I was brought up, like most Englishmen, to respect Free Trade not only as an economic doctrine which a rational and instructed person could not doubt, but almost as a part of the moral law.
These are the opening words of a lecture delivered by the economist John Maynard Keynes in Dublin in April 1933. The lecture was inaugurating the Finlay Series at University College Dublin, named in honour of the Jesuit priest Thomas Finlay. Keynes’s chosen topic was ‘National Self-Sufficiency’, especially protectionism; he also offered his thoughts on the Irish economy. In the audience for the talk were Éamon de Valera, then president of the Executive Council, his predecessor, WT Cosgrave, Douglas Hyde, Seán Lemass, Desmond FitzGerald, Richard Mulcahy and most of the Irish Cabinet. Such a gathering of the political and intellectual aristocracy was unprecedented in the Irish Free State.
Keynes was lecturing in the Physics Theatre in Earlsfort Terrace. Poignantly, that was the very same room where the debates on whether to accept the Anglo-Irish Treaty had taken place in 1921. (Mansion House, the usual site of the Second Dáil, was deemed unsuitable.) Many in Keynes’s audience had taken part in those debates – and indeed, fought on opposite sides of the resultant civil war.
Keynes’s lecture was widely reported in the Irish press and has remained a subject of debate and interest ever since. It’s a glimpse into how intellectuals at the time thought about the predicament of how newly independent nations should develop. This is the context in which I first became interested in the lecture; to learn what the world’s most famous economist thought about Ireland, without the benefit of hindsight, is fascinating. What is particularly notable about the Finlay Lecture is that, at least on a first reading, it is surprisingly positive about the state that Ireland was in. Particularly widely reported was one comment: ‘If I were an Irishman, I should find much to attract me in the economic outlook of your present government towards greater self-sufficiency.’ This was astonishing. At the time, Keynes was one of the most influential intellectuals in the world, and probably the most famous economist to ever live. And Ireland was a backwater, pursuing a disastrous trade war with Britain. As far as economic orthodoxy is concerned, it was as if Paul Krugman went to Tajikistan to praise the wisdom of their leaders in implementing price controls.
But, unsurprisingly, there’s a lot of context to unpack here. What did John Maynard Keynes actually think about Ireland? It was certainly not a subject that he wrote or spoke about much. In the lecture, he jokes about not being qualified, asking for ‘the pardon of my readers for an incursion for which I have but too little warrant’. His first research in economics was actually about India. While working for the India Office in London, he wrote Indian Currency and Finance, arguing that the gold standard should not be adopted for the rupee. It was an impressive scholarly achievement – especially for a man who had never stepped foot in India.
Keynes didn’t often travel to Ireland either. He accepted the offer to lecture in Dublin for far less than his usual speaking fee in large part because he wanted to visit again. He first intended to bring with him his wife, the famous Russian ballerina Lydia Lopokova. If she had been available, the trip doubtless would have garnered even more press attention. While a liberal, Keynes was also an imperialist, and took the idea of the British empire essentially as given. He once described British rule over India as ‘settled, humane, and intelligent government’. Less is known about his views on Irish independence but I don’t imagine he was particularly keen. Of his attitudes toward Ireland in the 1910s, his biographer Lord Skidelsky writes ‘Maynard was aware of these things … but was basically indifferent to them.’ Keynes wrote a letter to his mother in 1911 in which he said that a fortnight-long trip to Ireland with a group of Liberal MPs converted him to the cause of Home Rule. In any case, on his four-day trip to Dublin, questions of empire or republicanism don’t seem to have come up.
Keynes is fairly ambitious in his choice of topic: he says he is ‘delivering the first of a series of lectures, which will have many successors but no predecessor, delivering it in Ireland, which has lifted a lively foot out of its bogs to become a centre of economic experiment and stands almost as remote from English nineteenth century Liberalism as Communist Russia or Fascist Italy or the blond beasts in Germany’. Regarding such ‘economic experiment’, Keynes argues that it would be desirable for most countries to move closer to a system of autarky (economic self-sufficiency). This is a major departure from his previous position as a free trade fundamentalist, which he held up until the 1920s.
Keynes was infamous for reversing his positions. There’s an old joke that says that, in a room of twelve eminent economists, you’ll find thirteen opinions – and two of them will be Keynes. When Keynes started to publicly doubt free trade, it was a social scandal. Virginia Woolf and his close friends were horrified. ‘Maynard has become a Protectionist,’ she wrote to a friend in September 1930, ‘which horrified me so that I promptly fainted.’
My sense is that Keynes’s evolving views on trade contributed to his being increasingly socially alienated from his beloved Bloomsbury Set. This was a group of intellectuals and artists based in Cambridge and the Bloomsbury area of London, including EM Forster, Virginia Woolf and the biographer Lytton Strachey. To them, and to many intellectuals at the time, protectionism was synonymous with backwardness and xenophobia. Indeed, one of the central tensions in Keynes’s life was the difficulty he experienced in holding together a social circle of countercultural bohemians while also being an influential government adviser sometimes identified with unpopular policy stances.
It is easy to get the wrong idea from the Dublin lecture that Keynes was more protectionist than he really was. Transcripts were printed in several outlets, and there are four versions of it in circulation, each with their own target audience. Mark Nolan, for his PhD thesis, discovered that the authoritative version is the one that appeared in the Irish journal Studies. Insofar as the versions differ, the one Keynes actually delivered is the most cautious and sceptical of government intervention. Notably, the less cautious versions of the text appear in Keynes’ Collected Works, and are the source for, among other writings, Skidelsky’s celebrated three-volume biography. In Nolan’s account, the existing biographers exaggerate the degree of Keynes’s adherence to protectionism.
So, why did he abandon a dogmatic belief in free trade? Especially in the period after the First World War, liberals like Keynes came to no longer believe that the same economic model was appropriate for all countries. To think that free trade is appropriate for all places at all times is, arguably, hubris. Keynes himself viewed the most important contribution of his Dublin lecture to be a demonstration that, whatever the next generation of economic systems ended up looking like, there was no room for the level of uniformity that existed in the nineteenth century. He says: ‘We are – all of us, I expect – about to make many mistakes. No one can tell which of the new systems will prove itself best.” I find Keynes’s point here to be well-taken, in anticipating both the difficulty of generalising from one country to another, and in recognising the diversity of economic models that would eventually prove compatible with growth.
A second reason Keynes became a free trade sceptic is that, while there are good arguments that trade boosts welfare across the world as a whole, it can come at the expense of domestic employment or industry. The German economist Friedrich List, writing in the first half of the nineteenth century, argued that countries should insulate ‘infant industry’ from competition using tariffs until they were able to compete on world markets. List was widely read (or, widely pretended to have been read) by Irish nationalist economic thinkers, and – more recently – by economic modernisers in the East Asian Tigers. As he got older, Keynes became more sympathetic to the idea that governments should be fiddling with trade or even currency exchange rates to boost national welfare.
Third, Keynes was concerned that an open economy model would lead interest rates to be too high. The sort of society that Keynes envisaged, he says, may require the reduction of interest rates to almost zero – not possible in a system of free exchange of goods and loanable funds. He thought that free trade would lead to capital flowing too freely, and domestic economies being massively destabilised by international fluctuations as a result.
The Finlay Lecture is just about the farthest away Keynes ever got from the idea that trade promotes peace between nations. Going back at least to Adam Smith, ‘gentle commerce’ has been one of the most powerful arguments for free trade. I am personally fairly convinced by the evidence that, even after controlling for other relevant factors, countries that trade more are less likely to go to war. It’s less clear that this was true in the 1930s – I can’t imagine the data would allow for a convincing econometric analysis one way or the other. In the lecture, Keynes points out all the ways in which economic entanglement can sour relationships between nations as well as improve them. ‘If you owed us no money, if we had never owned your land,’ he says, then a great deal of the unpleasantness of English and Irish history would have been avoided. Economic entanglement between Ireland and Britain does not seem to have done them a whole lot of good as regards living in peace and harmony. The ownership of national assets by foreigners is also likely to ‘set up strains and enmities’ which, he implied, was part of what led to the First World War. Commenting on this sort of ill-fated entanglement is what had originally made Keynes famous, in his book The Economic Consequences of the Peace, which he wrote while serving in the British delegation to the Treaty of Versailles.
Keynes did not doubt that the principle of comparative advantage was one of the great triumphs of economic thinking. When you trade with your neighbours, you are, in an important sense, getting more productive yourself. But he says the actual differences – in geography and other factors which give an advantage to the production of goods in one place over another – are smaller than a simple model would assume. Keynes points out that with the development of new machine automation, many items can be manufactured in more places with almost equal efficiency. This surely changes the calculus of the benefits of opening up trade.
In the second volume of his biography, Skidelsky writes that the Finlay Lecture was ‘the nearest [Keynes] ever came to endorsing communist, or fascist, economics’. After a version of the lecture appeared in The New Statesman, Oswald Mosley, the leader of the British Union of Fascists, wrote to Keynes to warmly congratulate him on his ‘conversion’. Keynes replied in a letter to explain that he was intending ‘not to embrace you, but to save the country from you’.
Keynes’s qualified call for tariffs needs to be understood in its political context. After suspending the gold standard during the First World War, Britain rejoined it in 1925. Treasury officials and a cadre of bankers from JP Morgan talked Winston Churchill, then chancellor of the exchequer, into pegging the value of the pound to gold at its pre-World War One standard. This caused an economic calamity. The pound was suddenly intensely overvalued and British exports became uncompetitive. The resultant economic chaos and mass unemployment were largely responsible for the 1926 general workers’ strike. Keynes excoriated these policies in The Economic Consequences of Mr Churchill. Winston responded to these criticisms in a distinctly Churchillian fashion some years later: ‘Everybody said that I was the worst Chancellor of the Exchequer that ever was. And now I’m inclined to agree with them. So now the world’s unanimous.’
Britain tried and failed to reduce unemployment by forcing down its domestic wages to reduce the price of exports. One option was to leave the gold standard again, but, as Keynes argued in A Treatise on Money (1930), this would have had drastic and unpredictable effects. Another option was to level the playing field in the domestic market by imposing tariffs on imports. This wouldn’t help with overvalued exports, but it could boost British industry. It’s an exaggeration to say that Keynes abandoned free trade – among other reasons, because it’s not clear (to me, at least) what ‘free’ trade means in such a situation. When currencies are mispriced and some but not all countries use the gold standard, trade is already in important senses unfree. The Irish Free State had its own currency by this point (the punt), but it was pegged at a 1:1 exchange rate with sterling – and so Ireland was in an equally precarious situation vis-à-vis its currency.
Support for or opposition to free trade was a primary political cleavage in Britain at the time of the Finlay Lecture. The Liberals favoured it, while the Tories proposed a three-tiered system of tariffs: Britain first, the colonies second, and the rest of the world third. Keynes had accumulated enormous influence within the Liberal Party, befriending figures like Herbert Asquith, but the apex of his influence came just as the party declined into electoral oblivion with the rise of Labour. Labour had a mixed view on tariffs; fierce internal division over trade was one of the causes of the collapse of Ramsey MacDonald’s minority government in 1931. The sort of sentiment about trade Keynes was expressing in Ireland was beyond the pale even for hardline socialists within Labour.
In the Finlay Lecture, Keynes alludes to the London Economic Conference, which was due to happen later in 1933. He says that he hopes it will succeed in reducing tariffs and preparing the way for ‘regional agreements’. These hopes would be dashed when Franklin Delano Roosevelt torpedoed the conference by denouncing the idea of currency stabilisation.
Keynes’s Dublin visit was a major political event in Ireland. The previous year, Fianna Fáil took power for the first time, and Éamon de Valera made a series of changes undermining the Anglo-Irish Treaty. The new government renounced the oath of allegiance to the crown, stripped the governor-general of his powers, and (most consequentially) refused to keep paying land annuities to the British exchequer. During Ireland’s land reform, tenant farmers were given an opportunity to purchase the land they worked using subsidised government loans through a series of acts starting in the 1880s. The Anglo-Irish Treaty stated that the Free State would continue to gather the payments for these loans and pass them on to the British treasury. When de Valera’s government stopped sending the annuities, Britain retaliated by imposing a 20 per cent import duty on agricultural products from the Free State. What is sometimes omitted from this summary is that the Free State continued collecting the payments; they just stopped passing them on. Ireland responded with a similar duty on coal, leading to a resurrection of Jonathan Swift’s satirical phrase ‘Burn everything British but their coal’. The tariffs escalated on both sides, and Ireland and the UK remained in full-blown economic war until 1938. Given its incomparably greater size and diversity, the British economy was not much affected, but the War was economically ruinous for Ireland. Some economists, including Kevin O’Rourke, have argued that, due to the highly favourable resolution terms in 1938, the trade war was net positive for the Irish – but they could not have known that at the time.
This trade war makes it all the stranger that Keynes chose the Finlay Lecture to express the most nationalist sentiments of his career. According to George O’Brien, the UCD professor who invited Keynes to Dublin and arranged the trip, members of Fianna Fáil, and their predecessors in Cumann na nGaedheal, sat on opposite sides of the room. As Keynes expressed different views on protectionism, grins were traded between one side of the lecture hall and the other like in a tennis match.
Despite appearances, Keynes was absolutely not endorsing a particular Irish political party, or the policies of the trade war. The first reservation he expresses about any Irish effort toward self-sufficiency is whether the island of Ireland is geographically big enough to be self-sufficient without incurring an unacceptable reduction in living standards. Especially after partition, Ireland is tiny. For this reason, Keynes in the lecture endorses a common market between Ireland and England. He says that reaching such an arrangement is still politically possible, but is becoming more difficult by the day. In that sense, he was entirely opposed to Fianna Fáil’s policies: he favoured free trade within the British Isles.
For this reason, his famous ‘If I were an Irishman …’ comment should in my view be taken with a grain of salt. It was something between flattery and hyperbole. Keynes was alert to the possibility that his visit would be seen as favouring one side of the political divide, and wrote to the director of the Bank of England that it was for this reason that he included warnings in his lecture. In ‘National Self-Sufficiency’, Keynes quotes the French poet Paul Valéry in saying: “Political conflicts distort and disturb the people’s sense of distinction between matters of importance and matters of urgency.”
Keynes gives three more general reservations about economic nationalism, all of which were meant as veiled warnings to the Irish government of what they might become.
First, by advocating for any level of tariffs, you are immediately placing yourself in the same bucket as frauds, charlatans, and naïfs: ‘Where the advocates of national self-sufficiency have attained power … without exception, many foolish things are being done.’ Keynes was a free-trade sceptic, but he was acutely aware that practically everyone else who claimed to be ‘free-trade sceptical’ was actually dogmatically protectionist.
Second, economic nationalism is invariably implemented too hastily. Among the many lessons of the Russian Revolution are the perils of trying to change society too quickly. Here you can perhaps see some influence from the Irish philosopher Edmund Burke. Keynes wrote a long and deeply researched essay about Burke as an undergraduate, and he revisited him throughout his career. Burke’s pamphlet Reflections on the Revolution in France is credited with being one of the first statements of political conservatism. Since society is so complex, and most changes are likely to make it worse, we should be extremely sceptical even of interventions that sound good on paper. Economic nationalism was being dogmatically implemented with sweeping changes, rather than small-scale experiments as it should be.
Third, Keynes says economic nationalists cut off the means for criticism and error correction. Greater movement toward self-sufficiency is often accompanied by more censorship and insularity. This is another reason why Keynes is sceptical about self-sufficiency in practice, and thinks that governments (Ireland’s included) will make a dog’s dinner of implementation. He was presumably aware that de Valera had founded the Irish Press newspaper as essentially a propaganda vehicle for his policies. De Valera evidently did not heed the message; a month after Keynes’s visit, his government imposed a 40 per cent tax on imported newspapers – which is to say, mostly on newspapers that opposed him.
Keynes did not spend long in Dublin; one biography says two days while another says four. The rest of his time was filled with various meetings, the most important of which was a long private conversation with de Valera (in ‘the interests of protocol’de Valera met him not as head of government but as chancellor of the National University of Ireland). Keynes wrote in his diary that de Valera
Impressed me distinctly favourably … I was very glad to find that his mind was moving away from his insane wheat schemes to peat proposals which are at any rate harmless and might quite conceivably turn out well.
I suppose that, under the circumstances, ‘moving away from insane schemes’ is about the warmest endorsement de Valera could have hoped for. Keynes wrote to his mother that he could easily imagine himself working with ‘Dev’. Interestingly, he greatly preferred de Valera to his predecessor, WT Cosgrave; he wrote in the same letter that Cosgrave embodied the dogmatic nineteenth century consensus he was trying to escape.
The capstone of Keynes’s visit was an honorary dinner hosted by George O’Brien. It was apparently a fiasco. In attendance was the famously loquacious poet Oliver St John Gogarty, the inspiration for the character of Buck Mulligan in Ulysses. The dinner was interrupted by an urgent telephone call for Keynes from London. When he came back into the room, he announced to the group that America had just unilaterally suspended the gold standard – to which St John Gogarty replied ‘Does that matter?’
It did. The phone call was a reminder that Keynes’s mind was never far from the international monetary system. The Finlay Lecture is a fascinating episode in the history of Irish economic thought. But the fact that it’s still discussed is in some ways indicative of the paucity of research and writing about the Irish economy from that time.
It is surprising that Keynes didn’t think more about Ireland. Few intellectuals of the twentieth century wrote about a greater breadth of topics. Boundary disciplines were less clear in those days. Keynes received only eight weeks of formal economics training in his life. First and foremost, he was a defender of Civilisation: the realm of ideas and art and free love which he had expertly cultivated in Cambridge. That is a crucial context to understand his thinking, both the bad and the good.
Among his many famous sayings is ‘Anything we can actually do, we can afford.’ This expresses the core of his philosophy that the government should borrow money during economic downturns to stimulate the economy. If those policies are actually a good idea, and growth-enhancing, then – theoretically – credit constraints should not be the issue. He gives a variant of this quote when discussing his plans for Dublin, saying that if he were in charge he would transform it into a ‘splendid city fully endowed with all the appurtenances of art and civilisation on the highest standards of which its citizens were individually capable, convinced that what I could create, I could afford’. In other words, he wanted more people to be able to live like he did.
The Keynesian question, then, is: now that the Irish have got their independence, will they keep their Civilisation – or will they muck it up?
A note on sources
You can read Keynes’s original lecture ‘National Self-Sufficiency’ on JSTOR.
The quote about Keynes’s political indifference in the 1910s comes from Robert Skidelsky’s abridged John Maynard Keynes: 1883-1946: Economist, Philosopher, Statesman, page 137. His arguing against Home Rule at the Cambridge Union is discussed on page 71. His earlier trip to Ireland is discussed on page 155. The account of the Finlay Lecture, including quotes from George O’Brien, begins on page 495.
On Keynes’ attitude toward imperialism and quote about India, see Tyler Cowen’s GOAT: Who is the Greatest Economist of All Time and Why Does it Matter?, page 64.
On the social reaction to Keynes’s changing views on trade and the Virginia Woolf quote, see Zachary Carter, The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes, page 201.
For the Irish political significance of the lecture, see David McCullagh, De Valera: Volume II: Rule (1932-1975), page 21.
Mark Nolan’s Keynes in Dublin: Exploring the 1933 Finlay Lecture discusses de Valera’s taxation of foreign newspapers on page 102, which is based on his earlier PhD work.
1/10/2024
Sam Enright is executive editor of The Fitzwilliam, an online publication about Ireland, economics, and literature. You can follow him on Twitter here.
