John Maynard Keynes lived through two world wars as well as the great depression between them, and as an economic adviser to British and American governments did his best to fend off political disaster. But Zachary Carter’s solid, sombre intellectual biography begins at a moment when Keynes himself, in his private capacity, seemed to be causing a seismic upset. “The Universe totters,” Lytton Strachey informed his cronies in the Bloomsbury set in 1922: the cataclysm had happened because Keynes – whose previous lovers, conscientiously indexed in his archives, were a troupe of nameless men, among them “the shoemaker of the Hague” and “the clergyman” – had taken up with a woman, the Russian ballerina Lydia Lopokova.

By starting with this salacious titbit, Carter enticingly sexes up a book that soon settles down, as Keynes did, to be grimly serious. When he married Lopokova, Keynes gave up the sportive pursuit known in Bloomsbury as “buggery” and, as he saltily put it, relished being “foxed and gobbled” by his wife. Cultivating what he called “a disgusting and financial state of mind”, he became a public man so loftily impersonal that in an obituary in 1946 his former adversary Lionel Robbins called him “God-like”.

But conservatives have never stopped alluding to his libertine youth as a means of disparaging his assault on balanced budgets and penny-pinching austerity. Joseph Schumpeter, an Austrian toff who wore riding gloves when he lectured at Harvard, sniffed that because Keynes was “childless”, his principles of economic management were “short-run” – indifferent to future outcomes. The slur was recently repeated by Niall Ferguson. In 1983 William Rees-Mogg – the proud begetter of jiving Jake, choreographer of the Westminster conga – diagnosed Keynes’s hostility to the gold standard as a symptom of the amoralism for which homosexuals were in his view notorious.

Carter wastes no time on such odious aspersions, and instead interprets the hedonism of Bloomsbury as a positive influence on Keynes, whose ideal aim was “the democratisation of fine living”. Economy began as a miserly, parsimonious business: the Greek word refers to the virtuous practice of making do with less. Keynes, however, saw it as a doctrine that preached “joy through statistics”.

I’m dubious about Carter’s claim that Keynes’s Economic Consequences of the Peace deserves to be ranked with Strachey’s Eminent Victorians and Eliot’s The Waste Land as a modernist masterpiece; he does a better job of presenting the economist as an artist manqué when he suggests that Keynes saw money as “something illusory” – a fiction, or what linguists call a floating signifier. Keynes daringly acknowledged his reliance on artifice by describing economic policy as “a meaningless ritual”, a trick to ensure that we continue spending the abstract, notional contents of our wallets.

The price of peace in 1918 was a “grand scheme” devised by Keynes that proposed sending money round in a circle, paid out to Germany as funds for rehabilitation and then paid back as reparations. Carter admiringly likens this arrangement to the mad machines in Rube Goldberg’s cartoons; it might have held the squabbling world together for a while if President Woodrow Wilson hadn’t bluntly rejected the elaborate, deceptive rules of the game.

Economics, for Keynes a form of play, was underpinned by aesthetics. An off-hand metaphor revealed his partiality: in Britain’s imperial heyday, he said the Bank of England was “the conductor of the international orchestra”. He reminded governments of their duty to subsidise entertainers, whose “divine gift” brightened our lives. His utopia was the Covent Garden theatre which is now the Royal Opera House, where he first saw Lopokova dance with Diaghilev’s company. When it reopened in 1946, under the auspices of the newly established Arts Council, money ran out before the auditorium’s lampshades had been paid for. Women hired as usherettes therefore donated their rationed clothing coupons to buy the fabric. This small sacrifice moved Keynes to tears. 

Keynes dies two-thirds of the way through Carter’s book, which goes on to follow the contested afterlife of his ideas in America. Although Republicans denounced the welfare state as a socialist conspiracy, what John Kenneth Galbraith called “reactionary Keynesianism” seized on war as the highest form of deficit spending and, rather than diverting funds into something like the NHS, kept the country permanently militarised, poised for “campaigns of mass death” in Korea, Vietnam, Iraq and Afghanistan.

Meanwhile Keynes’s dream of making “great art and beautiful evenings” available to all citizens dwindled into the tacky abundance of the affluent society. “Consumption,” Keynes declared in 1936, “is the sole end and object of all economic activity.” What would he have thought of consumerism and the mile-long queues of famished shoppers in car parks when Ikea reopened earlier this month?

In Carter’s persuasive account, the slippery triangulations of Clinton and Blair are the final betrayal of Keynes: neoliberalism set markets free, unleashed speculators, and opened the way to a globalisation that treated people as “disembodied profit maximisers” and crammed them into Hillary Clinton’s “basket of deplorables”. Finally Carter admits that the Keynesian recipe for peace and prosperity has proved tragically incapable of sustaining democracy. Why did economic losers in the red states allow a demagogue like Trump to rip them off? Why do Tories crave a no-deal Brexit that will impoverish us all?

“I do not have satisfying answers,” says Carter with a morose shrug, after which he worries that we are blundering back into the “moral quagmire” that Keynes hoped to avoid. The book ends with an alarming reminder that “victories for democracy and equality – the end of slavery in the 19th century and the defeat of fascism in the 20th – came at the end of a gun”.

Keynes rebuffed criticism of his short-run solutions by pointing out: “In the long run, we are all dead.” True enough, but in the immediate future, as economies stall and societies fray, we may face a fate worse than death. The universe is tottering all over again.

• The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes by Zachary D Carter is published by Random House ($35)