Keynes argued markets would not fix mass unemployment on their own
In the Great Depression, orthodox economists said free markets would restore full employment if workers accepted lower wages. John Maynard Keynes disagreed: total spending drives activity, wages do not fall easily, and slumps can last. Time magazine later judged that his idea of governments spending money they lack may have saved capitalism.
Keynes was born in Cambridge in 1883 to an upper-middle-class family. His father lectured in moral sciences at the university, and his mother, a social reformer, became only the second woman to serve as the town's mayor. His father coached him through scholarship exams and bailed him out financially more than once, including when the 1929 crash nearly wiped out his assets. A sickly child with a gift for arithmetic, he was judged by his prep school head to be far ahead of every other boy.
He took a mathematics degree at King's College, Cambridge, in 1904, then built on earlier theories of business cycles. His 1936 book The General Theory of Employment, Interest and Money made the case that weak aggregate demand could trap an economy in high unemployment, and that fiscal and monetary policy should push back. After 1929 he also abandoned free trade, calling the assumptions behind comparative advantage unrealistic.
By the late 1930s leading Western economies were following his advice, and within two decades of his death in 1946 nearly all capitalist governments had adopted it. He led Britain's delegation in designing the post-war international economic institutions, though the Americans overruled him on several points. He was also a civil servant, a Bank of England director and a member of the Bloomsbury Group.
His reputation dipped in the 1970s, when stagflation hit Britain and the United States and monetarists led by Milton Friedman questioned whether governments could steer the business cycle. The 2008 financial crisis brought a revival, with Keynesian thinking underpinning responses by leaders including Barack Obama and Gordon Brown. He is often called the father of macroeconomics.
Source: John Maynard Keynes
