Nancy Dell'Olio

I will always defend a big spender like J.M. Keynes

Nancy Dell’Olio makes an impassioned case for Keynesian economics as the necessary remedy for the global crisis. It is to the Cambridge economist that we should turn once more

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I am an optimist. One of the reasons why I have always been a fan of the brilliant British economist John Maynard Keynes is that he too was an unashamed optimist who believed in the power of money for making things better. Unemployment, recession, deflation — if we were to believe all we see and read from the courts of the media kings, we might all be depressed into thinking there is no way out.

Born in Cambridge in the year that Karl Marx died, Keynes was a much more intriguing figure than his grey cadre of contemporaries. He brought flair and style to a dull establishment. A friend of Virginia Woolf and married to a ballerina (ballet is my passion), he became the darling of the Bloomsbury Group. Anyone who could say that the ‘economic problem is not — if we look into the future — the permanent problem of the human race’ is a human being with foresight. That was like saying you can make poverty history in the 1930s. For me, as an Italian-American law student at NYU, fascinated by the English intellectual order, he was an inspiration. Imagine, then, my chagrin when I found myself sitting by placement next to an eminent British historian (of that same Cambridge ilk) who had the killjoy temerity to criticise my hero and throw gloom over my social enjoyment of a fine dinner.

I was at a table hosted by Condé Nast chief Nicholas Coleridge. The conversation started off light and bubbly, like champagne, and sparkled with early-evening pleasantries. Soon, however, the talk turned to swopping bleak mid-winter opinions on the world economic crisis, and the good-humoured banter began to stall. Keen to avoid anything too negative with my food, I hoped to raise spirits by turning to the optimistic remedy proposed by Keynes during the dark years of the 1930s. ‘I have always loved a big spender,’ I said, a little flippantly. ‘The worst thing you can do is keep your money in the bank, so you might as well go out and spend it while you have it and help save the European economy.’

A chill wind not unlike the spectre of recession came from my left with the words, ‘You can’t just spend your way out of recession, if you spend too much money today, you will have to pay for it tomorrow.’

Sitting next to me was Andrew Roberts, known best for his historical biographies and his exhaustive NBC commentary of the funeral of Diana, Princess of Wales — in full Churchillian mode. ‘Do you have something against John Maynard?’ I asked, thinking, do I need a lesson in Tory economics from a man who inherited the UK Kentucky Fried Chicken franchise? But Andrew was warming to his theme and I have never been one to shrink from a charming argument. ‘Of course,’ he said, ‘it’s all very well in theory, and Keynes is back in vogue now, but if something sounds too good to be true, it normally is.’ I am thinking, so that’s it — in Andrew’s eyes, Keynes is just another fashion accessory for Nancy.

‘So,’ I asked, ‘we should sit on our hands and do nothing — the government shouldn’t boost spending to help the economy?’ I looked around and saw the whole table looking at us. I realised the intensity of our argument was beginning to hint at the opening exchange of rival campaign slogans for the next general election. ‘Well, if you both feel so strongly about it, why don’t you write about it?’ was the challenge that Nicholas Coleridge proposed as host and referee. The prospect of a duel in print between Nancy Dell’Olio and Andrew Roberts was too good to miss for Matthew d’Ancona, who immediately requested the piece. ‘Using pens instead of pistols?’ I quipped.

Sadly, the next day Andrew — who I had never taken for a cad — seemed much less keen on a column-inch confrontation. Perhaps he sensed that the Cameron–Osborne team’s rendition of ‘Dear Prudence’ might lose the public vote to ‘Santa Darling’ and the great Christmas giveaway. But I would like to think that it was surrender to the global consensus on the need for co-ordinated fiscal stimulus that made him realise he might have to admit that ‘we are all Keynesians now’.

Despite Andrew’s pull-out, I could not just let this slur upon my hero pass unchampioned and took up the Spectator’s offer of an opportunity to celebrate the genius who just keeps coming back. Keynes’s big idea was that the modern market economy does not always operate at maximum efficiency, and smart government intervention can raise the game to deliver an optimum result. As we are sucked toward the black hole of super-recession, the infatuation with free-market capitalism has cooled. Although few would quarrel with the notion that the free-market economy is the best way to distribute capital, most G20 leaders are agreed that state intervention is the only way to stave off the global slump. Inevitably, government is always going to be the spender of last resort. The question is — how smart is government with its spending?

Keynes, writing about Lenin, pointed out his dictum ‘that the best way to destroy the capitalist system is to debauch the currency’. Of course, in the UK, according to Lord Mandelson, we have George Osborne to do that. But this is a strange time for the Tory party to take a contrary line to the rest of the world. Prudence and fiscal restraint may be virtues in Notting Hill but for the rest of the world, facing the big squeeze, access to credit is what counts; and, as my local corner-shopkeeper says, ‘You only have cash flow if customers come through the doors to spend.’

Keynes argued that when private citizens, banks and businesses lose confidence and hold on to their money, then the only way to avert depression is for government to step in. The consequences of doing nothing would only lead to a deeper and more painful recession. Few suspected the depth of the current financial crisis and the trauma to the banking system. The government and the taxpayer have acted to recapitalise the banking system but that recapitalisation process is not complete and the banks remain nervous. The Chancellor must go ahead with his fiscal boost and ease the flow of money, with the banks encouraged to open up lines of credit to business and to hard-pressed householders. Of course, this does not mean a blanket bail-out for the banks or for industry, but when confidence dries up and fear undermines the economy the credit market needs to be made to work so that people stay in jobs and the hard-pressed do not lose their homes or livelihood. It makes sense for government to support interest rate cuts with fiscal action and give real help to families and businesses now. My belief is that the public will judge both the government and the opposition on their response to the financial crisis, and this will be the ground over which the next election will be fought. And that day may be closer than we think. Keynes has been hailed as the saviour of capitalism and, once again, the liberal market philosophy needs salvation.

It was pleasing to see that following the PBR on Monday, the City vindicated my position with a positive response to fiscal boost. The score for today: Nancy Dell’Olio 1 – Andrew Roberts 0. Never underestimate a woman in an argument over money! I think we can all agree with the words of Keynes which will serve to sum up this piece when he wrote that ‘the ideas of economists and philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood’.