‘Why Did He Do Such a Silly Thing?’: Keynes on Winston Churchill and The Economic Consequences of Mr. Churchill

John Maynard Keynes followed his analysis of the post-World War I hyperinflations in his Tract on Monetary Reform with an equally trenchant critique of the deflationary monetary policy and consequent unemployment resulting from Britain’s1925 restoration of the prewar gold parity of sterling, from which he had tried unsuccessfully to dissuade Winston Churchill, then Chancellor of the Exchequer. In advocating internal price stability rather than restoration of a prewar parity, Keynes drew attention to an earlier proponent of that position, David Ricardo in 1819. Keynes’s critique of the return to gold did not keep from writing appreciative reviews of Churchill’s volumes on World War I. As Churchill concluded in retrospect that Keynes had been right and that Churchill’s Treasury and Bank of England advisers had misled him, Keynes’s critique of The Economic Consequences of Mr. Churchill led to Keynes becoming a key advisor in Churchill’s government during World War II.