What price are we willing to pay for peace and democracy? I am raising this question because I have the sense our collective commitment for both is waning as waves of misinformation and ahistorical opinions confound our sense of responsibility to ourselves and the world. This comes to my mind as I recall a book I read a few years ago, The Price of Peace. Its message was that to preserve peace and democracy, nations, especially those in a leadership role, have to see beyond their narrow interests. In the years between the two World Wars nobody seemed to comprehend this better than John Maynard Keynes. I am afraid, that, to our great peril, we, here in America, are forgetting this and we are now moving in the opposite direction.
There have been a lot of comparisons made between that interwar period and the present. Back then there was a collective failure among the winners of the war in establishing the foundations of a lasting peaceful order. First, preoccupied with restoring the wealth they had lost during the war Britain and France imposed extreme reparations on Germany. Then, when the main world economies started to go south country after country resorted in rounds of punishing tariffs paying little attention to the growing unemployment. Neither Britain nor the United States stepped forward to provide economic leadership. Instead, the default position became one of sovereigntism, a term used by historian Jennifer Mittelstadt (NYT, Feb. 4, 2025) to describe the pursuit of narrow national interests without concern for the broader consequences. Well, we all know how that fixation ended back then.
In the turmoil that followed the end of World War I, Keynes tried in vain to convince his own government as well as other leaders to adjust their national interests to the common good of world peace. In the process of his endeavors, though, he provided the economic theory and design (what we call macroeconomics) that would eventually enable governments, starting with the Roosevelt administration, to jumpstart their moribund economies and put people back to work.
The upshot of the Keynesian revolution was to debunk the false belief of classical economics that markets adjust on their own and thus they can solve problems of insufficient investment and unemployment. Keynes showed that government had a useful (sometimes indispensable) role to play in economic management.
What is, however, more important for the common good and relevant to our times, was Keynes’s conviction that well-run economies were critical in maintaining social harmony and keeping countries away from aggressive (including military) policies against other nations. In the words of Zachary Carter, author of The Price of Peace, Keynes believed that competent and humane economic management could protect democracies from the siren songs of authoritarian demagogues and spread peace and prosperity around the globe. In that respect, Carter writes Keynes was the last Enlightenment intellectual who pursued political theory, economics, and aesthetics as a unified design.
In the post-war decades the policies and narratives of successive US administrations, both in the domestic and international arena, were imbued with Keynes’s prescriptions. The social contract among government, big business, and labor unions produced a period of unparalleled shared prosperity in the US. The generous assistance extended to both allies and losers in the form of direct aid (Marshall Plan) and favorable trade terms restored battered economies, strengthened democracy in Europe, Japan and S. Korea, ended colonialism, and gave us a long period of peace and progress.
Things started to unravel, though, as a new economic order, driven mostly by hostility to the role of government, took hold in the US and the West in general in the 1980s. Anti-government conservative thinking managed to restore the supremacy of private markets as envisioned in classical economics as the only panacea of all economic problems. The new version, called neoclassical or neoliberal economics pushed aside the government as a complementary and beneficial agent in the design and execution of economic policy and relied on the supposed “rational” individual acting in supposedly “free” markets to take care of common affairs. Thus, preserving the primacy of markets became more important than the goal of achieving a better and more humane social order.
This explains why we paid little or no attention to the stagnation of wages, higher than normal unemployment, market monopolies, and growing inequality. Under the misguided belief that markets know best governments were convinced to set aside sensible regulations of the financial system and entrust its guardianship to banks. When the Great Recession of 2008-2009 almost knocked the global economy out, there was no accountability for its perpetrators while millions of households were financially burnt. The most corrosive effect on the public’s trust in the system was that after each crisis the rich became richer and inequality reached new heights.
Eventually, decades after governments had stopped managing their economies in the interest of shared prosperity and social harmony as Keynes had counselled, America and the rest of the West got exactly what he feared. That is, the rise of nationalism, authoritarianism, and the retreat of liberal ideals through the erosion of the public’s confidence in democracy.
Tragically, although the neoliberal order is out, the misuse and underutilization of the state are becoming features of the current administration. The power of the state is now exhausted in relentless culture wars against institutions perceived to be carriers of the liberal standard. Even worse, the resources of the state are now relegated to underuse and idleness, when they are needed the most.
Public health policy, climate change, and advances in AI require research and knowledge-based policies that only the state can provide as public goods. If the frontiers for saving peace and democracy in the aftermath of the Second WW were in the allied countries of Europe and Asia, the new frontiers are now in the Global South where millions suffer from malnutrition, illnesses, and political turmoil. That’s where American leadership is not only desperately needed but it can also bear immense geopolitical benefits to this country. And yet, we are withdrawing our assistance because our leaders tell us the price is too high. I wonder for whom. The ranks of the wealthy who are averse to paying their fair share of taxes?
As our government retreats from its obligation to advance the public good and from seeking common ground with other nations, our country and the world are exposed more to mistakes of ignorance, disruption, and disorder.
Note: For those who have the patience to read books on economic theories and history, I recommend Robert Skidelsky’s Money and Government for an illuminating account of how views about the state shaped economic theories over the past one hundred years and what explains the causes of our present economic state.
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