In 2009, as the West was afflicted by the worst recession since the 1930s, Robert Skidelsky summoned the spirit of John Maynard Keynes. The Return of the Master, as Skidelsky called his book, argued for an aggressive fiscal stimulus (public spending and tax cuts) to counteract the slump.
But the master did not return, or at least not for long. After initially deploying Keynesian weapons, the UK and others embraced punitive austerity, resulting in the slowest economic recovery in recorded history.
In his new book Money and Government: A Challenge to Mainstream Economics, Skidelsky – Keynes’s pre-eminent biographer – seeks to explain this failure and offer an alternative.
“In the course of writing it I tended very much to the belief that it was simply the wrong ideas, that this was the fault of the economics profession,” the 79-year-old crossbench peer told me when we met recently at his Westminster office. “But I’ve become more and more persuaded by Marx on this, power structures are terribly important. Some ideas are acceptable, some aren’t.” In other words, as Marx and Friedrich Engels wrote in The German Ideology in 1846: “The ideas of the ruling class are in every epoch the ruling ideas.”
Defenders of austerity, such as the former chancellor George Osborne, now claim vindication: the current budget deficit has been eliminated for the first time in 16 years and UK unemployment is at a 43-year low (4 per cent). But Skidelsky, who is emeritus professor of political economy at the University of Warwick, brooked no concessions. “Every competent authority now believes that austerity delayed the recovery, including the IMF and all the international organisations which at one time were in favour of it. And delaying the recovery has knock-on effects. It lowers productive potential, people are very much aware of hysteresis.”
Robert Jacob Alexander Skidelsky was born in Harbin, China, in 1939 to parents of Russian descent. His life has been marked by an unusual political odyssey: he left the Labour Party to become a founding member of the Social Democratic Party in 1981 only to join the Conservatives in 1992. In 1999, he was sacked as a House of Lords Treasury spokesman by the party after opposing Nato’s bombing of Serbia. He then became a crossbench peer in 2001 and was one of the first major economists to praise Jeremy Corbyn’s 2015 leadership campaign.
“They’re on the right lines,” Skidelsky said of Labour’s current programme. As a Keynesian, how does he respond to the socialist argument that capitalism cannot be “tamed” but rather must be abolished? “I’m certainly happy to entertain the argument but I want to know what socialism is because there isn’t a coherent doctrine of socialism.”
Labour’s policy platform, he said, is merely social democratic. “The furthest I’d want to go is to get back to the idea of a mixed economy…that was seen by Keynes and the embattled Liberals of the 1930s as the proper antidote to communism and fascism. What Keynes said is that if we leave the defence of political freedom to classical economics we’ll lose the battle. I think that’s a very relevant message for today.”
Skidelsky is open to the renationalisation of the privatised utilities and wants a “properly regulated” banking system (with retail banks restricted to national customers and investment banks denied state protection). On monetary policy, he would be “more radical” than shadow chancellor John McDonnell. “I’d say you should abolish the Bank of England’s inflation target or its independence. The mandate should be to support the economic policy of the government with special responsibility for financial stability – that’s it.” In Skidelsky’s view, the notion of a neutral technocracy is a “dangerous delusion”.
Though he was a Remainer, Skidelsky does not agree with the historian Ian Kershaw, whom I recently interviewed, and other liberals that Brexit would be “the greatest act of self-harm by any country in postwar history”. He explained: “There’s no basis for saying that at all… the worst that might happen is that we lose a bit of growth over the next few years. But we were very happy to lose a bit of growth in the name of austerity. There’s nothing to tell you what the self-harm of leaving the EU will be – there’s no theorem, it’s just rhetoric.”
He argued that the UK might even reap some benefits from leaving the EU, which is not “social democratic” but “neoliberal”. Skidelsky believes the UK should “park itself in the European Economic Area and allow things to play out” and opposes a second Brexit referendum: “I argue with my very good friend Andrew Adonis about this… it would be taking much too big a risk with democracy.”
After the avoidable harm wrought by austerity and free market dogma, does Skidelsky see any cause for optimism? “Not much before another crash or two – one only hopes they won’t be too serious.”
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This article appears in the 19 Sep 2018 issue of the New Statesman, Corbyn’s next war