All language subtitles for Masters.of.Money.S01E01.John.Maynard.Keynes.and.Keynesianism.1080p.AMZN.WEB-DL.DDP2.0.H.264-MRCS

Narrator: 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 of action
will be great,

I can assure you
that the cost of inaction

will be far greater.

Narrator: With the economy
still struggling,

the American government
is shelling out

three quarters of $1 trillion

to try to haul the country
out of trouble.

And in Britain,
billions are being spent

to accelerate growth,

even by a government
determined to cut borrowing.

Is this really
the right road to take?

After the crash in 2008,

the world seemed
to be running out of cash.

But rather than cut back,

governments spent
huge amounts of money

they didn't have.
Why on earth would they do that?

It all goes back

to the extraordinary ideas
of this man -

the British economist
John Maynard Keynes.

Quite simply,
he changed the world.

- I think it is true that
he's one of the great figures

of the 20th century
and in many ways,

of the 21st century.

Narrator: Keynes 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 Whitehall, Westminster
or Cambridge

who thought he knew best.

Narrator: Keynes has never been
more relevant or controversial

than he is today.

Because for the first time
since the 1930s,

the problems
he was grappling with then -

bank failures,
international crises,

the possibility
of a long economic slump -

we're facing, too.

In this series,
we'll explore the stories

of the lives
and world-changing thinking

of three men with
dramatically polarised views.

Karl Marx, Friedrich Hayek,
and tonight, Keynes.

They're the ones who taught us
the awesome power of money.

The good that markets
and capitalism could do,

but also, the enormous trouble
they could bring.

Could these radical thinkers

help us understand
the huge mess we're in?

Could their ideas
help us get out of it?

Narrator: The quiet hills
of Northwest England.

This is economics in action.

[engine revs]

These rally cars are competing
in the Tour of Cumbria.

The sponsors, Pirelli,
are getting a slice

of the government's
£2.4 billion fund

to help regional growth
and employment.

They want to show

what the company's
really all about.

Pirelli's one of the world's
biggest tyre makers.

It's been manufacturing
in Britain for almost a century.

It wants to develop
some of its top ranges

and beef up
research and development.

But the sums
hadn't been adding up.

This factory's one of Carlisle's
biggest employers.

There are about 750 workers
here,

producing 10,000 tyres a day.

Not so long ago,

people worried the company
would shift production overseas

to cut costs.

A £2 million government grant

has persuaded Pirelli
to invest in Britain instead.

- When we have
a major investment,

the confidence in people

to spend their wages
is increased

and the local economy benefits.

And it's not only
Pirelli employees.

We have hundreds of suppliers
and contractors

who depend on this factory,

and they benefit also
when Pirelli increases its spend

and also they recycle that money
into the local economy.

Narrator:
It might seem surprising,

a handout to a private company

when the government's so worried

about the mounting
national debt -

now more than £1 trillion.

But Keynes 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.

- What Keynes said
was that it was possible

for a government to come in

and make markets work better.

So, one way that it's often put
is that,

Keynes saved capitalism
from the capitalists.

Narrator:
Though for Keynes critics,

it's mistakes by governments
that really cause the trouble.

- When we find instances
of economies

being seriously
knocked out of equilibrium,

it's generally been as a result
of government policy mistakes.

But Keynes didn't really
make a convincing case

that even when an economy
was knocked out of equilibrium,

that government action
could do better

than allowing the economy
to essentially mend itself.

Narrator: Keynes is either
an economic saviour,

or the man
who led us all astray.

But he was at the centre
of the debate 80 years ago,

and he's back there again today.

A great weight
is lifted from us.

Narrator:
This is the only known film

of Keynes speaking.

There's no danger
of the exchange falling too far,

there's no danger
of a serious rise

in the cost of living.

Narrator: It's a broadcast
about economics.

How to share out
the world's resources.

Meanwhile, British trade...

Narrator: But for Keynes,
this was no dry science.

It was about changing the world
for the better.

- I think if we're looking
at Britons

who made a real difference
in the 20th century,

the most obvious name

would be Winston Churchill.

John Maynard Keynes

is really not far behind.

Narrator: Keynes spent years
in this house in London,

developing ideas
that helped shape

some of the most important
events of the past century.

Helping to save capitalism
from the Great Depression.

Funding the war
against the Nazis.

And building a new
post-war economic order

that helped pave the way
for decades of growth

and rising prosperity.

He had the ear
of everyone who mattered.

Presidents and prime ministers

all listened
to what he had to say.

Though it was only
after his death

that everyone actually started
taking his advice.

- I applied to university
in 1965,

and the whole
intellectual climate

of the time, not just in terms
of economics, but politics,

was driven by the idea
that Keynes

had solved the economic problem.

Narrator: By the late 1960s,

Keynes ideas were built
into the fabric

of pretty much
every Western economy.

But he didn't seem
to have an answer

to the high inflation
of the '70s.

After that,
Keynesian fine tuning was out,

and free market ideas
gradually took over.

But when the world
got into serious bother in 2008,

Keynes was back.

It's ideas
that mobilise the world.

On right and left, good and bad.

And Keynes was the author of,
in my judgement,

the best suite of ideas

about how to think
about capitalism

that there's been.

And if you think that counts,
then, he counts.

Narrator:
So what are these great ideas

that have dominated
our economic landscape

for so long?

And where exactly
did they come from?

Keynes was born at the height
of the British Empire, in 1883,

to middle-class parents

who sent him to Eton

and Cambridge.

So far, so conventional.

But at university, he fell in

with a very unconventional
crowd,

The Bloomsbury Set.

As a young man,
he spent a lot of time here,

at their country retreat,
Charleston, in Sussex.

It was a kind of commune

for artists and writers

and the one economist.

- They did see themselves
as very different.

To an extent, they where tinged

by that rather
indefinable concept - bohemian.

[up-tempo violin music]

They were very ahead
of their time.

They were pioneers
about sexual behaviour,

they were pioneers
on the political front,

they were pioneers
in many aesthetic fields,

in writing and in the arts.

- The Bloomsbury Group
allowed him

to step outside of the box

and to think the unthinkable,

and that breadth of intellect
that he had

allowed him to leap off cliffs

with the confidence
that there was no bottom.

Narrator:
Keynes immersed himself

in the cultural world
all his life.

Collecting paintings,
fine books,

even founding the Arts Theatre,
here in Cambridge.

Perhaps it'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.

[dramatic music]

[crowds shouting]

Narrator: Greek fury
at the austerity

they feel has been imposed
on them

by their European neighbours.

For Keynes,
this might feel a bit familiar.

He saw at first hand

the disaster that can come
from stronger countries

dictating economic terms
to the weak.

That helped him form
his first big idea,

in an interconnected world,

when you beggar your neighbour,
you might well beggar yourself.

It was an idea forged
by the horrors of World War I.

True to his Bloomsbury values,

Keynes didn't want to fight
in the war.

But he was willing
to use his economic brilliance

to help finance it,

by working
for the British Treasury.

Once the war was over,
Keynes could see

how hatred
of the defeated Germans

might lead the victors
to make a terrible mistake.

- At the end
of the First World War,

there was a great deal
of, obviously,

public hostility
towards Germany.

I mean, it had been

a disastrous war on both,

obviously, in terms
of lives and casualties

but economically, too.

I think
there was quite a strong feeling

that Germany
must be made to pay.

Narrator:
At the Palace of Versailles,

where the peace treaty
was signed,

British Prime Minister
Lloyd George

and his French
and 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.

- How could Germany afford
to repay that debt?

You need an economy
that is running

to produce money,
to produce wealth,

and then you can repay.

You cannot repay with,
out of nothing.

Narrator: 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
of the Peace.'

Brilliantly written,
it became a bestseller.

Though some said,

with his sympathy
for the Germans,

he should be awarded
an Iron Cross.

The key point
was that he didn't think

the Treaty of Versailles
was just unfair,

he thought it was stupid.

He thought a desperate Germany

wasn't going to keep the peace
in Europe

and it certainly
wasn't going to contribute

to prosperity.

It wasn't going to buy goods
from Britain

and help Britain
recover from the war.

That's something
he kept coming back to

throughout his life -
we're all in it together.

The Versailles Treaty

brought one of the great powers
of Europe to its knees.

As Keynes predicted,

the German economy
descended into chaos.

Their debts
were so impossibly large,

they ended up printing the money
to pay the bills,

which quickly led
to hyperinflation

and a thoroughly worthless
currency.

Hyperinflation
didn't just destroy the economy,

it destroyed the fabric
of German society.

People's hopes, too.

When Keynes warned
that the Versailles Treaty

would bring a catastrophe here,
even his admirers

might have thought
he was exaggerating.

They didn't think that for long.

Just 14 years
after the Treaty of Versailles,

Hitler came to power...

- [speaking German]

..and World War II
wasn't far away.

[speaking German]

Narrator: As Keynes
had predicted,

the price of getting
economic relations wrong

was calamity.

- Keynes foresaw

that the reparations
were too onerous,

would have to be adjusted

and that, actually,
you were laying the seeds

of the next
European conflagration.

He thought it was
unbelievably short-sighted.

He was right.

Narrator: So, what would Keynes
make of Europe today?

Well, once again,
he might see strong countries

dictating economic terms
to the weak.

But this time,
it's strong countries

like Germany itself,

insisting
that crisis-ridden nations,

like Greece,
sign up to tough budget cuts

in exchange
for emergency loans.

- The dominant thinking
in Europe at the moment

is exactly
repeating the mistakes,

I believe, certainly as far
as Greece is concerned,

as was made at the end
of the First World War.

There comes a point,
if you visit upon countries

things they can never deliver,
it will end in tears.

If you look at what's happening
in the Eurozone today,

you know,
riots on the streets of Greece,

general strikes in Spain,

general strikes in Portugal,

you can say, well...

..aren't we just failing

to learn the lessons
of history, here?

- I think he would have said,
"Let's make weak strong

"so then they can repay
their debt."

As long as the debtor pays,
the creditor is happy.

But as soon as the debtor
gets into difficulties,

and if he's
a very important debtor,

the creditor has also problems.

Because he won't get
his money back.

Narrator: Faced with the crisis

affecting the people of Europe
today,

Keynes would undoubtedly
have come up

with some solutions.

In fact, years after
the Treaty of Versailles,

he'd unveil a plan for countries
to work better together.

But first, there was
a more basic question,

how to steer the economy itself.

To tame the economy,
to make it work for us,

Keynes realised
you first had to understand

how it worked.

But that's easier said
than done.

Keynes came to believe
that economies

were fundamentally
unpredictable.

In fact, he noticed,

the times when the economy
looked most predictable,

were usually the times

when things were about to go
disastrously wrong.

[dramatic music]

It certainly felt like that
in 2008,

when the global financial system
imploded

after one of the longest booms
in history.

Many claim now
to have seen it coming

but at the time,
many more behaved

as if the good times
would go on and on.

No return to Tory boom and bust.

Narrator: Being too sure
about the economic future

was another mistake
that Keynes had warned about,

80 years ago.

Because he'd made
the same mistake himself.

[peaceful music]

After resigning
from the Treasury

after World War I,
Keynes retreated

to the sanctuary
of his old college,

Kings, in Cambridge.

He was a lecturer
and later a bursar,

looking after
the college's finances.

He had a special interest
in probability theory,

a branch of mathematics

that tries to predict the future

from the evidence of the past.

When he wasn't writing
or studying,

Keynes was often betting
on the financial market.

He needed money
and he thought speculation

was a good way to get it.

But it was also a great way
to test his belief

that probability theory
and statistics

could help predict the way
markets were going to move.

He had very mixed results.

In his early years
as an investor,

Keynes sat in bed
every morning,

poring over reams of statistics

about currencies, shares,
bonds and commodities.

When he was sure he'd worked out

which way the market would move,
he'd make the deals.

The Cambridge academic
David Chambers

has spent a lot of time

studying Keynes's
investment strategies.

- Given this economic knowledge
that he had,

this great thirst that he had
for numbers and statistics,

he believed, I think,

that he could define,

delineate the business cycle.

And as a consequence of that,

you would be able to pick
when was a right time

to be in the stock market,
to own shares,

when was the right time
to come out of the stock market

into say, bonds,

government bonds, in particular,
or alternatively, cash.

Narrator: But none of Keynes's
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 Keynes 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 bitterly
reproached himself

for not foreseeing
the Great Depression.

But he came to the view

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 judgement.

Narrator: Then he changed
the way he invested,

became a wealthy man.

He'd learned lessons
about the way economies work

that we still
struggle with today.

That you can never get rid
of uncertainty,

and that economies are made up
of people, not numbers.

More than anyone,
Keynes wanted economics

to be respected
as a modern science,

but he knew it was never
going to be a science

you he could reduce
to a set of equations

or iron predictions.

Because economists
were always going to have

one extra thing to deal with -

human nature.

- If you don't know
about the future,

and you're trying to get a fix

on what's taking place
at any moment in time...

..you know,
you would defer to the crowd.

The crowd is moving
in a certain direction,

and you think,
"They must be right."

You know,
"The crowd's buying.

"What are they buying?
I must buy, too!"

"The crowd's selling,
I must sell, too!"

And it's very animal.
It's very herd.

Narrator: In normal times,
any economic textbook,

now, or in Keynes's time,

tells you when
something gets more expensive,

people buy less of it.

And when it's cheaper,
they buy more.

But not when you get bubbles.

Then, Keynes realised,

a different side of human nature
took over,

the side that says

when a house or share
goes up in price,

you should buy more of it,

because it's going to go up
some more.

Which of course, it does,

because everyone's thinking
the same thing.

But eventually,
the bubble will burst.

It always does.

In the years before 2008,

did we forget
what Keynes had taught us

about herd psychology,

bubbles,

and the uncertainty
of economic life?

Did the bankers, investors,
politicians and the rest of us

simply get too confident

in thinking the good times
would go on forever?

- I think, inasmuch as people
actually sat down

and thought about,
what were 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,

it's not surprising

that you end up
being smashed to bits,

and that's precisely
what happened.

Narrator: Keynes's big ideas

that countries shouldn't beggar
their neighbours,

that markets are unpredictable,

all came out
of his own experience.

Now, the arrival
of the Great Depression

produced his most important idea
yet,

and added real urgency
to his need to tame the economy.

What he realised

was that economies might sink,

and then not automatically
float back up.

[romantic instrumental music]

In the early '30s,

the outside world
was deep in gloom,

with dole queues lengthening

and factories closing
everywhere.

But Keynes's life was blissful.

By now, he was famous,
and he'd shocked

even his avant-garde
Bloomsbury friends

by marrying a Russian ballerina.

Up till then, he'd been gay.

Art, books, love affairs.

For Keynes, this is what life
was 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 civilised society

without a well-functioning
economy.

When he was back
in the real world

on 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,
and the economy would revive.

But Keynes disagreed.

He thought the way to recovery
was being blocked by pessimism,

or low animal spirits.

- The big insight of Keynes,
behind all of this,

was that a market economy
is not self-stabilising.

And when you get
very big changes

in animal spirits,
in sentiment,

where people who are producing

to sell in the future,

suddenly worry that actually,

maybe there won't be the demand
in the future,

so they stop producing.

To get out
of that low-output trap

can be very difficult.

Narrator: Keynes's realisation
that an economy

could stay sunk indefinitely

was a radical break
with conventional thinking.

The classical approach said
the economy would get better,

we just had to give it time.

But looking around,
it seemed obvious to Keynes

that it wasn't
getting any better,

and it seemed blindingly obvious
why it wasn't.

Every time
someone lost their job

and joined the dole queue,

they had less money to spend.

So that meant fewer goods
were being bought,

would probably mean
more job losses.

You could get caught
in a downward spiral

with no obvious way out.

Keynes thought
the low animal spirits

in the business world
were now infecting everyone.

In a radio broadcast in 1931,

he made a dramatic call
for action.

- The slump in trade
and employment,

are as bad as the worst
which have ever occurred.

Activity and enterprise,

both individually
and nationally,

must be the cure.

Narrator: Keynes might have died
almost seven decades ago,

but out here
in the Arizona desert,

his big idea

for getting the economy
moving again lives on.

At Gila Bend, they're building
the biggest solar power plant

of its kind in the world.

The site covers
over 3.5 square miles.

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 for John Maynard Keynes,

probably
the most important thing

this plant will produce
is employment.

- Between my wife and I,
we probably spent two years

out of work. Thank God,
not at the same time, but...

..but we, uh...

..we took
some very significant hits.

The company that sources
our manpower

tells me they receive
300 resumes per day.

There's a lot of people
looking for work,

and the people who have jobs
out here feel very lucky

to have their jobs.

Narrator: In effect,
this plant is part

of a vast Keynesian experiment.

In the wake of the crash,

the US government stumped up

three-quarters
of 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've raised
the billion and a half dollars

to get things going

from commercial banks.

But these aren't normal times.

- Because of that downturn,
we had to...

..look for alternative sources
of financing.

And of course, in this context,

the federal
Loan Guarantee Program

here in the US,
has helped a lot.

In fact, without that kind
of public programs,

this plant
would have never been a reality.

Narrator: Now, we're used
to governments using their cash

to try to bring the economy
to life

in hostile environments,
where private money's drying up.

But back in Keynes's day,

it was a much more controversial
idea.

In the 1930s,
Keynes spent weekdays

at his home, here
in London's Bloomsbury district.

He wrote countless articles
and pamphlets,

explaining how something could
and should be done

to tackle this Great Depression.

In normal times,
Keynes thought monetary policy

was the best way
to help the economy.

You cut interest rates
to encourage people to borrow

and spend more,
and companies to invest.

But when animal spirits
were really low,

that might not be enough.

Companies might not
see the point

of making new investments,

and people might not
want to borrow,

no matter how low
the interest rates are.

That's when Keynes thought
government needed

to make up the gap
with more public spending.

Keynes 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,

and the economy would recover.

If you picked the right moment,

he insisted the extra spending
would pay for itself,

by producing
higher tax revenues.

- Well of course,
he did have enormous trouble

trying to persuade the Treasury,

the so-called 'treasury view'

that you should borrow

at the bottom
of a business cycle.

But in economic terms,

what you need
is more demand in the economy,

and you can do that in the ways
that Keynes suggested.

Naive Keynesian 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,

I really think

are very dangerous
policy prescriptions.

Narrator: In the '30s,
Keynes 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 70%.

You had unemployment nationally
at 25%.

In places like Chicago
and Detroit,

unemployment was up to 50%,

or over half the population,
unemployed.

Narrator: President Hoover's
solution to the Great Depression

had been spending cuts
and tax rises.

He'd 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 has happened.

When you cut back
government spending,

in a situation
such as a recession

or depression,

demand goes down,
unemployment goes up,

and it's a vicious circle.

Confidence isn't restored
when unemployment goes up,

and when business goes down,
confidence is eroded.

Narrator: Hoover's successor,
Franklin Delano Roosevelt,

had a different approach.

Again,
echoing arguments made today,

he thought the government

should spend its way
out of trouble.

- This nation is asking
for action, and action now!

[applause]

Narrator: When Keynes
arrived in America in 1934,

there's no evidence
that he persuaded

the US government
to adopt Keynesianism.

They were doing it anyway.

The New Deal.

A vast programme
of government-funded projects

to put armies of jobless
to work.

Ever since,
it's been the celebrated example

of a Keynesian effort
to boost flagging economies.

And there's no more
iconic project of 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 it
a Keynesian project, absolutely.

The government stepped in
with money,

built a deficit,

and out of that came Hoover Dam,

which gave thousands,
tens of thousands of people,

a new life - money to spend.

Narrator: Armies of workers
from across America

tunnelled for five years

through miles upon mile
of mountain rock

to build what was, in effect,

a vast power generator,

providing electricity
for huge swathes of the country.

- It primed the economy.

A $165 million investment

which produced billions
in growth, economic growth.

Narrator: Just eight miles away
is Boulder City,

built to house the workers
building the dam.

- All these houses
along these avenues

are what we now call
"dingbat" houses.

They were the homes
built for the workers.

They were put up

to last through the construction
of the dam,

very quickly built.

But because people stayed,

which they didn't anticipate
people would do,

families still live in them.

Narrator: Roger Shoaff
runs the town's hotel.

He thinks Boulder City
shows how in a depression,

extra government spending

can trigger private spending
and investment, too.

Adding to the economic benefits.

It's what Keynes called
"The Multiplier".

- By the end of the second year,
they lived in a town.

A full town,
fully operating town,

with retail stores
and restaurants

and medical facilities

and recreational facilities.

It happened in, you know,
less than two years.

Narrator: Critics
of Keynesian spending plans

often say the benefits
are fleeting,

and the costs permanent.

But Boulder City took root
and thrived.

Those who still live here say
if 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.

It took a world war,

and all the extra
government spending

that went with that, finally,

to bring the economy
out of the doldrums.

You might wonder
whether a world war

was really the best test
of Keynes's arguments.

But ever since then,
so-called Keynesian policies

have been what governments do
when faced with emergencies.

And the crisis of 2008

was the biggest emergency
anyone had seen for a long time.

When the global financial system
crashed,

the world faced
the real possibility

of another Great Depression.

Governments had been preaching
the free market for years.

But faced
with this economic disaster,

they reached again
for the old Keynesian levers.

- It was a classic
Keynesian response

when individuals
stop spending money

and when businesses
stop spending money,

if the government also stops
spending money at the same time,

then what happens,
the economy, basically, crashes.

Narrator: The aim
was to boost confidence,

or animal spirits,

by making it easier to borrow,
invest and spend.

In 2009, with the global economy
still tottering,

leaders gathered in London

to endorse
a 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

of over 15% in six months,

between the end of '08

and beginning of spring '09,

in terms of anything other
than an extraordinary collapse

of animal spirits or confidence.

Now, some of that
was turned around in 2009,

but by no means all.

Narrator:
Even that great rescue plan

of 2009

wasn't all that it seemed.

For all Gordon Brown's talk,

Britain's own stimulus package

was actually
one of the smallest.

Because the government
was already borrowing

more than
any other advanced economy.

So even a...

..Keynesian Prime Minister
like Gordon Brown,

didn't think Britain
could borrow a lot more.

His successor
believes in borrowing much less.

After Brown,
Britain elected a Prime Minister

who, on one fundamental point,
appears to disagree with Keynes.

- Some of the normal things
that governments 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 of a debt crisis

is to deal with your debts.

I suspect that Keynes
probably wouldn't have used,

exactly, the Prime Minister's
formulation.

I think that Keynes
would've accepted at some point

that you have to head back
towards a more balanced budget,

particularly
if you don't want to stack debts

onto future generations.

To me, 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 get weaker,

unemployment will go up,

and there will be

an enormous amount
of unnecessary suffering.

Narrator: This argument
will run and run,

on both sides of the Atlantic.

In Arizona,
the massive spending programme

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 on
most Western economies

means the Keynesian route
to recovery is simply shut off.

- We are in a stratosphere today

that we just have not seen
before.

And maybe it's fine,

but no other countries,
very rarely,

have seen these kind
of debt levels -

public, private
and other measures.

They're a risk.

Narrator: By the 1940s,
Keynes was riding high.

His theatre here in Cambridge
was thriving,

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

with profound implications
for the world, then and now.

Keynes's ideas
for fixing broken economies

had now been tested.

But towards the end
of World War II,

he got a chance
to leave his mark

on the entire global economy.

In a more integrated world,
he was more convinced than ever

that countries
needed institutions

to force them together,
make them cooperate.

The catastrophe
after World War I

could never happen again.

The single most important trip
to America

that Keynes ever took
was in 1944,

to the exclusive resort
of Bretton Woods,

in New Hampshire.

He was joining delegates

from over 40
different countries,

all charged
with laying the foundations

of a new, post-war
global economy.

- They wanted
to rebuild the system,

not just from the war,
but from the Great Depression.

The financial system
had just been destroyed.

Narrator: The economic chaos
of the '20s and '30s

was largely responsible
for the war, Keynes believed.

Countries had all focused
on charting their own path,

without very much thought

for what was going on
around them.

The world had paid
a terrible price

for that failure to cooperate.

There was a real determination
among officials,

both in London
and in Washington, that...

..we couldn't do this again.

We had to fix
the world's economy,

we couldn't go back

to the kind of economic crisis
we'd had before

because we couldn't afford
another world war.

Narrator: As representatives
from across the world

gathered here at
Mount Washington Hotel,

elsewhere, there was still
ferocious fighting.

But once the war was over,
Keynes knew

for the world economy
to prosper,

countries would need
to work together

much more closely.

Only two delegations
at the conference

really counted -
Keynes's British team

and the Americans.

Both agreed that
there should be controls

to prevent currencies
fluctuating too wildly

against each other.

They agreed, too,

that institutions
that later became the World Bank

and International Monetary Fund,

should be there to foster trade
and growth in poorer economies.

- Well, the big gain from it
was the recognition

that countries need
to work together

to resolve their macro economic
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.

Narrator:
But on one crucial issue

Keynes failed.

The Americans were adamant

that rich, exporting countries
like them

shouldn't have to spend more
and 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 Keynes's logic,

that it takes all sides

to keep the global economy
in balance,

the world today
might be in a lot better shape.

This old East German
television tower

is a symbol
of reunified Germany.

These days,
feelings of European unity

are in short supply.

Ministers here in Berlin

want struggling
Eurozone countries

to impose tough measures

to get their economies
into shape.

The stronger countries
have been willing to help

by offering massive loans,

but I don't think Keynes

would have thought
that was enough.

Keynes thought that
for the global economy to work,

there had to be
a two-way street.

So weak countries
that had run up a lot of debt

with the rest of the world,

they did have to become
more competitive,

learn to pay their way.

But the rich exporters
had to do their bit, as well.

Prepare to spend more
on other countries' goods,

and export less.

Become a bit less competitive.

That's a bit of Keynesian advice

that doesn't go down well
in Germany at all.

- If you say Germany
should export less

or become less competitive,

the popular view is that
that's mad.

Why getting us weak,
when others are already weak?

And certainly,
that's the wrong conclusion.

Narrator:
There are signs of movement

on Germany's side of the street.

Domestic car sales
have been going up.

But exports
are still a central plank

of the country's
economic policies.

And car exports are up

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.

- That's
a very popular approach,

tell German private households,
please spend more.

Don't be so greedy
with your money.

But I think that's wrong

because people look
at their income and they say,

"I can't afford," simply.

And that's true, I mean,

we have had very weak
wage increases

during the past years.

And that's the point

where you have to have
higher wages

and these higher wages
you could certainly spend,

and then German consumption
would certainly be much stronger

than it was in the past,
and that will help us.

Narrator:
Memories of hyperinflation

are still raw in Germany.

Few want to put their hard-won
economic stability at risk

for their weaker
European neighbours.

The divisions between countries
at a global level

are even clearer.

Leaders pay lip-service
to Keynes's dream

of a truly coordinated
global economy,

where the strong work
with the weak

for the benefit of all.

But there's little sign
of them actually doing it.

Sure, it would be great to have

better
multinational institutions

and Keynes was a pioneer
in that,

he was a big believer.

And I think, in order to fix

the international
financial system,

that would be very helpful.

And maybe somebody
with the sort of magnetism

and gravitas and stature
of Keynes

could somehow catalyse that.

But he is a rare person, indeed.

Narrator: Keynes
left an extraordinary legacy.

He didn't just transform
economics -

changed the lives

of billions of people
around the globe.

Back in Cumbria, it's clear
what Keynes has done for them.

Government intervention

will help keep
Pirelli's tyre factory open

and provide a lot of employment.

In the political mainstream,

there aren't many who challenge
Keynes's basic message

that you can't leave economies
to drive themselves.

- Keynes
was a very dominant force

in the 20th century,

and my guess is he will remain
a dominant force

in the 21st century.

Which is why, I think,
he will go down

as one
of the greatest economists

the world has produced.

Narrator: 80 years ago,

building this dam
eased 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.

But 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 debt,
borrow more money,

spend, spend, spend
and cut taxes,

that needs to be used
more judiciously here

because at the end of the day,

you've got to get rid
of this debt.

This is a very long haul.

I don't think anything
just boosts your way

and zooms your way
out of this.

There just is no magic bullet.

Narrator: And what of Keynes's
final big idea?

That countries
are all in it together?

Since Bretton Woods,

the world
has grudgingly accepted

that we have to cooperate
to prosper.

But we're struggling
to make it work in practice.

- He'd be worried.
He'd be very worried.

He'd have been very concerned

about the growth of inequality
worldwide,

he'd be very concerned

that there was a return
to beggar-my-neighbour policies.

I have no doubt

that he would be warning
of regional war...

..and all its dangers.

He'd be very frightened
that the circumstances

that led to war in '14-'18
and '39-'45,

were, on a slow-burn basis,
unfolding in front of us again.

Narrator:
Today, his admirers believe

perhaps the biggest thing

Keynes could do for us
right now,

would be to remind us
of the traits

that guided him all his life -

imagination and optimism.

- He came along
and was willing to examine

these profound problems in ways
that no-one had done before.

His great legacy is that
fundamental belief in humanity,

that fundamental belief
in the ability of government

and of society
to dedicate itself

to helping those
that are less fortunate

and need our help.

Narrator: In 1946,

Keynes suffered
a fatal heart attack

in his beloved Sussex Downs.

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 we're still
grappling with today.

Captioned by Ai-Media
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