconomic and microeconomic behavior measured in accordance with if a particular variable(s) is present or absent. In our particular case all Mantoux needed were the factors of capital flow and foreign investment into Germany, to give a better valuation context to the thesis of “The Economic Consequences of the Peace.” Injections of foreign investment and capital flows into post-war Germany more than compensated for Keynes’ dire projections in relation to his technical analysis of the political economy of production budgeting in a hypothetical cash-strapped Germany that failed to meet her reparations payment schedules.

Yet capital flow and foreign investment into Germany were external variables Keynes had no control over.

Let us add quickly that it is not too farfetched to speculate on the claim that production budgeting schemes require implicit, and perhaps more often than not, explicit references to the economics of optimization, management of margin of error, and probability theory. Then, there are also the additional variables of foreseeable and unforeseeable constraints that may impinge upon the relative originality and integrity of production budgeting, in part disrupting its anticipated equilibrium and projected functionality. The unforeseeable constraints may as well be beyond the range of mortal calculations. These realities cannot and should not be divorced from the noble aims of Keynesian critique. With Feinstein’s creative intervention, however, Mantoux’s critique of Keynes seems to have been neutralized. Then again the Canadian economist Johnson and Douglas C. McIntosh, another economist, critique Mantoux for all the good reasons.

What we should also do not want to miss is the fact that Keynes’ response to his critics collected in the volume “Revision of the Treaty (1922),” expands upon his earlier arguments in as well as provides insightful updates and corrective facts to those he advanced in “The Economic Consequences of the Peace (1919),” although we have to say Mantoux’s critique (1946) came some twenty-seven years later. On the other hand Johnson’s (1975), McIntosh’s (1977), and Feinstein’s (1995) critiques, all of which appeared after Mantoux’s critique, provide new insights and data that were not probably available to Mantoux or which he missed out on in assessing the overall structural arguments of Keynes, collected in those two aforementioned books of his, the latter. We may then even hazard an assertion that Mantoux’s arguments are, if we could also add, fundamentally, anachronistic to a certain degree.

ADDITIONAL FACTS FOR CONSIDERATION
In sum, all three scholars exposed Mantoux’s logical flaws, methodological lapses, ideological biases, and factual errors by, among other things, reinstating the methodological, factual, and analytical superiority of Keynes’ formidable arguments. The general weakness of Mantoux’s arguments lay in this brilliant exposé. Even so regarding the positive impact capital flow and foreign investment had on Germany after the peace conference, Feinstein states that out of about $10,000 million that flowed into Europe from 1924-30, a seven-year period, nearly $7,000 million went to Germany alone. This is significant in that it underwrote international monetary stability and offered some stability to European economies, including Germany’s, in addition to the fact that the Dawes Plan (1924) also provided a temporary “settlement of the dispute over reparations.” Significantly, the “downward adjustment” plan which was included in the Dawes Plan mitigated the general objections Keynes raised to the treaty’s draconian terms. Feinstein concludes after thoroughly reviewing the arguments made by Mantoux and other Keynesian critics and the literature on the subject:

“However, this analysis does not allow sufficiently for the prospect that payments could be progressively raised as the Germany economy expanded, or for the extreme reluctance of Germans to accept even a modest increase in taxation to meet what was universally regarded as an unjustified and oppressive imposition by hostile adversaries. Thus even if the economic aspects of the problems were not as crippling as had been assumed in the 1920s, the exaction of reparations was still of deep political and psychological significance for Germany. The payments were a paramount cause of instability and a barrier to international economic cooperation…”

The last sentence of the quotation was part of Keynes’ general predictions as far back as 1919. Feinstein’s came some eighty years later. Meanwhile, the Dawes Plan failed but Charles G. Dawes won a Nobel Peace Prize (1925) for it. The Plan was then replaced with the Young Plan in 1929. The latter also failed, among other reasons ushering in the Wall Street Crash (1929) and culminating in the Great Depression of the 1930s that rocked the industrialized countries of the West. Why did the Allied leaders not listen to John Maynard Keynes? Could this train of events possibly not have been prevented had the Allied leaders put Keynes general predictions and suggestions in practice? Is it not surprising, then, that American economists, policy analysts, and politicians would adopt his economic theories when the Great Depression struck at the heart of Western economies? Could it be why Keynes is still celebrated around the world today? Why would men who had refused to listen to Keynes suddenly turn around to embrace him? What reasons possibly sufficiently explain the paradoxical or ambivalent attitudes of the great men and women Keynes worked with?

FINAL THOUGHTS ON KEYNESIAN CRITICS: MANTOUX AND CO.

A case has been made that the technical sophistication of Keynes’ arguments on “taxable capacity,” aside from injecting “a moral repugnance” into the debate on Germany’s reparations burden, far from creating any technical confusions rather turned out to what one write described as “In this light, it is understandable that Keynes’ demonstration of Germany’s hardship aroused Mantoux’s suspicions” (McIntosh). The latter went on to demonstrate the ineffectiveness of Mantoux’s core arguments. Mr. Baidoo never mentioned these scholars in his articles linking “The Economic Consequences of the Peace” and the Second World War. Then also Georges Clemenceau, a French Prime Minister (1906-09, 1917-20) and one of the chief architects of the Paris Peace Conference (1919), later found wisdom in and endorsed some of the practical suggestions in Keynes’ “Revision of the Treaty,” though he was Keynes’ main critic at the peace conference. Clemenceau wanted a revenge for the way Germany had treated France at the Treaty of Frankfurt.

What Mr. Baidoo may have also missed is that economics is not an exact science. Even then, we are not saying this to inoculate Mantoux, Keynes, Feinstein, Friedman, McIntosh, Greenspan, and Johnson against criticism. Economics is fundamentally about the study of greed and rational choice both of which cannot be simply reduced to mathematical or statistical exactness. Arguably, human psychology is a very complex phenomenon and therefore may not lend itself to an easy task of mathematical or statistical reductionism. The adoption of stochastic or probabilistic models, for instance p-value, in the disciplines of economics and econometrics, the social sciences in general, adds to this complication. This is partly because data collection and data analysis are sometimes informed by biases, operational paradigms, methodology, and schools of thought. Neither are mathematical modeling, simulation, and optimization perfect when applied in the social sciences.

The disciplines of behavioral economics, fuzzy theory, and behavioral finance are providing some useful clues into human nature where conventional economics has failed. Fuzzy theory and fuzzy logic provide multivalued access to methods and techniques for pinning down on uncertainty. That aside, not every conceptualization in the exact sciences is necessarily “exact.” For instance, there exists innate inexactness in quantum theory. Determining the spatial location of an electron, a position or distance from the nucleus, in an electron cloud becomes a searching question of probability. The work of Erwin Schrodinger and Neil Bohr in the area of quantum mechanics partially rely on mathematical probability. As if that is not enough there are calls within certain quarters of the international scientific community for replacing the Theory of Relatively with another because, apparently, it cannot sufficiently explain certain natural phenomena.

The above notwithstanding, Mr. Baidoo’s dogmatic free-market fundamentalists such as Milton Friedman (Adams) and Alan Greenspan (Fleckenstein & Sheenan) failed many economies in the world with their laissez-faire analytic laziness. It has been shown how Friedman’s laissez-faire ideas failed around the world and how some of his positive contributions to economics ended up helping Keynesian-style governments instead. He regretted this (Adams).

But we do know where Keynes stands in the world today, towering over his colleagues and modern economists of all ideological persuasions. It is no wonder the 2001 recipient of the Nobel Memorial Prize in Economic Sciences Joseph Stiglitz, and Paul Krugman, his colleague and the 2008 recipient of the Nobel Prize in Economic Sciences, together with other economists from around the world are celebrating the return of Keynesian economics. Yet Keynesian economics has always been part and parcel of any political economy on the planet. Stiglitz’s and Krugman’s “return” may relate to certain aspects of Keynesian economics that went “underground” when free market fundamentalists, such as Milton Friedman and his now-prostrate Chicago School, started peddling their snake oil. Krugman says of the economists at the Chicago School: “the product of a Dark Age of macroeconomics in which hard-worn knowledge has been forgotten.”

Now, it seems it is the intellectual descendants of the late Paul Samuelson, a Keynesian economist as well as a Nobel Laureate, at the Massachusetts Institute of Technology (MIT) who have displaced the Chicago School. One writer acknowledges Samuelson as a more important economist of the 20th century than Friedman (Adams). This conclusion is largely based on the ineffectiveness and failures of Friedman’s economic ideas and those of the Chicago School in general.

KEYNES: THE RETURN OF THE MASTER
In reviewing Robert Skidelsky’s book “Keynes: The Return of the Master” for The Guardian, Nobel Laureate Paul Krugman had this to say about Keynes:

“’At research seminars, people don't take Keynesian theorising seriously anymore; the audience starts to whisper and giggle to one another.’ So declared Robert Lucas of the University of Chicago, writing in 1980.

“At the time, Lucas was arguably the world's most influential macroeconomist; the influence of John Maynard Keynes, the British economist whose theory of recessions dominated economic policy for a generation after the Second World War, seemed to be virtually at an end.”

“But Keynes, it turns out, is having the last giggle. Lucas's "rational expectations" theory of booms and slumps has shown itself to be completely useless in the current world crisis. Not only does it offer no guide for action, but it more or less asserts that market economies cannot possibly experience the kind of problems they are, in fact, experiencing. Keynesian economics, on the other hand, which was created precisely to make sense of times like these, looks better than ever…”

Krugman could not have stated the relevance of Keynesian economics to contemporary financial crises any better. But that does not take away the theoretical challenges confronting the economics discipline today. Therefore having taken note of the shortcomings of economics as an inexact science, we should want to state here that Keynes and his predictions could not have been the cause of the Second World War. For one thing, the Germans did not accept the fact that they had been defeated in the First World War and therefore found the reparations outrageous, uncalled-for, even unjustifiable. For another, the Germans had made up their minds to resist the reparation imposition no matter what. Thus Keynes’ criticism of the reparations burden could not have been primary motivation for Hitler to go to war. The other fact is that Keynes’ reservations about the reparations imposed on Germany were reflections of a strong consensus of British opinion.

Not even was the French leadership willing to enforce the reparation payment via military imposition. Contrary to what critics of Keynes might say about his views projected in “The Economic Consequences of the Peace,” there were still many French and Americans who did not fully support the harsh terms of the peace treaty. Thus Keynes’ “The Economic Consequences of the Peace” and its sequel merely present an intellectual, technical, and theoretical reinforcement of that disapproving international consensus. And even aside that, some have advanced the claim that Mantoux may have exported or projected the historical hurt and humiliation resulting from the damage done to the French national pride, something the defeated and demoralized French received at the hands of the Germans at the Treaty of Frankfurt on to his critique, thereby skewing his intellect toward a certain destination of reparable national dignity and personal sanity.

Similarly, the French Prime Minister Clemenceau carried the same old-school and anachronistic baggage of deep national hurt and the scar of national humiliation to the peace conference: Payback time! Why anyone will carry the scar of revenge to a peace conference hoping to make amends with an old enemy, without casting off that scar of revenge even after entente and peace have become proven actualities, beats our imagination and defeats our sense of moral proportion. Keynes, on the other hand, stood to gain practically nothing because he and the British people he represented at the peace conference did not feel the same bouts of historical angst and humiliation as the French did about the Treaty of Frankfurt. This distinction makes a huge difference in the intellectual, philosophical, moral and political outlooks of Keynes and his critics, Mantoux included, and how the two schools of thought approached the Germans and the peace conference.

Thus far, no concrete evidence has been adduced to expose the Germans bribing or persuading Keynes to support their cause at the peace conference. It appears the French did not even have official say or given the chance to exert political clout at the conference, having privately contacted President Wilson to arrange for an armistice. “Germany had no role in the negotiations deciding its fate, and lesser Allied powers had little responsibility in the drafting of the final treaty” (H History). The real power brokers were President Wilson (US), Prime Minister Clemenceau (France), and Prime Minister George (Britain). Keynes presence there was merely advisory. By asking President Wilson to lead the peace negotiation efforts the French automatically gave away their right to leadership representation at the conference. This constitutes a controversial interpretation of the facts of history because the conference attendees went there with Germany at the back of their minds as a defeated nation, although the Germans taught otherwise.

Yet if anything at all, Keynes should have taken sides with the French because the war brought untold hardships on the British too including loss of lives, infrastructural damage, a dent in national psychology, and financial stress on the Treasury. In other words Keynes should have sought revenge for the British people, like Prime Minister Clemenceau did, if he taught of the Germans the way the latter did.

But Keynes saw things differently. He did not want to see a repeat of the war because he saw the carnage and the damage it wrought on the economies of Europe and the global economy, infrastructure, human lives, intra-continental cooperation, and development. Feinstein captures this period: “The First World War produced conditions which both postulated and made impossible an even greater degree of cooperation that had been necessary in the late nineteenth century. Lack of leadership was of course a problem, but not the only one. The war itself had created the most uncooperative of all worlds. Behind the failure of the successive conferences, from Brussels in 1920 to London in 1933, lie rancour, vindictiveness, and all the problems created by the pursuit of misplaced patriotism and self-interest…The war has also undermined the credibility of the commitment to gold…Domestic political pressures meant that governments could no longer permit their central bankers to give unquestioned priority to external stability, regardless of the consequences for the internal economy.”

Keynes general arguments for a fairer or just treatment of Germany stemmed primarily from these basic facts of moral suasion and political-economic realities of post-war events, although his views had the strong backing of mathematics and economic theory. An unbiased understanding of “The Economic Consequences of the Peace” and “Revision of the Treaty” takes note of this basic fact. And Prime Minister Clemenceau could not have agreed more with Keynes on the strength of the technical and moral arguments he advances in the text, “Revision of the Treaty.”

KEYNES WON THE DEBATE HANDS DOWN
It is however ironic how ideological enemies and admirers of Keynes have both used “The Economic Consequences of the Peace” to further their respective agenda.

Thus if the leaderships of the United States, France, and Britain had listened to the wisdom of Keynes the Second World War would probably not have happened. Peter Coy of Bloomberg Business is correct when he wrote the following: “In 1919, in a prescient book called ‘The Economic Consequences of the Peace,’ he condemned harsh reparations in Germany after World War 1, which were so punitive that they helped create the conditions for Adolf Hitler’s Third Reich.”

Therefore, it was not Keynes who created the conditions for the Second World War. Rather it was the leaderships of the United States, Britain, and France whose stubbornness prevented them from considering Keynes criticism of the reparations they had imposed on Germany that precipitated the conditions for the war.

Here is why (H History): “Germany soon fell hopelessly behind in its reparations payments, and in 1923 France and Belgium occupied the industrial Ruhr region as a means of forcing payment. In protest, workers and employers closed down the factories in the region. Catastrophic inflation ensued, and Germany’s fragile economy began quickly to collapse. By the time the crash came in November 1923, a lifetime of savings could not buy a loaf of bread. That month, the Nazi Party led by Adolf Hitler launched an abortive coup against Germany’s government. The Nazis were crushed and Hitler was imprisoned, but many resentful Germans sympathized with the Nazis and their hatred of the Treaty of Versailles.”

These predictions form the central arguments of Keynes’ 1919 “The Economic Consequences of the Peace” and his 1922 “Revision of the Treaty.” What lessons, if any, can we draw from the above quotation? In other words, four years from the publication of the former [“The Economic Consequences of the Peace”] and just a year from the publication of the latter [“Revision of the Treaty”] Keynes larger predictions came into fruition. What does Mr. Baidoo make of Keynes’ prediction in “Revision of the Treaty” that Europe and America would go off the gold standard which, in fact, they later did? Or the correctness of Keynes’ prediction on coal economics in pre-war (WW1) and post-war (WW1)?

Mr. Baidoo did not say why those leaders and their advisors at the 1919 peace conference and their advisors who had initially opposed Keynes’ proposals, would make a swift volte-face by restructuring the treaty in Germany’s favor as some of his dire predictions continued through the 1930s even with the limited improvement in the German economy as Feinstein described it, in line with Keynes’ prescriptions in “Revision of the Treaty” and “The Economic Consequences of the Peace.” Everything considered, it goes to the heart of the debate whether Belgium and France started the Second World War by setting up a long chain of events that led to it when they occupied an industrial base in Germany in 1923, Germany’s failure to honor her reparations payment obligations because of her dire economic situation resulting from the Treaty of Versailles, Clemenceau’s desire to see the Germans punished at all cost, or President Wilson’s veto of the “Keynes Plan,” or all four.

KEYNES: A CAPITALIST OR MARXIST?
The long and the short of it is that Mr. Baidoo has no respect for context, archival and social science research methods. An immediate example is when he quoted Keynes as saying “the best way to destroy the capitalist system was to debauch the currency.” Mr. Baidoo purposefully quoted Keynes out of context just so he could set up a straw man and discredit him and paint him as anti-capitalist. Likewise, there were negative comments Keynes made about Marxism to qualify him as anti-Marxist. Keynes, if we can be fair to ourselves, took advantage of global trends to criticize both capitalism and communism when he deemed fit. For instance, he “told playwright George Bernard Shaw that the whole point of ‘The General Theory’ was to knock away the Ricardian foundations of Marxism” and Keynes reportedly made this comment as well: “State socialism is, in fact, little better than a dusty survival of a plan to meet the problems of 50 years ago” (Bartlett).

Keynes also reportedly made the following observations: “The decedent international but individualistic capitalism in the hands of which we found ourselves after the war is not intelligent. It is not beautiful. It is not just. And it does not deliver the goods,” “For my part, I think that capitalism, wisely managed, can probably be made more efficient for attaining economic ends than any alternative system yet in sight, but that in itself it is in many ways extremely objectionable,” and “The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during the half century before the war, could never have come about in a Society where wealth was divided equitably.” A statement to the effect that capitalism is “the astonishing belief that the nastiest motives of the nastiest men somehow or other work for the best results in the best of all possible worlds,” which Sir George Schuster may have falsely attributed to Keynes, has its equivalent in the words of another writer “’Communists, Keynes believed, were people who produced evil in the hope that good may come of it’” (Bartlett).

Given these criticisms of both capitalism and communism, where do we place Keynes in this seemingly agreeable dichotomy?

This is where Mr. Baidoo’s forced mischaracterization of the ideological character of Keynes becomes suspect.

What we can make of these divergent criticisms of classical economics and Marxism is that, at best, Keynes was and still is a strategic compromise between two major competing economic theories given that his magnum opus, “The General Theory,” is a critique of Karl Marx and Adam Smith in many important ways. Yet Keynesian economics is neither strictly capitalism nor Marxism. It comes across as a creative synthesis of the best of economic theories. This is probably why Keynesian economics appeals more to most national economies and governments on the planet than the chimeric free-market fundamentalism of Milton Friedman and the Chicago School.

Granted all the above concessions, one would have wished for Mr. Baidoo to tell his readership that the attribution was originally Lenin’s, although there is some debate in certain quarters questioning whether Lenin made this statement, a point we deem not too important for the present discourse. Whatever the merit of the debate, there is no denying the fact that Keynes’ version was a paraphrase, not a direct quote. The point of the matter is that Lenin may have conceptualized the potential of that attribution to cripple the capitalist system. But Keynes saw some striking parallels between Lenin’s observation and European governments whose behavior during the First World War threatened to destroy the capitalist system. Keynes wrote in Book VI of “The Economic Consequences of the Peace” (Chapter Title is “Europe After the Treaty”; the Lenin attribution is found here):

“In the latter stages of the war all the belligerent governments practiced, from necessity or incompetence, what a Bolshevist might have done from design. Even now, when the war is over, most of them continue out of weakness the same malpractices…The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent governments, unable or too timid or too shortsighted to secure from loans or taxes the resources they required, have printed notes for the balance. In Russia and Austria-Hungary this process has reached a point where for the purposes of foreign trade the currency is practically valueless. The Polish mark can be bought for about three cents and the Australian crown for less than two cents, but they cannot be sold at all. The German mark is worth less than four cents on the exchanges…”

From this long quotation, we submit that Keynes evidently did not see any strategic difference between the behaviors of the “belligerent governments” of Europe and what they were doing to cripple capitalism on the one hand and on the other, what the Bolshevists would have done to capitalism on the basis of strategic political calculation. In short, Keynes was concerned about rising inflation and how the behavior of the “belligerent governments” of Europe contributed to it. He saw political stability and intra-continental cooperation as important to the debate that sought to address Europe’s myriad problems. Keynes wanted to see rising inflation managed, believing also that the behavior of the “belligerent governments” of Europe went beyond Lenin’s. To that end he argued that some interventions of government were partly to blame for rising inflation.

He wrote in that regard:
“By combining a popular hatred of the class of entrepreneurs with the blow already given social security by the violent and arbitrary disturbance of contract and of the established equilibrium of wealth which is the inevitable result of inflation, these governments are rendering impossible a continuance of the social and economic order of the nineteenth century…This sentiment is supported by the various legal regulations with which the government endeavor to control internal prices…”

We see Keynes and Smith converging on state intervention when it should not be the case. Managing inflation and the possibility of inflation to cripple European society were central to Keynes’ arguments. Keynes wanted the behavior of the “belligerent governments” of Europe not contributing to the debauchery of their respective currencies, thereby leading to the crippling of the capitalist system. Keynes believed that certain government interventions could undermine the “naturalness” of market mechanism and thus argued against the tendency of the “belligerent governments” of Europe to debauch their currencies, leading to inflationary distortions. Thus Mr. Baidoo missed the point of what Keynes wanted to do, which was actually to manage inflation so as to prevent Lenin’s prophetic indictment of the capitalist system from gaining traction in the European political economy.

CONCLUSION
Therefore by grossly misreading Keynes, if he in fact read him at all, Mr. Baidoo merely ended up assuming the opposite of what Keynes had actually meant: Fighting inflation so that it did not end up undermining the value of European currencies and destroying the capitalist system. Against this background, Keynes saw the behavior of the “belligerent governments” of Europe in the manner Lenin supposedly described it and mounted a formidable argument against its taking root in the political economy of Europe. Keynes style of arguing may have been too complicated or sophisticated for Mr. Baidoo to grasp. This is what we meant the other day when we told Mr. Baidoo he was not a critical reader of primary texts or a serious thinker.

And yet we still stand by that statement indicting him of his lack of deep understanding of basic concepts of political or economic theory! In the end Mr. Baidoo has yet to tell his readers why almost every single nation on the planet subscribes to Keynesian economics. We believe this question is more important than his effeminately uninformed articles combined. We also need to know why world-renowned economists (Temin & Vines), universities, heads of central banks, politicians, research institutions, think tanks, activists, governments, presidents, political scientists, professors, policy analysts, environmentalists, the clergy, IMF/World Bank and others are defending and using Keynesian economics every single day while the likes of Milton Friedman, Alan Greenspan, and the so-called Chicago School, proponents of free market fundamentalism or of the “Washington Consensus,” are largely consistently ignored.

Keynes, a mathematician, who was not an academic economist let alone have acquired an economics degree, dominated the world of political economy in the 20th century, even in the 21st, via what has come to be known as Keynesian economics. Where are Mantoux and the dinosaurs?

Additional references:
1) "Project Paperclip: German Scientists and the Cold War" (Clarence Lasby)

2) "The Nazis Next Door: How America Became a Safe Haven for Hitler's Men" (Eric Lichtblau)

3) “A Brief Account of the Destruction of the Indies” (Bartolome de las Casas)

4) “History of the Indies” (Bartolome de la Casas)

5) “Blood and Soil” (Ben Kiernan)
6) “The Classical Transfer Problem: An Alternative Formulation” (Harry G. Johnson; Economica (New Series), Vol. 42, No. 165, Feb. 1975, p. 20-31)

6) “Mantoux Versus Keynes: A Note on Germany Income and the Reparations Controversy” (Douglas C. McIntosh; The Economic Journal, Vol. 87, No. 348, Dec. 1977, p. 765-767)

7) “Banking, Currency, and Finance in Europe Between the Wars” (Charles H. Feinstein”).

8) “Milton Friedman: A Study in Failure” (Richard Adams; The Guardian, Nov. 16, 2006)

9) “Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve” (William Fleckenstein & Frederick Sheenan)

10) “Keynes Was Really a Conservative” (Bruce Bartlett; Forbes, Aug. 14, 2009)

11) “Blowback: America’s Recruitment of Nazis and its Effects on the Cold War” (Christopher Simpson)

12) “Keynes Predicts Economic Chaos” (H History; Link: www.history.com/this-day-in-history/keynes-predicts-economic-chaos)

13) “Keynes: Useful Economics for the World Economy” (David Vines & Peter Temin)

14) “How Did Economists Get it So Wrong?” (Paul Krugman; The New York Times, June 9, 2009)