In 1926, three years before the Great Crash and a decade before publication of his own grand synthesis, Keynes wrote a prescient essay titled The End of Laissez-Faire. “Some coordinated act of intelligent judgment is required,” he wrote, “as to the scale on which it is desirable that the community as a whole should save, the scale on which these savings should go abroad in the form of foreign investments, and whether the present organization of the investment market distributes savings along the most nationally productive channels. I do not think these matters should be left entirely to the chances of private judgment and private profits as they are at present.”
In the 1930s, the Keynesian lesson was learned at great cost. Capitalism came out of World War II persuaded that the system itself could not withstand the instabilities of pure laissez-faire. The Keynesian era enlisted the nation-state to make the “coordinated act of intelligent judgment” —to regulate demand, to channel investment, to broker social contracts between industry and labor, and to prevent speculative excess from wrecking the market itself. Yet, in the shelter of a mixed economy and a social peace, something peculiar happened: Keynes was captured by conservatives, and pure capitalism quietly made a phoenix- like recovery, both as institution and as ideology. The globalization of commerce in the 1970s resurrected the reality of laissez-faire, blurred the memory of its multiple hazards, and weakened the institutions committed to its domestication.