How to build a better American economy

Part of The Great Rebuild Issue of The Highlight, our home for ambitious stories that explain our world.

The most intimidating figure in the British government during World War II received no salary and operated under the unassuming title of adviser to His Majesty’s Treasury. By the 1940s, John Maynard Keynes didn’t need new sources of money or prestige. The most famous economist in the world for more than two decades, he was friendly with US Supreme Court Justice Felix Frankfurter, King Alfonso XIII of Spain, celebrity journalist Walter Lippmann, poet T.S. Eliot, novelist Virginia Woolf, and too many other titans of the 20th century to count.

Keynes advised on military strategy, managed financial diplomacy with the United States, helped structure the internal economic program of the British Empire and represented his country in 1944 at the Bretton Woods Conference, the most important international summit in a quarter century, which set the terms of global economic cooperation for a quarter century to come.

He was a serious man who understood in painful detail just how much devastation the war had wreaked on his nation. Nearly 450,000 subjects of the crown had been killed, including over 30,000 civilians in the London Blitz, which destroyed roughly 70,000 buildings and damaged millions more. Factories and warehouses had been lost to explosions, and domestic resources exhausted on bombs and battalions.

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So in the summer of 1945, with Germany vanquished and Japan soon to follow, Keynes prepared a BBC address on what he believed to be one of the most critical issues facing Britain: great art.

The advent of radio, Keynes told his audience, had revolutionized the cultural landscape. Where symphonies, operas, and stage plays had once been “games” enjoyed only by the elite, they were now the joy of the whole nation. Broadcasting had revealed an “enormous” and “unsatisfied demand” for “serious and fine entertainment.” Keynes understood this firsthand. With her dancing days behind her, his wife, the Russian ballerina Lydia Lopokova, had embarked on a new career with the BBC, introducing symphonies and reading literary works. Their home was flooded with fan mail not for the famous economist, but for the radio personality whose voice reached millions of homes.

With the end of the war, Keynes declared, it was time for Britain to devote itself to building a world-class artistic infrastructure.

London would be a priority, of course. The British capital should be transformed into “a great artistic metropolis, a place to visit and to wonder at,” with a refurbished Royal Opera House at Covent Garden to serve as the crown jewel, hosting a new national opera and ballet company.

But Keynes wanted more than a performing arts center to rival pre-war Paris and St. Petersburg. All over the country, in every city and county, theaters would be constructed and funds provided to hire local playwrights, composers, actors, and musicians.

“Let every part of Merry England be merry in its own way,” Keynes declared. “Death to Hollywood.”

This portrait of Britain as a vibrant global center of cultural expression startled his war-wearied audience, which was accustomed to decades of material decay and imperial decline. The British government had never subsidized the arts before. The idea that it could afford to do so was almost beyond comprehension. At the time of his 1945 radio address, Keynes himself had just negotiated a $2 billion loan with the Truman administration. Keynes was calling for a full employment program for actors, dancers, and musicians. To many ears, it seemed a preposterous extravagance.

What would Keynes do?

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What the 20th century’s most influential economist can teach us about rebuilding the US economy.

But the new Arts Council of Great Britain was not some vague bohemian dream. It was the spiritual lynchpin of a broad, carefully planned economic strategy that Keynes had been assembling over the course of the war. The more famous elements of this program included the new National Health Service — for which Keynes served as financial architect — and an ambitious pension and social support system that introduced the meager British welfare state to the possibilities that US President Franklin Delano Roosevelt’s New Deal had opened across the Atlantic.

These programs offered meaningful material guarantees. Things could only get so bad for citizens of victorious Britain — nobody would have to worry about medical bills or the prospect of retiring into poverty. Keynes believed such reassurances were essential to a public that had been battered by the tides of fate. Assuaging such fears, however, was not enough. The country needed something affirmative to believe in.

The war had given the beleaguered public a sense of shared national purpose. The daily sacrifices made by householders getting by on rationed goods with loved ones in danger abroad were part of a greater cause. The Arts Council projects would show the country that its perseverance had been worth it, and demonstrate that Britain remained capable of big, ambitious endeavors. Keynes meant to prove it in every corner of the country, and to invest millions of citizens in the success of British rebuilding by creating careers for them in a cultural renaissance.

Keynes had endured war and its aftermath before. After managing the empire’s finances through World War I, he watched the British economy collapse in 1919, entering what we now call the Great Depression. The government had managed almost every sector of the World War I economy, directing resources and manpower to specific projects needed by the war machine. Unemployment had disappeared, but when the government pulled back its financial commitments at the end of the war, decay set in. Reconstruction didn’t just happen on its own through the magic of the market. It had to be directed by political leadership.

Keynes spent the interwar years developing a sophisticated new economic theory to explain why this was true, hoping to persuade economists and bureaucrats that only aggressive government action could secure the social aims most of them shared — low unemployment, social harmony, international comity. In the 1940s, he could at last put that theory into action, redirecting the targets of economic management away from bombs and battalions toward doctors and ballerinas. Britain would mobilize for peace just as it had mobilized for war.

Today, America is in an economic position not so different from that of Britain in the 1940s. Our nation is a global leader at the intersection of multiple crises. It has just sustained severe economic damage. The coronavirus crash, the breakdown of globalization, and the unfolding climate disaster each pose challenges unprecedented in living memory. But they are not unprecedented in human history. Peoples have confronted cataclysm before and, with the right leadership, emerged from it stronger than they believed possible. We can conquer the trials before us. But they will not conquer themselves.

The economic era of the last half century is now over, for better or for worse. International organizations designed to meet previous problems may well survive in name, but their functions will be reinvented, or they will decay. The World Trade Organization had devolved into an institutional fiction long before President Donald Trump began his tariff tirades. The European Union is attempting to navigate a union without Britain, and the political relationship between the United States and China is breaking down.

How American leaders work with the rest of the world to navigate these crises will not be simple or easy. The rest of this issue will be devoted to specific ideas and proposals intended to mobilize our people and resources in service of a better tomorrow. This project need not be a step into the unknown. We can look to the past for guidance.

Keynes did not live to enjoy the fruits of these labors. He died in 1946 just as his dream was taking flight. Unemployment, which remained in double digits between the wars and consumed nearly a quarter of the population at its peak, would not eclipse 4 percent until the mid-1970s. The poverty rate plummeted and life expectancy increased. The National Health Service remains a source of tremendous national pride. The British government’s public commitment to the arts persists to this day. The products of that commitment include Keith Richards and Mick Jagger, who united at a publicly supported art school in the late 1950s and spent much of the early 1960s playing concert halls constructed and renovated by Arts Council funding.

Britain didn’t achieve all of this alone. In addition to the $2 billion loan Keynes negotiated, it received $2.7 billion from the United States under the Marshall Plan. The timing of this aid was especially important, coming early in the rebuilding process when Britain was most vulnerable. But the amounts pale in the context of postwar Britain’s spending ambitions. Total American aid was about equal to one year of British government spending in the late 1940s, which rose considerably over the following two decades.

The nation could not, however, have succeeded in an international vacuum. The Rolling Stones could not have become cultural icons absent an audience of millions of enraptured Americans. Keith Richards could not have recorded the riff to “Satisfaction” without a new effect pedal designed by engineers in central Michigan and shipped tariff-free to Britain. And British art students never would have thought to emulate American blues musicians if they hadn’t been able to purchase American albums in British record stores. All of this depended on a postwar system of trade and monetary management that did not simply fall from the sky. It was designed and negotiated by Keynes and his American counterpart Harry Dexter White at the Bretton Woods Conference.

It was not written in the ether of the universe that Britain would remain a prosperous nation or maintain its commitment to democracy — particularly amid the collapse of its overseas empire. It did so because Keynes and his political allies mobilized resources and ideas for a common purpose that animated the national imagination and motivated international cooperation.

In 1942, with Britain deep in debt, and still consumed by war, Keynes addressed the public through the BBC. It was a mistake, he argued, to confuse accounting figures of debt and deficits with national economic potential. The very act of mobilizing resources for new productive purposes would create the wealth that Britain needed to meet its obligations to citizens and foreign creditors. Technology, expertise, and an active workforce gave even debt-ridden, war-torn Britain a productive potential that would have made the monarchs of other ages blush. The key was mustering the political will to realize that potential.

“Why should we not add in every substantial city the dignity of an ancient university or a European capital?” Keynes insisted. “Assuredly we can afford this and so much more. Anything we can actually do, we can afford.”

For America today, the project must begin with a broad attack on economic inequality. The gap between the rich and the rest is wider now than it has been since World War I. Alleviating inequality is not just a question of improving the standard of living for millions of Americans who deserve a better paycheck — it’s about making sure everyone in America is engaged in the same political project. We cannot mobilize our economy for the greater good if we do not collectively believe our democracy works for all of us.

How can these Keynesian lessons be applied to a world in which Covid-19 continues to change the landscape for American workers, and the very structure of the global economy? Inside The Great Rebuild Issue, five writers explore how policymakers can transform social improvements and national well-being into an economic strategy that could secure America for years to come.

Zachary D. Carter is a writer for HuffPost and the author of The Price of Peace: Money, Democracy and the Life of John Maynard Keynes.

This story is part of The Great Rebuild, a project made possible thanks to support from Omidyar Network, a social impact venture that works to reimagine critical systems and the ideas that govern them, and to build more inclusive and equitable societies. All Great Rebuild coverage is editorially independent and produced by our journalists.

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