Whenever I get a spare moment, I try to soak up the wisdom of those sages from the past. The current economic situation clearly could use a dose of such perspective — one untainted by the incessant torrent of confusion. Fortunately, we only have to travel back less than a century to find such an oracle.

 Many brilliant minds dominated the first half of the twentieth century — Bohr, Freud, Picasso, Heisenberg and Joyce.  At the half-century mark in 1950, however, two stood above all others: Albert Einstein and John Maynard Keynes. 

As of now, Einstein’s light is brighter. But Keynes’ star is again on the rise. His influence from the 1930s through the 1970s is difficult to exaggerate. He was on the cover of Time in 1965, two decades after his death, and even Milton Friedman and Richard Nixon grudgingly acknowledged, “We are all Keynesians now.”

No less an intellect than Bertrand Russell, who frequently engaged him in debate and also knew Einstein and others among the contemporaneous luminaries, believed Keynes to be the smartest person he ever encountered. If his wasn’t the finest mind ever, it was definitely amongst them.

Keynes was a British economist, Cambridge don, leading figure along with Virginia Woolf in the Bloomsbury Group, art collector, investor and currency trader.  He helped his country finance World War I and was a part of negotiations that led to the Treaty of Versailles. He realized the terms were not realistic, and, in a burst of anger and acerbic wit, immediately dashed off a little book titled The Economic Consequences of the Peace in 1919. He predicted hyperinflation in Germany and the rise of a radical movement that would lead to another and even larger war. Not surprisingly, world leaders followed his advice in dealing with Japan and Germany after World War II, thus setting the stage for the most remarkable period of growth in human history. Among many other things, Keynes was the inspiration for the Marshall Plan.

He attended the 1944 Bretton Woods Conference in picturesque New Hampshire a short while before he died. At this historic meeting the global monetary system for the post-World War II era was established. Keynes liked most of what occurred but felt that pegging the value of the dollar to gold could not be sustained for more than about a quarter-century. Twenty-six years later, President Nixon floated the dollar.

 In between these two startling insights came his most amazing and lasting contribution. In 1936, he published The General Theory of Employment, Interest and Money. In the 1980s, it became popular to associate this book and its author with the notion that all government spending was good and markets were bad. Nothing could be further from the truth. Even during his lifetime, his followers and popularizers had so distorted his original concepts that he felt led to declare that “I am not a Keynesian.” 

Keynes loved markets. He recognized they were not perfect but reveled in their possibilities. During a five-year period when the British stock markets lost 15 percent, a trust he managed grew by 500 percent. He amassed a personal fortune by engaging in currency trading for a few minutes each morning while still in bed.

His basic message in General Theory was simple:  Capitalism in the “real world” can get into a “liquidity trap” in which fear and lack of trust can stall economic activity no matter how low interest rates go (sound familiar?). When that happens, government must step in and stimulate activity. That’s it!

He further suggested we should use some of the revenue generated by the subsequent expansion to pay down debt, a fact which has been completely forgotten in the efforts to make him the whipping boy of limited-government advocates and the scapegoat for every hare-brained scheme to spend public money that somebody suggests.

In our current cataclysm, many leaders of all philosophical persuasions are coming around to the notion that we have no realistic choice but to provide a strong “Keynesian” stimulus. 

We are now in the season when people of many faiths pause to take stock of their blessings. One of our greatest is that we have the benefit of the wisdom of this self-proclaimed “academic scribbler” to guide us toward the next round of prosperity and progress. 

Dr. M. Ray Perryman is president and chief executive officer of The Perryman Group (www.perrymangroup.com). He also serves as distinguished professor of economic theory and method at the International Institute for Advanced Studies.