05/07/2013 11:55 am ET Updated May 07, 2013

Niall Ferguson In 1995: Keynes' Gay Crush Shaped Pro-Inflation Opinions

Getty Images


Niall Ferguson has already apologized for saying over the weekend that John Maynard Keynes' homosexuality was at the root of his views on fiscal policy, but Brad DeLong has recovered a remarkable 1995 Spectator article in which he alleges that Keynes' views on the Treaty of Versailles were also caused by homosexuality. In this case, Ferguson's view is less that Keynes had a distinctive gay outlook on the issue and more that a gay crush on a German representative to the conference led him to adopt pro-German and pro-inflation opinions.

The conclusion:

From 1919 onwards, for reasons which owed as much to emotion as economic logic, he had repeatedly encouraged the Germans in their resistance to Allied demands. He had heard and echoed their arguments at Versailles, predicting currency depreciation, the dumping of German exports and the westward march of Bolshevism as consequences of the treaty. He had shared their dismay at the reparations total set in 1921, and predicted German default from the outset. Even when he becan to suspect that his friends were exaggerating their fiscal difficulties, this only inclined him to egg them on to a more confrontational strategy. Only when this ended in the complete collapse of the currency did Keynes distance himself.

All this sheds revealing light on Keynes's later views on inflation. Those who see Keynesianism as, at root, an inflationary doctrine will not perhaps be surprised; just as those familiar with Bloomsbury will appreciate why Keynes fell so hard for the representative of an enemy power. Only those—like Robert Skidelsky—who seek to rescue his reputation as a monetary theorist may find Keynes's conduct less easy to account for.

I have not read The Economic Consequences of the Peace, but am somewhat familiar with the general debates at the time. My view of the situation is that the whole question of an "enemy power" is actually the crux of the dispute here. Keynes, in keeping with general liberal sentiments at the time and vindicated by history, took the view that it was foolish for France and Britain to try to treat Germany as an enemy-to-be-crushed rather than a partner-to-be-rehabilitated. The only possible consequence of a strategy of crushing the German economy would be to empower German political forces committed to overthrowing the treaty and thus a new war. This is roughly what eventually happened, and obviously in the late-1940s the Western allies took a different approach and it's paid off. I don't know if any key Truman administration advisors was seduced by sexy German conference representatives. Perhaps some day we'll learn that was the real story of the Marshall Plan, in which case I think we'd have to say we were thankful for the emergence of a sentiment that could transcend petty nationalism.

8 Biggest Career Mistakes Of 20-Somethings