The vital link between ‘vision’ and policy

It is probably fair to say that Keynes never completely threw off the vision of the working of economies in terms of an equilibrium framework. He did, of course, argue that government intervention was needed to help attain a satisfactory full employment equilibrium (internal balance) in each economy – left alone, less satisfactory equilibria or rest states would emerge. This was an essential step towards equilibrium associated with external balance in the international system and the possibility then to take advantage of the classical principles of free trade on which he had been brought up. (Skidelsky 1992, xv called him ‘the last of the great English liberals.’) The proposals Keynes put forward at Bretton Woods were designed to provide the institutions and the orders of magnitude of, for example, the provision of liquidity that would make all this possible. That the Americans, principally through Harry Dexter White, won out on both the institutions and the orders of magnitude adopted for the post-war period was a tragedy; for this ensured that the Bretton Woods system contained within it the seeds of its own eventual destruction from its very inception.

One of the major changes in vision since Keynes' death about how markets, economies and even whole systems work, associated with Keynes' followers, especially Kaldor and Joan Robinson, is, as we have seen, the concept of cumulative causation.