Keynes and Hayek, the Great Debate (Part 3): Nicholas Wapshott

By the early 1940s, the Keynesian Revolution in America was in full swing. Fast-moving events in Germany obliged Franklin D. Roosevelt to spend on the vast scale that John Maynard Keynes prescribed. Despite the president’s assurances during the 1940 presidential campaign -- “I have said this before, but I shall say it again and again and again: Your boys are not going to be sent into foreign wars” -- he ordered a gargantuan rearmament program. In 1940, the annual defense expenditure was $2.2 billion; the following year it reached a sizzling $13.7 billion.

“If expenditure on armaments really does cure unemployment, a grand experiment has begun,” Keynes declared in 1939. “We may learn a trick or two which will come in useful when the day of peace comes.”