Sadly, we have recently lost Robert Skidelsky who passed away in April this year. His monumental three-volume biography of Keynes established him as an eminent economic historian. He understood and interpreted Keynes perceptively, with deep erudition, and continuing relevance. His legacy is profound.

In this, his last book, he is surely right on his main point: Keynes urgently needs re-establishing in economic theory and policy. It is shocking that the macroeconomics entry text for economics students at Cambridge UK, Charles Jones’s ‘Macroeconomics’, reverts entirely to neo-classical economics and excludes the Keynesian revolution. Skidelsky acknowledges the ‘collapse of Keynesian theory and policy in the 1980s’ (p1) and offers a redress. He traces the evolution of Keynes’s thinking from his 1923 ‘Tract on Monetary Reform’ through his 1930 ‘A Treatise on Money’ to his 1936 ‘General Theory of Employment, Interest, and Money’, as well as his polemics in ‘The Economic Consequences of the Peace’ (1919) presciently pointing out the danger of the punitive reparations of Versailles, and ‘The Economic Consequences of Mr Churchill’ (1925), again accurately predicting the dire results of the return to the Gold Standard at an over-valued exchange rate.

Keynes attacked the dominance of price theory. In the labour market, wage reduction does not generate employment due to its suppression of demand. In the capital market, interest rate reduction does not generate investment due to liquidity preference. Saving does not generate investment; rather expected future consumption does. Price does not clear all markets. Involuntary unemployment is a potential outcome. Keynes’s core theory of effective demand with its ‘multiplier’ led to his proposal for public works to stimulate the economy, although as Skidelsky acknowledges, rearmament was the effective tool (p36). It is political opposition to Keynes’s proposal for state intervention, rather than any intellectual opposition to his theory, which has driven the current dominance of monetarism. Monetarism itself has meanwhile morphed from its failed attempt to control the quantity of money, to an attempt to control it through its price, the interest rate, a blunt single instrument tool it claims can manage the economy.

Skidelsky includes fascinating chapters 6 on love of money, 8 on rhetoric, an ‘intermezzo’ on Hayek, and 9 on neoliberalism. In chapter 7, he describes Keynes’s prediction of abundance and a fifteen-hour working week as a ‘failed utopia’ (p98). In his final chapter 10, he ponders Keynesian positions for today, suggesting public investment, a job guarantee, and wealth taxation (p144), but only presents thin arguments which peter out. He mentions basic income, whereas Keynes strongly opposed the arguments of C H Douglas.

Rather we could expect Keynes to be powerfully engaged, vociferous, thoughtful and persuasive. On income, he may well have addressed the fact that the real income of the lowest income quintile households has not increased over 50 years, analysing this as technological unemployment. He may have shifted to recognise the need for increased welfare income. On money, he might have attacked the dysfunctionalities of QE and seen direct money financing as a solution to increasing debt. From his 1942 claim that ‘anything we can actually do, we can afford’, he might have challenged the ‘fiscal rules’ for running the economy below full capacity and unnecessarily imposing austerity.

Who knows? We can all fondly speculate that he may agree with our personal propositions or claim that they derive from his precepts. What we should not do is to dismiss his huge contribution to economic theory and policy. We are indebted to Robert Skidelsky for continuing to uphold the Keynesian contribution.