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Keynes: The Young Imperialist, 1906–13

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John Maynard Keynes was the most influential economist of the twentieth century. Those interested in modern economics must ask: how did he become so influential? It is well known that his 1919 polemic The Economic Consequences of the Peace launched his career. But how did he come to be in a position to write the book?

The story of Keynesian economics starts with his work on India. Between 1909 and 1913, he was the most important defender of British monetary imperialism in India. For this work he was awarded a position at the British Treasury during the First World War. Thus, it was his faithful defense of the British Empire that allowed Keynes to become the century’s most influential economist after the war.

The Young Imperialist at the India Office

To comprehend his work on Indian affairs, it must be realized that Keynes was an imperialist. Of course, his defenders are deeply embarrassed by his imperialism and seek to deny it. For example, Robert Skidelsky insists, “Keynes was neither a jingoistic imperialist, nor an economic imperialist.”1 But Keynes proudly described himself as an imperialist: “We, who are impe­rialists…think that British rule brings with it an increase of justice, liberty, and prosperity.”2

His views on race made him a particularly zealous one. As John Toye admits, Keynes believed that it was important to the highest degree that Europeans should triumph in the coming global struggle of races.”3 Keynes declared: “Almost any measures seem to me to be justified in order to protect our standard of life from injury at the hands of more prolific races. Some definite parceling out of the world may well become necessary; and I suppose that this may not improbably provoke racial wars.”4

But Keynes was not simply thinking in terms of a “global struggle of races.” He felt that his supposedly superior race had the right, and even the duty, to exercise imperialistic violence against inferior races:

It is only during the present reign that we have begun to realize the responsibilities of the Empire and to see our duties to subject races. We have begun to see that Great Britain may have a high destiny and a great future before her. We have before taken up “the white man’s burden” and we must endeavor to wield the power of Empire with more lasting effect and to greater good than the mighty empires that have risen and fallen through the course of history.5

It is commonly said that the British ruled India for two hundred years, but the story is a little more complicated. The British ruled territory in India beginning in the 1650s, but it was not until after 1757, when Robert Clive won the Battle of Plassey, that their control expanded significantly. Even so, the region did not become an official part of the British Empire until after 1857.

The period of direct British rule over India from 1858 to 1947 is known as the British Raj (raj is Hindi for “rule”). The British Raj emerged after the Indian Rebellion of 1857. This widespread and unsuccessful mutiny by Indian soldiers of the East India Company, sometimes called the First War of Independence, was aimed at overthrowing British rule. Britain tightened its control after the rebellion, and the India Office was created in 1858 as its chief instrument of imperial control.

Keynes started his undergraduate studies at the University of Cambridge in 1902, during the height of the British Raj. From the time of his adolescence, his goal was to work in the British Treasury. So, despite pressure to pursue an academic career, he decided to enter the civil service. He took the civil service examination in 1906 but placed second. This meant that he would not receive a position in the Treasury. Instead, he took a position in the India Office, where he served as a clerk from October 1906 to June 1908.

The India Office was essentially the government of India, and Keynes’s work there reflects his support for British rule over Indians. Indeed, he condemned the Indian Rebellion of 1857: “If the Indian Mutiny had been successful, India would have become the home of anarchy and bloodshed, and the rest of the world would have been the poorer for its isolation.”6 He insisted that institutionalized British coercion was good for the uncivilized Indians: “It would not be true to say that the material condition of the ryot [Indian peasant] and the fellah [Egyptian peasant] has not been somewhat improved by the British occupation of their countries.”7

From the beginning, Keynes was an ardent advocate of British state power at home and abroad. As Austin Robinson suggests, his time in the India Office reinforced his early statism: “His short period—a little less than two years—in the India Office was not wasted. He had learned there a great deal about the way the machinery of government operated, and in particular to see the problems of economics from the angle of the administrator.”8

India in Crisis

Unfortunately, conventional accounts of Keynes’s work on India ignore the most important people in the drama—namely the Indians. Sympathetic reporters such as Skidelsky distort his role by failing to emphasize a vital point: India was in economic turmoil throughout the period in which Keynes worked on Indian problems. Keynes called this time one of the “most trying periods in the history of India, when plague, famine and political unrest quickly followed one another, revenues fell, prices rose to an unprecedented level, and the currency system seemed at one moment to be in danger.”9

From 1858 to 1913, recurring famines killed as many as 30 million Indians.10 These famines were not acts of God. As Adam Smith wrote in 1776, “Famine has never arisen from any other cause but the violence of government.”11 The India Office, not crop failures, was responsible for the misery: “The basic economic feature of Indian famines [was] that they indicated a famine of purchasing power and a general erosion of people’s capabilities to acquire food and of their exchange entitlements rather than of crop failures and reduced availability of food grains.”12

From 1900 to 1913, British mismanagement of the Indian monetary system was the crux of the problem. Keynes reported, “It is at least true that there was a substantial rise in the general level of prices in India during the three years preceding 1908, accompanied by correspondingly large issues of notes.”13 According to his figures, the Indian money supply increased by 43 percent between 1903 and 1907, and the Indian price level rose 40 percent during this period.14

The problem in India was price inflation. Keynes confessed, “It is recognized in India that there was, prior to the famine of 1907–08, a fall in the food-purchasing power of the rupee” and “the volume of currency was so rapidly expanded.”15 British mismanagement of the money supply was the cause of the price inflation. In turn, the price inflation produced economic problems in India, including famine.

At this time, Gopal Krishna Gokhale (1866–1915) was the key figure in the Indian independence movement. He harshly criticized British monetary policy in India: “During the last ten years [1898–1908] the Government have made a net addition to this stock [of rupees] of over [1 billion]. Such a sudden inflation is bound to result in a general rise in prices.”16 As Gokhale and other members of the Indian independence movement realized, monetary reform was required to solve the economic problems that plagued India.

The Indians’ call for monetary reform posed a threat to British rule in India. An empire can only control a colony if it controls its money. British rule over India required British control of the Indian monetary system. The British were being asked to relinquish this control, and it posed a strategic threat to their rule.

Indian Currency and Finance: A Collaboration with the India Office

Published in 1913, Keynes’s first book was Indian Currency and Finance. His defenders represent the book as a value-free, scientific work on monetary theory. But Keynes never worked on economic theory without some political purpose. Austin Robinson reported, “I can think of no original piece of theoretical economics which Keynes conceived as an exercise in pure economics.”17

The practical motivation behind the book was to defend British imperialism. To protect its rule over India, the British Empire needed an intellectual justification for maintaining, and even expanding, its control over the Indian monetary system. Indian Currency and Finance supplied this justification.

Although Keynes formally left the India Office in June 1908 to become an economics lecturer at Cambridge, his role in Indian affairs expanded greatly soon after. In October 1909, Lionel Abrahams (1869–1919), secretary of the financial department of the India Office, recruited him as an academic apologist for the India Office.

Although he appeared to be an independent academic, Keynes was in bed with Abrahams and the India Office establishment in the years before his book was released. Extant letters between Keynes and Abrahams, the key figure in its production, prove that Indian Currency and Finance is not an objective, value-free work on economic science. It was produced with the assistance of high-ranking officials in the India Office.

The editors of the Collected Writings admit that Abrahams vetted the book before it was published: “By February 1913 Keynes was sending out proofs of Indian Currency and Finance…Abrahams greeted the proofs…Many times he supplied or corrected matters of information.”18 Moggridge confirms this as well: “[Discussions] with Abrahams concerning both matters of fact and opinion were particularly intense and Keynes made numerous alterations to meet his official critic.”19

What about the economics of the book? The main takeaway is that Keynes was a lifelong advocate of an elastic, fractional reserve banking system managed by a powerful central bank. Indeed, the book contains many of the monetary ideas that shaped his work at the Bretton Woods Conference in 1944.

The Indian economist S. V. Doraiswami recognized this: “Mr. J. M. Keynes and Sir Ernest Cable…desire that the Paper Currency system in India should be elasticised, and do not follow the cautious policy laid down by the Bank Charter Act of Sir Robert Peel for the maintenance of the paper currency of England.”20 He continues, “Mr. Keynes…holds the view that the gold exchange standard marks an advanced stage in monetary evolution. I am not aware of any economist of repute who holds that view. Be that as it may, the Indian currency system should not be tampered with to suit the whims of an armchair doctrinaire.”21

Though reviewers at the time could not have known that Indian Currency and Finance was produced in collaboration with the India Office, they were on to his sympathies. The economist B. R. Ambedkar observed, “Mr. Keynes [is] anything but an unfriendly critic of the Government’s policy.”22 Reviewing the book, Herbert S. Foxwell was sympathetic to Keynes’s position but seemed to recognize the book’s origins: “The time of its appearance may have been determined by the very energetic but ill-considered attack on the Indian monetary administration made last autumn, but the phrasing of some passages rather suggests that they were originally written as a memorandum or report for official use.”23

Naturally, Keynes’s seemingly independent findings cleared the India Office of any blame for India’s economic problems. And, predictably, his policy recommendations coincided perfectly with the India Office’s desires. His solution was more British control over India, not less. He advocated imposing a British-controlled central bank on India to implement an elastic, fractional reserve banking system, a plan he elaborated in “Memorandum on Proposals for the Establishment of a State Bank in India.”24


Indian Currency and Finance was a piece of government-sponsored propaganda designed to placate critics of British imperialism in India. In writing the book, Keynes helped perpetuate the system of imperialism that caused immense human suffering in India. He was incapable of empathizing with the misery of the Indian peasant.25

In early 1915, Keynes was rewarded for his work defending British imperialism with a position in the British Treasury. Indian Currency and Finance had landed him a spot on the 1913 Royal Commission on Indian Currency and Finance. As his Bloomsbury friend Clive Bell wrote, “He …consequently had begun to make friends in high places.”26 These friends—specifically, Basil Blackett and Edwin Montagu—got him into the Treasury in the opening months of the war.27 As his Bloomsbury companions complained, he spent the war in the Treasury “finding ways of killing the maximum number of Germans at the minimum expense.”28

In 1919 The Economic Consequences of the Peace launched John Maynard Keynes to the top of the economics profession, but the story of Keynesian economics starts with his defense of British imperialism in India. A passionate British imperialist, he became nothing less than the government’s official apologist for British monetary rule over India, and this work is what won him his coveted position in the Treasury, which amplified his influence on policy.

In writing Indian Currency and Finance, Keynes was not a neutral economic theorist committed to the development of objective, value-free economic science.29 Rather, he was an official apologist for the state—nothing more, as Joseph Schumpeter put it, than “a civil servant in an academic gown.”30

  • 1. Robert Skidelsky, John Maynard Keynes: Fighting for Freedom, 1937–1946 (New York: Viking, 2000), p. 130; Skidelsky, “Keynes in Canada,” Robert Skidelsky (website), 2001,
  • 2. “Speech to the Cambridge Union, 20 January 1903,” p. 24, OC/5/4–26, Papers of John Maynard Keynes, King’s College Archive Centre, Cambridge University.
  • 3. John Toye, Keynes on Population (New York: Oxford University Press, 2000), pp. 230–31.
  • 4. “Population,” 1914, p. 35, SS/1/1–37, Papers of John Maynard Keynes. For documentation, see Edward W. Fuller, “Keynes on Eugenics, Race, and Population Control,” Mises Wire, Nov. 14, 2019,
  • 5. Untitled Essay Concerning the Achievements of GB under Queen Victoria, 1899, p. 4, PP/31/7/1–5, in Papers of John Maynard Keynes.
  • 6. “The Difference Between East and West: Will They Ever Disappear?,” 1900, p. 5, PP/31/4/1–5, Papers of John Maynard Keynes.
  • 7. “Population,” p. 22. For documentation, see
  • 8. J.A. Schumpeter, “John Maynard Keynes 1883–1946,” Economic Journal, 57, no. 225 (1947): 1–68, esp. 13–14.
  • 9. The Collected Writings of John Maynard Keynes, 30 vols., (London: Macmillan and Cambridge University Press for the Royal Economic Society, 1971–89), vol. 15, p. 34.
  • 10. Jon Wilson, The Chaos of Empire: The British Raj and the Conquest of India (New York: Public Affairs, 2016), p. 318.
  • 11. Adam Smith, The Wealth of Nations (New York: The Modern Library, 1994), p. 563.
  • 12. The Collected Writings of John Maynard Keynes, vol. 15, pp. 39–40.
  • 13. The Collected Writings of John Maynard Keynes, vol. 11, p. 9.
  • 14. Ibid.
  • 15. The Collected Writings of John Maynard Keynes, vol. 11, pp. 1–2, 13.
  • 16. A. Chandavarkar, Keynes and India: A Study in Economics and Biography (London: Macmillan, 1989), pp. 52n5.
  • 17. Austin Robinson, quoted in Donald Moggridge, Keynes: Aspects of the Man and his Work (London: Macmillan, 1974), p. 100. Donald Moggridge similarly notes that “A [significant] aspect of Keynes’s theoretical works was its essentially practical motivation. Throughout his career he disliked theorising for its own sake.” See Moggridge, Maynard Keynes: An Economist’s Biography (London: Routledge, 1992), p. 553.
  • 18. Moggridge, Keynes: Aspects of the Man, p. 95.
  • 19. Moggridge, Maynard Keynes, p. 223.
  • 20. S.V. Doraiswami, Indian Finance, Currency and Banking (Mylapore, Madras: S. V. Doraiswami, 1915), pp. 90–91.
  • 21. Ibid., p. 109.
  • 22. B.R. Ambedkar, The Problem of the Rupee: Its Origin and Its Solution (London: P.S. King & Son, 1923), p. 214.
  • 23. J.M. Keynes, “Indian Currency and Finance by John May­nard Keynes,” Economic Journal, 23, no. 92 (1913): 561–72, esp. 561.
  • 24. Moggridge, Maynard Keynes, pp. 226–27.
  • 25. As Skidelsky confesses, Keynes was incapable of empathy: “He had never felt despair, and could not understand it.” Keynes: Fighting for Freedom, p. 86.
  • 26. Clive Bell, Old Friends: Personal Recollections (New York: Harcourt, Brace and Company, 1956), pp. 44–45.
  • 27. Moggridge, Maynard, pp. 235, 243; Robert Skidelsky, John Maynard Keynes: Hopes Betrayed (New York: Viking, 1983), pp. 289, 297.
  • 28. Kingsley Martin, Father Figures (London: Hutchinson of London), p. 100.
  • 29. Anna M. Carabell, writes, “economic theory, was seen by Keynes as being scope-dependent. It had lost all presumptions of neutrality from values.” On Keynes’s Method (New York: Macmillan, 1988), p. 159. Even Skidelsky admits: “He invented theory to justify what he wanted to do” and he “mixes up science and politics.” John Maynard Keynes: The Economist as Saviour, 1920–1937 (New York: Viking, 1992), pp. 344, 577.
  • 30. J.A. Schumpeter, “John Maynard Keynes, 1883–1946,” American Economic Review, 36, no. 4 (1946): 495–518, esp. 499.

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