M. Keynes Essay

Submitted By Matifrid
Words: 1607
Pages: 7

The central argument in the article “National Self-Sufficiency” by John Maynard Keynes is in support of a gradual movement towards national self-sufficient economies which is supposed to reduce unemployment, foster peace, and will generate greater economic and social prosperity for a nation. His view of the twentieth century is opposed to his previous view of the nineteenth century of internationalism and free trade. His change on mind may be attributed to the events that occurred between 1914 to 1933. That time period was characterized by the First World War followed by post war years of uncertainty, communism was adopted in Russia, nationalism was on the rise, and the Great Depression of 1929 which called for protectionist policies in order to protect industries and employment. Having those events in mind is helpful in understanding Keynes’s new beliefs and the reasons for the change.
Let’s begin with a quick review of Keynes’s initial view in support of internationalism. Through the early 1920’s, Keynes had been an enthusiastic supporter of free trade, free capital flows and laissez-faire policy as the foundation for peace and prosperity in the international economy. Perhaps at that time his assumption was that this economic system of a free-market economy automatically moves towards full employment and prosperity. However, that is not the case. The economic model of free trade and free flow of capital, like any other model, needs to be managed consistently through time to attain its goal. Then it is a mistake to think and preach that free trade is some sort of cure for all economic troubles, in all contexts, domestic and foreign.
Whether he realized the above or perhaps the events that took place at that time that encouraged him to completely rethink his position on the international financial system. The twentieth century brought dramatic changes in the structure of the international economy and thus on the effects of free trade. The following extort from the article depicts well Keynes's rejection of free trade doctrine: “The decadent international but individualistic capitalism, in the hands of which we found ourselves after the war, is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous-and it doesn't deliver the goods. In short, we dislike it, and we are beginning to despise it” (Keynes, 1933). Although he claimed that Britain was better off after the war, he insisted on shifting towards self-sufficiency economy. Britain may have been wealthier during post war years than in the past. However, the question becomes at what price? He believed that nations should move towards a national self sufficiency as long as the cost will not be excessive.
In the 1930’s his new view positioned him to argue the case for less international finance and less international trade or in other words, to move as close as possible to a pure national self-sufficient economy. His new view supporting national economies can be illustrated with the following paragraph: “I sympathize, therefore, with those who would minimize, rather than with those who would maximize economic entanglement between nations. Ideas, knowledge, art, hospitality, travel — these are the things, which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible; and, above all, let finance be primarily national. Yet, at the same time those who seek to disembarrass a country of its entanglements should be very slow and wary. I should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction” (Keynes, 1933). Not only on this extract we can observe his view towards a self sufficient economy, but also his realization that it will never be possible to have a pure national economy. Consequently, he viewed protectionism policies such as tariffs and quotas, as a way to move closer to the ‘ideal model’ which would benefit the national…