Lenin's Reply to Keynes.

You may have seen that pearl of economic wisdom extracted from Keynes' "The Economic Consequences of the Peace":

"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency." (here)

"Lenin was certainly right", Keynes added, for once agreeing with a plebe, a Marxist, and a Russian (whoever said miracles did not happen?).

Although both Keynesians and Austerians have written abundantly on this (the latter to embarrass the former), I find it instructive to go to the article where that quote's story was first told.

You see, Lord Keynes wasn't much given to document his statements or too demanding on the sources he quoted -- particularly when it comes to "Leninist Russia" -- so it was difficult to ascertain how did he learn about Lenin's thinking: "Lenin is said to have …" -- is said … by whom?

Michael V. White and Kurt Schuler ("Retrospectives: Who said 'Debauch the Currency': Keynes or Lenin?" Journal of Economic Perspectives, Vol. 23, No. 3, Spring 2009, pages 213-222) did the detective work.

To make a long story short, Keynes must have taken that from an "interview" published on April 23, 1919, by the Daily Chronicle in London (reproduced the same day in the New York Times and a few days later by other outlets).

It appears the "interview" was an anti-Bolshevik fabrication. An obvious red flag -- pun intended -- is its authors' anonymity: White and Schuler found that Lenin did give interviews at the time, but none involved anonymous reporters. Why should this particular interview require anonymity?

White and Schuler do not touch on this, but if that interview was a forgery -- as it seems -- it wasn't the only one. Similar exposés of diabolical red conspiracy theories were not unknown at the time:

"On October 27 and 28, 1919, the Philadelphia Public Ledger published excerpts of an English language translation as the 'Red Bible,' deleting all references to the purported Jewish authorship and re-casting the document as a Bolshevik manifesto. The author of the articles was the paper's correspondent at the time, Carl W. Ackerman, who later became the head of the journalism department at Columbia University."

I suppose one should be thankful Lord Keynes wasn't a reader of the Public Ledger: the original of the "Red Bible" was the "Protocols of the Elders of Zion".

White and Schuler add a detail indicative of the climate of hysterical fear then prevalent among the Western "educated bourgeoisie" (same fear which gave Hitler in Germany much to laugh: "We used to roar with laughter at these silly faint-hearted bourgeoisie"):

"That mood was vividly illustrated in a July 1919 letter from Herbert Somerton Foxwell, the Cambridge and London University economist (…) Referring to the attempts to restore real wage rates and changes in working conditions, Foxwell continued:

'They [the reckless British socialists, a.k.a. the Labour Party!] are out for anarchy. Possibly some of them believe they can build a better system on the ruins of the old. (…) They are a rather bad lot, from Ramsay MacDonald, the dear friend of our Premier [Prime Minister], downwards.

'If we had such a thing as a Government many of them would have been hanged as traitors long ago.

'I was at a dinner of very able City men & others on Thursday, when I never saw such profound pessimism. Keynes (junior) said 'you talk of what the position of the country will be after five years. The question is will it hold together for two years'."

Mercifully, the guests' Animal Spirits did not compel them to lynch Ramsay MacDonald, and so Keynes (junior) simply had to clutch his pearls fearfully.

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White and Schuler's paper is a must read (here).

Before closing: I have to confess my ignorance on everything Lenin. But his 1920 reply to Keynes, which White and Schuler sketched, was priceless:

"He [Keynes] has arrived at conclusions which are more weighty, more striking and more instructive than any a Communist revolutionary could draw, because they are the conclusions of a well-known bourgeois and implacable enemy of Bolshevism, which he, like the British philistine he is, imagines as something monstrous, ferocious, and bestial. Keynes has reached the conclusion that after the Peace of Versailles, Europe and the whole world are heading for bankruptcy. He has resigned, and thrown his book in the government's face with the words: 'What you are doing is madness'." (here)

Incidentally, Leninist Russia's policy towards public debt could have been supported by many a modern Keynesian economist advising the Greek government. Now, that would have been a sight to behold.

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The more I learn about Keynes, the more I'm reminded of his online mujahideen … You've gotta love Keynes.