Keynes on solving the "economic problem"

One of the most important essays from the great economist John Maynard Keynes is "Economic Possibilities for our Grandchildren" (1930). The essay came out during the early years of the Great Depression. But in it, Keynes was looking beyond the immediate problems of recession and technological unemployment:

But this is only a temporary phase of maladjustment. All this means in the long run that mankind is solving its economic problem. I would predict that the standard of life in progressive countries one hundred years hence will be between four and eight times as high as it is today. There would be nothing surprising in this even in the light of our present knowledge. It would not be foolish to contemplate the possibility of a far greater progress still.

Here the "economic problem" of humanity means the satisfaction of basic needs for food, clothing and shelter. Keynes based his analysis of long-term possibilities on developments in the European economies in the modern age, i.e., the 15th century forward. He distinguishes between two kind of needs:

Now it is true that the needs of human beings may seem to be insatiable. But they fall into two classes — those needs which are absolute in the sense that we feel them whatever the situation of our fellow human beings may be, and those which are relative in the sense that we feel them only if their satisfaction lifts us above, makes us feel superior to, our fellows. Needs of the second class, those which satisfy the desire for superiority, may indeed be insatiable; for the higher the general level, the higher still are they. But this is not so true of the absolute needs — a point may soon be reached, much sooner perhaps than we are all of us aware of, when these needs are satisfied in the sense that we prefer to devote our further energies to non-economic purposes. [my emphasis]

Keynes draws a conclusion from this which played a large role in the thinking of Western social critics and the labor movement. That is that social productivity in the advanced nations was reaching a point where basic economic needs, the "absolute" needs in particular, could be satisfied with considerably less time worked.

This observation, if accurate, opens up a radical alternative state of humanity to that of today, in which are large amount of the average person's time is devoted to the basic "economic problem." But Keynes argued that this was a real possibility of economic development, and argued specifically against the need for a revolutionary change to achieve such a result, contrasting its possibility to:

... the pessimism of the revolutionaries who think that things are so bad that nothing can save us but violent change, and the pessimism of the reactionaries who consider the balance of our economic and social life so precarious that we must risk no experiments.

The fact that the possibilities of a drastic reduction in labor is scarcely discussed in social commentary today is not a good thing. Keynes wrote in 1930:

Will this be a benefit? If one believes at all in the real values of life, the prospect at least opens up the possibility of benefit. Yet I think with dread of the readjustment of the habits and instincts of the ordinary man, bred into him for countless generations, which he may be asked to discard within a few decades.

To use the language of to-day - must we not expect a general "nervous breakdown"? ...

Why would he worry about that? Because it would put the human race in new territory in terms of our experience of life and community:

Thus for the first time since his creation man will be faced with his real, his permanent problem - how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well. ...

Yet there is no country and no people, I think, who can look forward to the age of leisure and of abundance without a dread. For we have been trained too long to strive and not to enjoy. It is a fearful problem for the ordinary person, with no special talents, to occupy himself, especially if he no longer has roots in the soil or in custom or in the beloved conventions of a traditional society. To judge from the behaviour and the achievements of the wealthy classes to-day in any quarter of the world, the outlook is very depressing! For these are, so to speak, our advance guard - those who are spying out the promised land for the rest of us and pitching their camp there. For they have most of them failed disastrously, so it seems to me - those who have an independent income but no associations or duties or ties - to solve the problem which has been set them.

I feel sure that with a little more experience we shall use the newfound bounty of nature quite differently from the way in which the rich use it to-day, and will map out for ourselves a plan of life quite otherwise than theirs. [my emphasis]

No wonder conservatives today don't want to hear about Keynes today! And, unfortunately, too many people who consider themselves liberals don't, either.

Tags: keynes