ABSTRACT
The concern that John Maynard Keynes had expressed in 1919 about the dissolution of the old order was reinforced by a collapse of production and employment followed by an era of sustained high unemployment. Starting in late 1922, Keynes increasingly turned his attention toward domestic economic problems and domestic policy. Keynes understood that organized labor had become much more powerful in Britain during and after the war and would fiercely resist any significant cut in nominal wages. Though Keynes remained unsure about precisely how to solve all of the serious problems confronting Britain, he was quite clear that there would have to be a qualitative increase in the economic responsibilities and powers of the state in the post-war era. For Keynes in the interwar years, the state of balance sheets is a crucial determinant of economic performance: balance sheets matter.
