How Keynes's ideas could make capitalism work for the people

Robert Skidelsky offers a welcome contribution to the plethora of new books recognising that political economy stands at a crossroads. A distinguished biographer of Keynes, Skidelsky argues that his subject invented macroeconomics, a field he regards as all about money and government, twin determinants of effective demand across the economy as a whole, and changes in the overall price level across the range of markets.

Beyond the rise and fall of Keynesianism, the book covers a remarkable amount of ground from Adam Smith to Karl Marx, from the UK coming off the gold standard in 1931 to the monetarism of the 1980s, from post-crash banking regulation to the theory behind modern austerity policies. His writing is equally accessible to keen readers, students and central bankers.

Skidelsky succinctly outlines important points of theory, from the flaws in pre-crisis orthodoxy to the stubborn global imbalances in trade and capital accounts—problematic, but not the main driver in the financial crash. He challenges economics to restore money and government to centre stage (easy to agree with). He also makes sound suggestions such as fiscal and monetary policy coordination.

Sadly, the chapters laying out where we go next are disappointingly short. Money reform geeks such as myself would like to have heard more from Skidelsky about how exactly his proposals would be implemented. The detail is lacking. For example, he states that central banks’ mandate for monetary policy should shift to require them to support the government’s economic policy. That might be a good idea, but what it would involve is not made clear.

Contributors such as Skidelsky with a lot to offer shouldn’t hold back in laying out precisely how we shift economics in the direction of greater equality and more democracy. A lot is at stake.

Money and Government: A Challenge to Mainstream Economics by Robert Skidelsky (Allen Lane, £25)