this vast solar power plant being built in the remote
Arizona desert is part of the biggest economic rescue effort
in history while the cost action will be great I can assure you
but the cost them in Eq will be far greater
with the economy still struggling the american government is shelling out
three quarters amid trillion dollars to try to pull the country out of trouble
like any Britain
billions are being spent to accelerate growth beaten by government determined
to cut borrowing
this really the right rated
after the crash 2008 the world seem to be running out of cash
Robin cutback government spent
huge amounts of money they didn't have why on earth would they do that
it all goes back to the extraordinary ideas the this man
British economist John may not canes
quite simply he changed the world I think it is true that he is one of the
great figures of the 20th century I'm
in many ways the 21st century
canes thought capitalism was brilliant but left to its own devices it could
also go seriously wrong
it was up to governments to step in to get the economy back on track
he was the archetypal man in white to westminster a Cambridge
who thought he knew best kane says never been more relevant
or controversial than he is today because for the first time since the
nineteen thirties
the problems he was grappling with then bank failures
international crises the possibility of a long economic slump
we're facing to in this series I'll tell you about the lives and thoughts
a three extraordinary men with radically different views
Karl Marx Friedrich Hayek and tonight
canes they also retaining the growing power of money was the crucial challenge
for the modern world
all three were intellectual giants whose ideas have been a hidden force shaping
world events
changing the lives in every one of us but I think they have something special
to tell us right now
because they more than anyone tortoise the also empower
money the goods that markets in capitalism could do
and the enormous trouble they could cause I think they'd know exactly what
we've been going through
I want to know can they help us find a way out
the quiet hills of North West England
for me a chance to experience economics in action no
no
I'm
the
I'm getting to try out rally cars competing in the Tour
Cumbria from
the sponsors to really I getting a slice of the government's 2.4 billion pound
fund to help
regional growth and employment they want to share me
put the company's really all about
mmm
it really is one of the world's biggest tire makers has been manufacturing in
Britain for almost a century
it wants to develop some ovett stop ranges and beef up
research and development
that the sums and then adding on
on
this factory's one of Carlisle's
biggest employers there about 750 workers here
producing 10,000 times a day not so long ago
people worried the company which shift production overseas
to cut costs 2 million pounds
government grant has persuaded for any to invest in Britain instead
when we other major investment the confidence
people to spend the wages all is increased
and the local economy benefits under its not only
really employees we have hundreds of suppliers and contractors
will depend on the spot late benefits also include
he sees as it stands also they've recycle up money
into the local economy it might seem surprising
to hand out to a private company when the government's so worried about the
mounting national debt
now more than a trillion pounds but
pains was quite clear there are times when we need to step in to make
capitalism work for us even when that means spending money we don't have.
with Cain said was that it was possible for government
to come in and make markets work better
so one way that it's off to put his dad
canes save capitalism from the Capitals
good that the Canes critics
its mistakes by governments that really cause the trouble
when we find instances have economies being
seriously not out Rebecca Libyan it's generally been as a result of government
policy mistakes
but Cain's didn't really make a convincing case that
even when the economy was knocked out Rebecca Librium thats
government action could do better than allowing the economy to
essentially mend itself them know came as either an economic Saviour
all the man who led us all a stray but there's no argument
that he changed our world and the way we think about it
he was at the centre the debate eighty years ago and he's back there again
today
a great week dude from this is the only known filled with Cain speaking
danger exchange willing to near danger
on a serious rise into custody into broadcast about
economics how to share out the world's resources
British trade but the cage
this was no dries science it was about changing the world
for the better I think if we looking at Britain's
who made a real difference in the 20th century
the most obvious name will be winston churchill John Maynard Keynes
is really not far behind the man
Kane spent years in this house in London
developing ideas that help shape some the most important events of the past
century
I'll helping to save capitalism from the Great Depression
funding the war against the nazis and building a new post-war economic order
to help pave the way for decades have growth and rising prosperity
was really extraordinary matt Cain's modern perspective was his
access despite being so unconventional in his life and especially his views
he had the here anyone whom acid
presidents and prime ministers all listen to what he had to say
that was only after his death everyone started taking his advice
I apply to University in 1965
and the whole intellectual climate to the time not just in terms of economics
but politics
was driven by the idea that Cain's had sole
economic problem
by the late 1960s canes ideas were
built into the fabric you've pretty much every Western economy
but he didn't seem to have an answer to the high inflation in the nineteen
seventies
after that keynesian fine-tuning without
and free-market ideas gradually took over
but when the world got into Syria's bother in 2008
Keynes was back its ideas that
that mobilize the world the on right and left good and bad
and canes is the author above in my judgment the best suites of ideas
about how to think about capitalism that has been a
and you think that counts then he counts
on to what are these great ideas that have dominated our economic landscape
has said long
where exactly did they come from I'll
Cain was born at the height of the British Empire in 1883
to middle-class parents who sent into eaten
and Cambridge so far said conventional
but University he fell in with a very
unconventional crowd the Bloomsbury set
as a young man he spent a lot of time here their country retreat
charleston in Sussex was gonna commune
for artists and writers and the one
economist they did see themselves
us very different to the extent they were tinged by that rather indefinable
concept hinion
more
there was a hell of a time they were pioneers about sexual behavior though
pioneers on the political front
and they were pioneers in many athletic fields in writing
and and the arts the Blueshirt group allowed him to his
step outside the box into think that the unthinkable
and that breadth inspected he had
allowed him to leap off cliffs with the confidence that there was no bottom
canes immersed himself in the cultural world all his life
collecting paintings fine books even founding the
Arts Theatre here in Cambridge that's no coincidence that a man with such
wide-ranging interests
should have the vision to develop a radically new approach to economics
Keynesianism shorthand today for government efforts to control the
economy
case was born nearly 130 years ago
into a confident age science have been marching forward in medicine engineering
every year extending what was humanly possible
but there was one domain where science had barely begun
economics the world have money and markets
if we could tame capitalism we could really shape our destiny
canes fundamentally believe that but he also understood
may be better than some of his followers just how difficult that was going to be
them
up
Greek fury at the austerity they feel has been imposed on them by the European
neighbors
the Canes this might feel a bit familiar the store
first-hand the disaster that can come from strong the country's
dictating economic terms to the week
man helped inform his first big idea in an interconnected world
when you bend your neighbor might well thank you yourself
the
it was my idea forge by the horrors of World War
one true to his Bloomsbury values
canes didn't want to fight in the war no but he was willing to use his economic
brilliance
to help finance it canes job at the Treasury
was to help channel loans from america other countries in the Alliance
his time here brought home to him how integrated the global economy and become
isolation just wasn't an option the economic fate
entire populations might come to depend on events hundreds
even thousands of miles away
once the war was over canes could see how hatred and the defeated germans
might lead the victors to make a terrible mistake
at the end to the password will inspect the property public hostility towards
German damaged been
a disastrous war on both 150 intensive lives in casualties but economically
to I think there was quite a strong feeling that Germany must be made
pay the net the palace server side where the peace treaty was signed
british Prime Minister Lloyd George and his French in american allies
relished their victory Keynes was a member of the British delegation here
but against his advice germany was ordered to pay everyone's bills for the
damage and suffering caused by the war
home good german uniforms to repay that
you need an economy that is running to produce money
to produce well and then you can repay the
you cannot repay with out of nothing
I'll
Keynes was so outraged that he resigned from the Treasury
and retreated to his room in charleston to write his first major book
the economic consequences if the peace brilliantly written it became a
bestseller
there's some said with his sympathy for the germans he should be awarded in
I and cross he says if we aim deliberately at the impoverishment of
central europe
vengeance I def predict will not limp
the key point for me is he didn't just think it was
in moral the treaty or more unfair it was stupid
he thought a desperate Germany wasn't gonna keep the peace in europe
it certainly wasn't going to contribute to prosperity
wasn't gonna buy goods from Britain and help Britain recover from the war
something kept coming back to one way or another throughout his life
we're all in it together
the verse I treaty brought one of the great powers of Europe to its knees
as Keynes predicted the German economy descended into chaos
the deaths were so impossibly large they ended up printing the money to pay the
bills
which quickly led to hyperinflation thoroughly
worthless currency
hyper-inflation didn't just destroy the economy its
joined the fabric German society people's hopes to
their stories about people taking out all their savings
to buy a single postage stamp for suicide lesser
think ames warm but the first sight treaty
with bringing pastor here even his admirers might have thought he was
exaggerating
they didn't think that for long the
the just fourteen years after the Treaty of Versailles
Hitler came to power
way World War two wasn't far away
ok
why
as came to predicted the price of getting economic relations wrong
was calamity on canes force or
that the reparations were too onerous would have to be adjusted in that
actually
you laying the seeds if they're have the next European conflagration
who it was a bit leery short-sighted who's right the
so what Keynes makeup Europe today well once again he might see strong countries
dictating
economic terms to the week at this time its strong countries like Germany itself
insisting that crisis-ridden nations like Greece sign up to tough budget cuts
in exchange for emergency loans
the newspaper said the debt them ill-will that's built up as a result in
the crisis
he got the germans talking about the Greeks is
no good scroungers but in Greece
well as name or to be you anymore about comparing german leaders to nazis
mccain's might say they were harking back to the wrong wall
the tough conditions being imposed on Greece
might remind him ironically the deal imposed on Germany adverse side
the dollar thinking in Europe at the moment is exactly
repeating the mistakes I believe such as far as Greece is concerned as was made
made in the first world war the comes a point if you visit upon countries things
that can never deliver
it will end in tears if you look at what's happening in the euro zone today
brought some streets have grease general strike since by Ian general strikes in
Portugal you can say well
homie just failing to learn the lessons of history
canes could join me in berlin today he'd surely appreciate the complexity of the
crisis in the euro zone
me understand why ordinary germans feel it's time for Greece to pay its own way
but he also understood that imposing
too much austerity could be self-defeating
I think he would have said let's make week strong so then they can repay
that as long as a data pages the creditors happy
but assuming as a doctor gets into difficulties
and he's a very important that the crater has call to problems
because he won't get his money back faced with the crisis affecting the
people in Europe today
canes would undoubtedly have come up with some solutions
fact years after the Treaty of Versailles heat on bail a plan for
countries to work better together
that first there was a more basic question
how to steer the economy itself
to tame the economy to make it work for us
canes realize you first had to understand how it worked
and the tool for doing that economics was still young
in the nineteen twenties but it had grand ambitions
people hope to be able to predict the movement of economies
but you can predict the movement to the planet's Keynes was drawn to that idea
as well
they came to the conclusion economies would like planets
they were more like people you never really knew what they were going to do
next
in fact he noticed the times
when economies looked most predictable we usually the times when things were
about to go disastrously wrong
ok
it certainly felt like that in 2008 when the global financial system
imploded after one of the longest these
history
many claim now have seen it coming at the time
many more behaved as if the good times would go on and on
dole return to Tori
boom and box being too sure about the economic future
was another mistake the Canes warned about eighty years ago
because he'd made the same mistake himself cool
good
after resigning from the Treasury after world war 1
canes retreated to the sanctuary at his old college
Kings in Cambridge
he was Electra and later a bursa looking after the college's finances
the other special interest in probability theory
a branch of mathematics the tries to predict the future
from the evidence that the past
when he wasn't rising studying
cases often betting on the financial markets he needed money
and he thought speculation was a good way to get it
there was also a great way for him to test his belief
the probability theory and statistics could help you predict the way markets
were gonna move
you have very mixed results
in the
in his early years as an investor came sat in bed every morning
poring over reams of statistics about currencies shares
bombs and commodities when he was sure he'd worked out which way
market with new he'd make the deals the Cambridge academic David chambers
has spent a lot of time studying canes investment strategies
getting this
economic knowledge that he had this great service that he had fair
numbers and statistics he believed I think that he could
define the delineated business cycle
and and as a consequence is that you will be able to pick one was the right
time to be in the stock market
to and shares when was the right time to come out the stock market
in to say bombs government bonds in particular
or alternatively cash
but none have canes elaborate calculations pointed out the disaster
just around the corner
wall street before the crash in 1929 looked a lot like the tail end of our
market boom
investors could see no end to the good times armed with the very latest
mathematical models
they thought they had everything covered then the bubble burst
world markets collapsed and canes lost money along with millions of others
paving the way for the Great Depression his confidence in predicting the future
was gone
he would have but to limit approached in sell for not foreseeing
the Great Depression but he came to the few that the future is not like that
that anybody who happens
to predict it right is likely to be doing so on the basis of luck
rather than judgment
Kane speculating days weren't quite over
cool
years later he thought he might have to store hundreds of tons of wheat
in King's College Chapel after commodity trade went wrong
but he did change the way he invested became a wealthy man
he'd learned lessons about the way economies work
but we still struggle with today you can never get rid of uncertainty
and that economies a made up of people not numbers
more than anyone canes wanted economics to be respected as a modern science
but he knew it was never going to be a science you could reduce to a set of
equations
I N predictions because economists were always gonna have one
extra thing to deal with human nature
didn't know about the future and you try to get a fix on what's
am taking place in time and
you you know you defer to the crowd as the crowd is moving in a certain
direction
must write hear the crowd by weather but must pass by to
the crash site I'm a cell to and it's it's very animal
it's very hard I'll
this idea of heard psychology help canes makes sense to the economic bubble that
blew up
many years before the Great Crash of 1929
the new you can also do a pretty good job
explaining are in great financial crash 2008
the new
in normal times any economic textbook
now in Cain's time would say if the price is something goes up
people buy less if it the price goes down to buy more
that some markets work except
canes realized when you have bubbles then a different side of human nature
takes over
it's the side that says for house prices going up
shares are going up I should buy more because the price is gonna go up again
protocols it does becomes a self-fulfilling spiral prices go up and
up and up and up
eventually bubble will burst
it always does
in the years before 2008 to prefer get
what came to tortoise about heard psychology
bubbles and the uncertainty about economic life
did the bankers investors politicians and the rest of us
simply get too confident thinking a good times would go on for ever
I think in as much as people actually sat down
unfortunate about what was the risks what are the uncertainties
then quite clearly a large number of people were manifestly found wanting
and of course if you don't know what you're doing is not surprising that you
I get end up being smashed to bits and that's precisely what happened
canes big ideas the country's should begin their neighbors
that markets were unpredictable all came out on his own experience
now the Great Depression produced his most important idea yet
and added real urgency to his need to tame the economy
what he realized was economies might think
a min not also massively float back up
looking around the Western economies today that does sound a bit familiar
well
nearly thirty is the outside world was deep in gloom
with dole queues lengthening and factories closing everywhere
the canyons life was blissful
the new
by now he was famous and shocked even his Avon gardellin's bring friends by
marrying a Russian ballerina
up till then he'd been gay
arts books
love affairs the Canes this is what life is all about
but he understood probably more keenly than his Bloomsbury friends
with their inherited wealth that money kept the whole thing afloat
you couldn't have a civilized society without
a well functioning economy when he was back in the real world
Monday morning he could see the British economy
wasn't working at all Britain had been in a slump for years
classical economists said that if workers would just agree to wage cuts
businessmen would invest again create jobs Nikon me would revive
the Canes disagreed
he thought the way to recovery was being blocked by pessimism
on low animal spirits the big inside two canes behind all this
was that a market economy is not self-stabilizing
and when you get very big changes in animal spirits in sentiment
the people who are producing to sell in the future suddenly worry that actually
maybe they won't be the demand in the future
to the stop producing to get out if thats
low output trap can be very difficult
canes realization that an economy could stay sunk
in definitely was a medical break with conventional thinking
the classical approach said the economy would get better we just had to give it
time
but looking around seemed obvious to Cain's
that it wasn't getting any better and it seemed blindingly obvious
why it wasn't every time someone lost their jobs and join the dole queue will
they have less money to spend
so that would mean fewer goods were bought probably mean more job losses
you get caught in a downward spiral with no obvious way out
nazis equally obvious to us today
batsmen was all very new
canes thought the low animal spirits in the business world
well now infecting everyone
in a radio broadcast in 1931 he made a dramatic
call for action a slump in trade and employment
are as bad as the worst witch ever occurred activity and enterprise but
individually and nationally must be the cure
it today
canes followers have made similar called
years after the start of the recession the economy still struggling to get back
to where it was
yen up to be pains to see
animal spirits and let whether his ideas
provide is another question paint inside
countries could just get stock was probably his most important contribution
to economic thinking
but he didn't just want to understand economies he wanted to make them work
better
he had plenty of advice to getting out of a slump
but the most controversial was that government should spend money
they haven't got to my mind the biggest arguments in politics today is over
whether countries have done too much of that since the crisis-hit
or not enough %uh
%uh
well
James might have died almost seven decades ago but out here in the Arizona
desert
his big idea for getting the economy moving again
lives om
at Hilo band
that building the biggest solar power plant of its kind in the world
and the site covers over three and a half square miles
the
nearly a million mirrors will capture enough energy to provide 70,000 American
homes
with clean power but for the people in this remote
region and the John Maynard Keynes probably the most important thing is
plant will produce
is employment between my wife and I we
probably spent two years at work thank God not at the same time
we
we took some very soon
its
company that sources our manpower
tells me the received three hundred resumes per day
us
some lot of people looking for work and the people who have jobs out here
very
feel very lucky
yeah jobs in effect this plant is part of a vast keynesian experiment
in the wake of the crash the US government stumped up
three quarters have a trillion dollars for projects like this one
to create jobs and growth
in normal times say the people who run this site
they would have raised a billion-and-a-half dollars to get things
going
from commercial banks but these are not normal times
because of that downturn we had to
a look for a alternative
sources of financing and of course
in this context the the federal long-gun tee program here in the US
has helped out a lot in fact without that can offer
of public programs a this plant would have never been a reality
now we used to government using their cash to try to bring the economy to life
in hostile environments where private monies drying up
that back in Cain's day it was much more controversial idea
the
on
the 1930s came spent weekdays
at his home here in London's Bloomsbury district you read countless articles and
pamphlets
explaining how something could and should be done
to tackle this Great Depression in normal times canes thought monetary
policy with the best way to help the economy
you cut interest rates to encourage people to borrow and spend more
and companies to invest when animal spirits really low that might not be
enough
companies might not see the point in making new investments
people might not want to borrow no matter how cheap it was that's when
Kane's thought government
d need to make up the gap with more public spending
that
came suggested the government should hire people to demolish south London
and then rebuild it he wasn't serious
but he was making a serious point if the government borrowed to create jobs
people would spend more confidence would rise the economy would recover
if you pick the right moment he insisted extra spending
would pay for itself producing higher tax revenues
with pretty did have norms trouble trying to persuade the Treasury the
circle Treasury view
that you should park at the bottom of the business cycle good economic terms
what you need is more demand in the economy you can do that in the ways the
Canes suggested
naive Kenjon prescriptions of simply responding to depressions and recessions
by
raising the budget deficit as if this had no effect on
other economic no adverse effect on other economic variables a
I i really the governor dangers policy prescriptions in the thirties canes
found that most British politicians had a similar view
high borrowing was dangerous
he thought he might have a more receptive audience in america
after all he was now a celebrity on both sides of the Atlantic
and the economic situation in america was desperate
gross national product was down to almost seventy percent you know
employment nationally a 25 percent in places like Chicago and Detroit
employment was up to fifty you fifty percent
over over half the population unemployed I
president hoover's solution to the Great Depression had been spending cuts and
tax rises
made an argument we've heard others make more recently balancing the country's
books would create confidence
and encourage investment didn't happen
never said me cut back government spending
in a situation searches earlier recession or depression
demand goes down unemployment goes up
and it's a vicious circle confidence isn't
restore when unemployment goes up business goes down
confidence is eroded hoover's successor
Franklin Delano Roosevelt have a different approach
again echoing arguments made today he thought the government should spend its
way out of trouble
make your neighbor ping pong him
and I come now
when Kane's arrived in America in 1934 there's no evidence that he persuaded
the US government to adopt Keynesianism
they were doing it anyway
pain news only me seeing with president roosevelt
by all accounts it didn't go very well pains thought the president was no
economist
president
the meeting have a friend
but they did agree on the mend
time the government
time
his story experiment
the New Deal Obama's program government-funded projects
to put armies and jobless to work
ever since it's been the celebrated example oven keynesian effort to boost
flagging economies
and there's no more iconic project in that era
than this one
Hoover Dam
built across the Colorado River bordering Nevada and Arizona
it was the biggest construction project in the world
I would call the Canes in project absolutely the government stepped in
with money
built a deficit and how does that came Hoover Dam which gave thousands tens of
thousands of people
a new life money to spend the
well
armies of workers from across america
tunnel for five years through mile upon my love mountain rock
to build what was in effect a vast power generator
providing electricity for huge swathes of the country
that prime the economy
165 million dollar investment
which produced billions in growth
economic growth
%uh
just eight miles away is Boulder City built to house the workers
building the dam
the
all these houses along these avenues are what we now call dingbat house
they were the homes built for the workers they were put up
to last through the construction of the dam very quickly build
but because people stay which they didn't anticipate people with the
families deliver them Rogers shows
runs the town's hotel he thinks Boulder City shows how in a depression
extra government spending can trigger private spending and investment in
adding to the economic benefits and what Keynes called
the multiplier %uh
by the end of the second year they lived in a town
fault I'll fully operating down with retail stores and restaurants and
medical facilities and recreational facilities
it happen then no less than two years critics have Keynesian spending plans
often say the benefits of leasing
and the cost permanent the Boulder City took route
and thrived
those who still live here say if it hadn't been for the New Deal
this would still be desert
Hoover Dam might have helped the local area but it's actually a myth
that the New Deal ended the Great Depression
0 it took a World War the man all the extra government spending that went with
that
finally to bring the economy out of the doldrums
them
you might wonder whether a world me
was really the best test canes arguments but I'm since then
so-called Keynesian policies have be more government
do when faced with emergencies the crisis of 2008 was the biggest emergency
anyone had seen for a long time low
when the global financial system crashed the world face the real possibility of
another Great Depression
governments have been preaching the free market for years
faced with this economic disaster they reached again
for the old keynesian leave this it was a classic Keynesian response
when individual stop spending money on businesses stop spending money
is a government also stop spending money at the same time
then what happens the economy basically crashes the aim was to boost confidence
more animal spirits by making it easier to borrow
invest and spent interest rates was slashed to just
half of one percent the lowest on record it
we're all now in uncharted territory
then when interest rates couldn't go much lower the Bank of England started
pumping
billions of pounds directly into the economy it's literally
creating £75 billion pounds in the next few months
to get money moving around the economy again
even be a team was temporarily cut
it'll make goods and services cheaper on by encouraging spending
it will help stimulate growth in 2009 with the global economy still
tottering leaders gathered in London to endorse keynesian rescue plan
for the entire world this is the day that the world
came together to fight back against the global recession
I find it very hard to explain the collapse in world trade over 15 percent
in six months
between the end overweight and beginning in spring 09 in terms of anything other
than an extraordinary collapse of
animals of the summer that was turned around in 2009 but by no means all
the mall
even that great rescue plan in 2009 wasn't quite what it seems
full Gordon Brown's talk Britain's own stimulus plan
was actually one of the smallest because our government was already borrowing
more than
any other advanced economy so even a Keynesian Prime Minister like Gordon
Brown
didn't think we could borrow a lot more his successor
think we should borrow much less
we now have the Prime Minister who on one fundamental point
appears to disagree with canes some other normal things that government can
do to deal with a normal recession
like borrowing to cut taxes or increasing spending
these things won't work because they lead to more debt
which would make the crisis worse the only way out
for the debt crisis is to deal with your debts
I suspect the Canes probably wouldn't have used exactly the Prime Minister's
formulation
I think the Canes would have accepted at some point the you have to head back
towards
a more balanced budget but if you don't want to stack debts on to future
generations to meet the remarkable thing
is that countries like the UK that have a choice
are voluntarily putting themselves through austerity
and almost certainly we will know
we know what will happen the economy will
will get weaker I am unemployment will go up
and there will be an enormous amount
unnecessary suffering
this argument will run and run on both sides of the Atlantic
in Arizona the massive spending program that built this solar power plant
and let thousands clock on for new jobs hasn't been a miracle cure for the US
economy
maybe the medicine didn't work because the dose was too small
or maybe the mountain of debt weighing almost
Western economies means the Keynesian route to recovery
is simply shut off we are in the stratosphere today
that we just have not seen before and maybe it's fine
but no other countries very rarely have seen these
kinda debt levels public-private another measures
their reps
by the nineteen forties Keynes was riding high
his visit here in Cambridge was driving he was back in the Treasury helping
finance the second world war
and his books were being hailed as masterpieces but he had one last
big idea to pursue profound implications for the world
then and now
canes ideas for fixing broken economies had now been tested
but will be in the world war two he got a chance to leave his mark
on the entire global economy the more integrated world
he was more convinced than ever the country's needed institutions to force
them together
make them cooperate the catastrophe after world war 1
could never happen again the single most important trip to america that Cain's
Everton
was in 1944 to the exclusive resort the Bretton Woods
new hampshire he was joining delegates from over 40 different countries
all charged with laying the foundations Avenue
post-war global economy they wanted to rebuild the system
here not just from the war but from the Great Depression
the financial system had just been destroyed
the economic chaos in the twenties and thirties was largely responsible
for the war canes believed
countries at all focused on charting their own of without very much thought
to what was going on around them
the world paid a terrible price
for that failure to cooperate
there is a real determination among
officials at both in London and Washington that we couldn't do this
again we knew we had to fix the world's economy that we had
we couldn't go back to the to the kinda economic crisis we've had before because
we couldn't
afford another war
as representatives from across the world gathered here at Mount Washington Hotel
elsewhere there was still ferocious fighting
but once the war was over canes new for the world economy to prosper
countries would need to work together much more closely
only two delegation to the conference really counted
canes British team and the Americans
both agreed that this should be controls to prevent currencies fluctuating to
wildly against each other
they agreed to that institutions that later became the World Bank and
International Monetary Fund
should be there to foster trade and growth in poorer economies
a big gain from it was the recognition
that countries need to work together to resolve their macroeconomic problems
it's just not enough to pretend that you can do it as an island
you may be an island geographically but you're not economically
but on one crucial issue
canes failed the Americans were adamant the rich
exporting countries like them shouldn't have to spend more on export less
to balance World Trade it was weak countries with big trade deficits that
had to shape up
if everyone at Bretton Woods
had accepted canes logic that it takes all sides to keep the global economy in
balance
the world today might be in a lot better shape
mine
this old East German television tower is a symbol in reunified Germany
these days feelings if european unity
in short supply
ministers here in Berlin want struggling euro-zone countries to impose
tough measures to get their economies into shape the strong the country's
have been willing to help by offering massive loans
but I don't think canes would have thought that was enough canes thought
for the global economy to work
it had to be a two-way street so the week countries in the run up a lot of
debt with the rest of the world
they did have to become more competitive plan to pay their way
but the rich exporters what we had to do their best as well
spending more on other countries goods exporting less
becoming a bit less competitive and that's a bit of keynesian advice that
doesn't go down well here in Germany at all if you say Germany should
export less become less competitive the pop you what s
thats Matt why getting as weak when other cells
already weak and certainly that's the wrong conclusion
there are signs of movement on
Germany side of the street
domestic car sales have been going up
but exports are still a central plank
the country's economic policies hand
car exports a rock by almost a third in the past two years
German consumers have been spending more lately but not enough to provide much of
a selling opportunity for struggling countries like Greece
thats
a very popular approach told German potholes apiece spent more
don't be secreted with your money a
but I think that's that's wrong because people look at their income
missile attack on Fort simply and that's true I mean we have had very
weak wage increases during the past years and that's
look the point where you have to have heart will higher wages and these high
wages but certainly spanned
and then drama consumption would certainly be much stronger than it was
in the past
and that will help us 0
memories of hyperinflation is still roaring Germany
from if you want to put their hard-won economic stability at risk
their weekly European neighbours one the division between countries at a global
level or even clearer
hmmm leaders paid lip service to Cain's dream
the truly coordinated global economy when a strong work with the week for the
benefit of all
but there's little sign in the match doing it
think canes would look at our world the troubles in the euro zone the banking
crisis
so it was a pretty scary place without many the checks and balances that he
argued for
Bretton Woods but he'd also say he did say
really global economy was tremendously exciting
huge potential to improve all of our lives
if governments could only work out how to put into practice that basic inside
he kept coming back to we really are
all in it together sure it would be great to have better multinational
institutions that Keynes was a pioneer and that is a big believer
and I think in order to fix the international financial system
that would be very helpful and maybe somebody with the
sorta magnetism Inc Robert R Us and stature
kids but somehow capitalize that but he is a rare person did
canes left an extraordinary legacy he didn't just transform economics
change the lives a billions of people around the globe
there are many people born in the 1880s
whose name you here as often as pains in current debates
his ideas the country should bigger their neighbors
the economy's would deeply unpredictable could get stuck in slumps
change the way we think about the world but what can canes
actually do for us right now
the back in Cumbria it's clear what cases done for them
government intervention will help keep her release tire factory open
and provide a lot of employment in the political mainstream
there are many who challenged canes basic message you can't leave economies
to drive themselves
ames was a 30 dominant force in the 20th century to my guess is he will remain a
dominant force
Lee good for a century which is why I think he will go down
was on the greatest cause the world's produced eighty years ago
building this damn ease the Great Depression with the government borrowing
more cheaply than ever before you might think the case for new deal type
investments was equally strong today
a given the sheer volume of public debt no one can promise that
piling on more borrowing will be a miracle cure what is thought of as a
typical keynesian solution
to get more death borrow money /span /span span
cut taxes that needs to be used more judiciously here because at the end of
the day
you gotta get rid of this debt this is a very
long-haul I don't think anything just push your way
consumes your way out of this there they're just is no magic bullet and what
if Cain's
final big idea the countries are all in it together
since Bretton Woods the world has grudgingly accepted that we have to
cooperate to prosper
but was struggling to make it work in practice ok
keyword debate work
hearing very concerned about the growth inequality worldwide their
he'd be very concerned that those who turn to buy back to my neighbor policies
I have no doubt that he would be warning of regional war
up was dangers he be
he'd be very frightened that the circumstances that led to ward 1480 that
they don't 45
where on a slow burn basis unfolding in front of us again
ok maybe the biggest thing
canes could do for us now would be to remind us
but the traits that guided him all his life
imagination and optimism
he came along and was willing to examine these
profound problems and in ways that no one done before
in his great legacy is that fundamental belief in humanity that from notably
from the ability of government and
society to to dedicate itself to to helping
those that are less fortunate and meter help
on
in 1946 came suffered a fatal heart attack in his beloved
Sussex Downs well
just 62 he left a legacy that changed the world
but he also left an enigma he thought we should try to tame the power of money to
make it work for us
but he also taught us that economies were fundamentally unpredictable
it's a contradiction with still grappling with today
more than anyone canes pave the way activist government
he said you could and should make the world economy work better
generation that rebuilt the global economy
after the war really were children canes
when you read in today another equally powerful message that comes through
about the great unpredictability uncertainty about economic life
he should never think you've got it covered Eve abolished
boom and bust that's the great paradox
the man who did most to make economists arrogant
net capacity to bend the world to their will
also gave them should have given them the best reasons for self-doubt
next time on the power of money canes great adversary
Friedrich Hayek the lead to the same fax Andrew exactly the opposite view
the market needed to be set free and government
should back off the Open University's produced six one minute animations to
explain some other key economic ideas that affect all of us
said he want to learn how to spot an invisible hand
or other secrets in economics go to BBC doc
Co .uk slash masters have money i'm for the link to the Open University
I'll
0
James May gets you thinking with things you need to know about chemistry
next here on bbc2 well bbc3 puts the National Gallery in the picture
will they notice as the revolution will be televised
it