John Maynard Keynes’ Economic Possibilities for Our Grandchildren

Introduction

In October of 1930, as the world suffered through the Great Depression, John Maynard Keynes published an essay considering the long-term economic prospects of developed nations. [1]

My purpose in this essay …. is not to examine the present or the near future, but to disembarrass myself of short views and take wings into the future. What can we reasonably expect the level of our economic life to be a hundred years hence? What are the economic possibilities for our grandchildren?

He argued that, though pessimism abound about the outlook for the economy, reflection on the economic developments of the past few centuries was encouraging.

And he predicted that, in the near future, developed nations would be able to overcome what he called “the economic problem” – the problem of needing to labor to produce the goods and services which sustain human life (e.g. food, shelter).

Humanity was on its way to solving this problem, Keynes argued, because of two powerful forces: capital accumulation and technological progress.

Rapid technological change would, Keynes wrote, bring about technological unemployment, but this would be a transitory problem on route to solving the far greater economic problem with which humanity has had to contend from its first days.

Thus, in the midst global economic calamity, Keynes had penned an overwhelmingly optimistic take on the future economic prospects of developed nations: in a dark period of wide-spread scarcity, Keynes prophesized about a coming age of abundance.

The Prevailing Pessimism is Unjustified

Keynes begins by suggesting that the prevailing sentiment of the day was one of fear that the outbreak of the Great Depression meant the economic progress of the 1800s was over.

We are suffering just now from a bad attack of economic pessimism. It is common to hear people say that the epoch of enormous economic progress which characterised the nineteenth century is over; that the rapid improvement in the standard of life is now going to slow down --at any rate in Great Britain; that a decline in prosperity is more likely than an improvement in the decade which lies ahead of us.

He argues that this negativity is unjustified. For Keynes, the Great Depression did not mark the end of an era of economic progress and the start of an era of economic decay.

Rather, the Depression constituted – painful as it was – an interlude in a longer-term trend of economic advancement.

I believe that this is a wildly mistaken interpretation of what is happening to us. We are suffering, not from the rheumatics of old age, but from the growing-pains of over-rapid changes, from the painfulness of readjustment between one economic period and another. The increase of technical efficiency has been taking place faster than we can deal with the problem of labour absorption; the improvement in the standard of life has been a little too quick; the banking and monetary system of the world has been preventing the rate of interest from falling as fast as equilibrium requires. …. We forget that in 1929 the physical output of the industry of Great Britain was greater than ever before[.]

The prevailing world depression, the enormous anomaly of unemployment in a world full of wants, the disastrous mistakes we have made, blind us to what is going on under the surface to the true interpretation of the trend of things.

Keynes then addresses two views which he believes mistakenly interpret the Depression as the end of economic progress: those calling for the end of capitalism and those suggesting that the state of the economy was so dire that it was too risky to try and take steps to improve its condition, lest things get worse.

For I predict that both of the two opposed errors of pessimism which now make so much noise in the world will be proved wrong in our own time-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.

Little Progress, Then a Boom

Keynes argues that for roughly 3,700 years (2,000 B.C. to 1700 A.D.), humanity had experienced no dramatic improvements to its quality of life.

From the earliest times of which we have record-back, say, to two thousand years before Christ-down to the beginning of the eighteenth century, there was no very great change in the standard of life of the average man living in the civilised centres of the earth. Ups and downs certainly. Visitations of plague, famine, and war. Golden intervals. But no progressive, violent change. Some periods perhaps So per cent better than others at the utmost 100 per cent better-in the four thousand years which ended (say) in A. D. 1700.

He argues that this prolonged period of minimal improvement to the human condition was due to the absence of two things: an absence of significant technological improvements and a lack of capital accumulation.

This slow rate of progress, or lack of progress, was due to two reasons-to the remarkable absence of important technical improvements and to the failure of capital to accumulate.

With respect to a lack of technological improvements, Keynes argues that almost all the major technologies – language, fire, the domestication of animals, and so on – which existed at the start of the modern age (which Keynes pegs as the 1500s A.D.) had been invented or discovered millennia earlier. [2] [3]

The absence of important technical inventions between the prehistoric age and comparatively modern times is truly remarkable. Almost everything which really matters and which the world possessed at the commencement of the modern age was already known to man at the dawn of history. Language, fire, the same domestic animals which we have to-day, wheat, barley, the vine and the olive, the plough, the wheel, the oar, the sail, leather, linen and cloth, bricks and pots, gold and silver, copper, tin, and lead-and iron was added to the list before 1000 B.C.-banking, statecraft, mathematics, astronomy, and religion.

Then, in the 16th century began a period of capital accumulation and technological innovation which, Keynes argues, marked the start of the modern age. [4]

The modern age opened; I think, with the accumulation of capital which began in the sixteenth century.

From the sixteenth century, with a cumulative crescendo after the eighteenth, the great age of science and technical inventions began, which since the beginning of the nineteenth century has been in full flood--coal, steam, electricity, petrol, steel, rubber, cotton, the chemical industries, automatic machinery and the methods of mass production, wireless, printing, Newton, Darwin, and Einstein, and thousands of other things and men too famous and familiar to catalogue.

And this modern age has resulted in a dramatic improvement to the standard of living in developed countries, despite an increase in population.

What is the result? In spite of an enormous growth in the population of the world, which it has been necessary to equip with houses and machines, the average standard of life in Europe and the United States has been raised, I think, about fourfold. The growth of capital has been on a scale which is far beyond a hundredfold of what any previous age had known.

Continuing Progress

And going forward, Keynes believed, the rate of population growth would be slower than it had been in the preceding centuries.

And from now on we need not expect so great an increase of population.

Meanwhile, capital accumulation will continue.

If capital increases, say, 2 per cent per annum, the capital equipment of the world will have increased by a half in twenty years, and seven and a half times in a hundred years. Think of this in terms of material things--houses, transport, and the like.

Likewise, technological progress will continue.

At the same time technical improvements in manufacture and transport have been proceeding at a greater rate in the last ten years than ever before in history. In the United States factory output per head was 40 per cent greater in 1925 than in 1919. In Europe we are held back by temporary obstacles, but even so it is safe to say that technical efficiency is increasing by more than 1 per cent per annum compound.

Solving the Economic Problem

This continued progress, Keynes believed, would soon bring about an end to the drudgery of wage-labor.

Technological progress, Keynes suggested, may soon allow us to be able to produce food, mine, and manufacture with only 25% of the human effort required in recent times.

There is evidence that the revolutionary technical changes, which have so far chiefly affected industry, may soon be attacking agriculture. We may be on the eve of improvements in the efficiency of food production as great as those which have already taken place in mining, manufacture, and transport. In quite a few years-in our own lifetimes I mean-we may be able to perform all the operations of agriculture, mining, and manufacture with a quarter of the human effort to which we have been accustomed.

This ability to produce the necessities of life with less labor than has historically been required will produce technological unemployment.

For the moment the very rapidity of these changes is hurting us and bringing difficult problems to solve. Those countries are suffering relatively which are not in the vanguard of progress. We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come--namely, technological unemployment. This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.

But technological unemployment is only a transitory problem that will surface as humanity overcomes a far greater challenge with which it has wrestled from its first days: the economic problem of needing to labor to produce the necessities of life. [5]

But this is only a temporary phase of maladjustment. All this means in the long run that mankind is solving its economic problem.

Keynes predicts that the quality of life in developed countries will in 100 years (i.e. 2030) be between four and eight times higher than in 1930.

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 to-day. 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 afar greater progress still.

And he concludes that, due to this progress, humanity – or at least that portion of it which occupies the developed world – will overcome, or be close to overcoming, the economic problem in 100 years (assuming no major wars or large increases in population). [6]

I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not-if we look into the future-the permanent problem of the human race.

I look forward, therefore, in days not so very remote, to the greatest change which has ever occurred in the material environment of life for human beings in the aggregate. But, of course, it will all happen gradually, not as a catastrophe. Indeed, it has already begun. The course of affairs will simply be that there will be ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed. The critical difference will be realised when this condition has become so general that the nature of one’s duty to one’s neighbour is changed. For it will remain reasonable to be economically purposive for others after it has ceased to be reasonable for oneself.

The pace at which we can reach our destination of economic bliss will be governed by four things-our power to control population, our determination to avoid wars and civil dissensions, our willingness to entrust to science the direction of those matters which are properly the concern of science, and the rate of accumulation as fixed by the margin between our production and our consumption; of which the last will easily look after itself, given the first three.

[This conclusion] is startling because-if, instead of looking into the future, we look into the past-we find that the economic problem, the struggle for subsistence, always has been hitherto the primary, most pressing problem of the human race-not only of the human race, but of the whole of the biological kingdom from the beginnings of life in its most primitive forms.

And Keynes suggested that, as we move nearer to solving the economic problem, we may soon be implementing 15-hour workweeks.

For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented. We shall do more things for ourselves than is usual with the rich to-day, only too glad to have small duties and tasks and routines. But beyond this, we shall endeavour to spread the bread thin on the butter-to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us!

Overcoming the economic problem would however present a new, though much lesser, challenge: how will humanity respond when life is no longer animated by the problem which has oriented it for so long?

[W]e have been expressly evolved by nature-with all our impulses and deepest instincts-for the purpose of solving the economic problem. If the economic problem is solved, mankind will be deprived of its traditional purpose.

Humanity’s Permanent Problem

What would be the implications of a world free of the need for wage-labor, especially when humanity’s existence up to that point will have been one where work had been such a defining feature of our lives, a focal point regimenting our daily schedules?

Will this be a benefit?

Keynes certainly saw, in the vapid lives of upper-society house wives, the possibility of life deprived of purpose.

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”? We already have a little experience of what I mean -a nervous breakdown of the sort which is already common enough in England and the United States amongst the wives of the well-to-do classes, unfortunate women, many of them, who have been deprived by their wealth of their traditional tasks and occupations--who cannot find it sufficiently amusing, when deprived of the spur of economic necessity, to cook and clean and mend, yet are quite unable to find anything more amusing.

To those who sweat for their daily bread leisure is a longed--for sweet-until they get it.

This, for Keynes, constituted humanity’s permanent problem: how to live to a good life once the temporary economic problem is overcome? 

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.

The strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance. But it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.

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.

Still, Keynes was optimistic that this new challenge could ultimately be overcome.

I feel sure that with a little more experience we shall use the new-found 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.

Vice & Virtue

When the ready availability of the life’s necessities means that work is no longer central to our lives, Keynes writes, society’s view of those who seek to accumulate wealth will change: love of money will no longer be considered a virtue. [7]

There are changes in other spheres too which we must expect to come. When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession -as distinguished from the love of money as a means to the enjoyments and realities of life -will be recognised for what it is, a somewhat disgusting morbidity, one of those semicriminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard.

Of course there will still be many people with intense, unsatisfied purposiveness who will blindly pursue wealth-unless they can find some plausible substitute. But the rest of us will no longer be under any obligation to applaud and encourage them. For we shall inquire more curiously than is safe to-day into the true character of this “purposiveness” with which in varying degrees Nature has endowed almost all of us. For purposiveness means that we are more concerned with the remote future results of our actions than with their own quality or their immediate effects on our own environment. The “purposive” man is always trying to secure a spurious and delusive immortality for his acts by pushing his interest in them forward into time.

I see us free, therefore, to return to some of the most sure and certain principles of religion and traditional virtue-that avarice is a vice, that the exaction of usury is a misdemeanour, and the love of money is detestable, that those walk most truly in the paths of virtue and sane wisdom who take least thought for the morrow. We shall once more value ends above means and prefer the good to the useful. We shall honour those who can teach us how to pluck the hour and the day virtuously and well, the delightful people who are capable of taking direct enjoyment in things, the lilies of the field who toil not, neither do they spin.

Keynes therefore viewed those who seek to accumulate wealth for wealth’s sake with considerable disdain, believing them a necessary evil who will, through their drive to procure riches, carry humanity to a world beyond the need to work. [8]

This sentiment also comes through in an earlier portion of the essay where Keynes writes about the role “money-makers” would play in producing economic abundance:

The strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance. But it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.

In the Meantime

But, Keynes continued, it would still be 100 years before we are to defeat, or very nearly defeat, the need for human exertion in the form of wage-labor.

And until then, we will still need these unscrupulous “money-makers” who will carry us to the age of abundance.

But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.

In the meantime, we should, Keynes suggested, prepare for the day when life would no longer center around the need to work.  

Meanwhile there will be no harm in making mild preparations for our destiny, in encouraging, and experimenting in, the arts of life as well as the activities of purpose.

And because we will soon overcome it, we should avoid thinking of the economic problem as a permanent problem.

Economists (who deal with questions pertaining to the production of life’s necessities; that is, with the economic problem) should be thought of as specialists working on a temporary problem. 

But, chiefly, do not let us overestimate the importance of the economic problem, or sacrifice to its supposed necessities other matters of greater and more permanent significance. It should be a matter for specialists-like dentistry. If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!

Economics, Keynes believed, would soon be much less relevant.

Summary

In the midst of the Great Depression – an economic calamity of enormous proportion – Keynes penned a positively utopian essay on the future prospects for humanity (particularly the developed world).

He predicted that, despite the pain of the Depression, humanity was on its way to overcoming what Keynes labeled the economic problem: the problem of having to work to produce those necessities which sustain human life (e.g. housing, food).

He argued that two processes, which had been at work in the developed world since the 16th century, would carry us to a state of “economic bliss”: capital accumulation and technological progress.

Subject to the caveats of no major wars and no substantive increase in population, these forces would mean that the standard of living for humans in the developed world will increase four to eight-fold in 100 years (i.e. by 2030).

By 2030, the developed world would therefore overcome, or be close to overcoming, the most pressing problem humanity has faced since its earliest days (assuming no major wars or increases in population).

With the need for human wage-labor nearing its end, we would soon be implementing 15-hour workweeks.

 Keynes thus viewed the economic problem as a temporary one which would be solved in short order.

Solving this temporary problem would, Keynes believed, create new challenges. But these too could be overcome.

First, it would create the new problem of technological unemployment.

But this would be a transitory problem, an issue that would arise as ever greater quantities of human labor could be replaced by technology, thereby freeing larger and larger portions of humanity from the misery of wage-labor.

Keynes was much more concerned about a second problem, which he believed was humanity’s permanent problem: how to live a purposeful life in the coming age of abundance, when humans would no longer need to regiment their lives around work, as they had grown accustomed to?

Addressing the question of what constitutes a good life in a world free from the need for mind-numbing work, Keynes indicates regard for those who “cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life”.

Keynes also expresses a distaste for “money-makers”: those who seek to accumulate wealth for the sake of wealth.

With the end of human drudgery, Keynes believed, would come a revolution in society’s values: those who pursue wealth for wealth’s sake would no longer be exalted.

But, Keynes wrote, given that it would still be 100 years before the end, or near end, of wage-labor, society needs those who “blindly pursue wealth” and their monetary predilections for just a little while longer.

Written By: Aiden Singh Published: December 9, 2020

Footnotes

[1] The essay, published in 1930, was based on a talk delivered to Winchester College on March 17, 1928.

[2] As these developments belong to the age of prehistory, we can’t say exactly when they were discovered/invented. As Keynes writes:

There is no record of when we first possessed these things.  

[3] There must, Keynes writes, have been a period in prehistory when humanity experienced a period of technological discovery and invention similar to that of the modern age.

But the majority of recorded history is characterized by the absence of such periods.

At some epoch before the dawn of history perhaps even in one of the comfortable intervals before the last ice age-there must have been an era of progress and invention comparable to that in which we live to-day. But through the greater part of recorded history there was nothing of the kind.

[4] Keynes argues that this period of capital accumulation began with the shipping back to Europe of the gold and silver which Spain had acquired in the New World.

The modern age opened; I think, with the accumulation of capital which began in the sixteenth century. I believe-for reasons with which I must not encumber the present argument-that this was initially due to the rise of prices, and the profits to which that led, which resulted from the treasure of gold and silver which Spain brought from the New World into the Old. From that time until to-day the power of accumulation by compound interest, which seems to have been sleeping for many generations, was re-born and renewed its strength. And the power of compound interest over two hundred years is such as to stagger the imagination.

[5] Keynes draws a distinction between those goods that are truly necessary to human sustenance, and those which some humans may desire – indeed may personally deem necessary – but which are not truly.

When he speaks of overcoming the economic problem, he means overcoming the problem of toiling to produce those things which are truly necessary (e.g. food and shelter), not merely wants which some may consider needs (e.g. jewels).

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.

[6] A major war – World War II (1939 – 1945) – was fought after Keynes published this essay in 1930. It’s not clear how this might revise the economist’s timeline for when the economic problem may be overcome.

Additionally, many wars which do not rise to the level of “world wars” have been fought since 1930. However, when Keynes lists as a caveat to his predicted timeline the non-occurrence of “important wars”, he appears to be referring to large-scale global conflagrations which would interrupt to a significant degree the process of capital accumulation in the developed world which he deems essential to overcoming the economic problem. Thus, these smaller conflicts would likely not have changed Keynes’ timeline.

[7] Though it is not essential to following Keynes’ core argument in Possibilities, and has therefore not been detailed in the main body of this article, the following should be noted. Possibilities is one of several times where Keynes expressed views which stereotyped Jews. In the portion of his essay dealing with morality, Keynes writes:

Perhaps it is not an accident that the race which did most to bring the promise of immortality into the heart and essence of our religions has also done most for the principle of compound interest and particularly loves this most purposive of human institutions.

This association of Jews with love of compound interest is analogous to long-running anti-Semitic stereotypes of Jews as money-lovers.

[8] It’s important to consider how Keynes’ own life, and the social circles he moved in, likely shaped his thinking about what constituted a full life. The economist was a member of the famed Bloomsbury Group, a London social circle named after the city’s posh Bloomsbury neighborhood where many of its members, including Keynes, lived. The group was comprised of creative types and intellectuals. Among others, the group included writer Virginia Woolf, painter Duncan Grant, and art critic Clive Bell.