Keynes: Speaking 80 Years into the Future

by Fabius Maximus

Summary: A sad aspect of our age is the willful blindness we impose on ourselves. It’s not just the blindness to our world so often described on this website, but also blindness to our past. To avoid learning from our sages we mutilate their message — then laugh at the debased result. Perhaps the clearest case of that is Keynes, one of the greatest economists of the past century — now mocked by people in the grip of indoctrinated ignorance. Here we look at one of his many brilliant insights, one that applies as well today as it did in his time.

“National Self-Sufficiency“, John Maynard Keynes, The Yale Review, June 1933 — Excerpt:.

There is one more explanation, I think, of the re-orientation of our minds. The 19th century carried to extravagant lengths the criterion of what one can call for short “the financial results,” as a test of the advisability of any course of action sponsored by private or by collective action. The whole conduct of life was made into a sort of parody of an accountant’s nightmare.

Instead of using their vastly increased material and technical resources to build a wonder city, the men of the 19th century built slums; and they thought it right and advisable to build slums because slums, on the test of private enterprise, “paid,” whereas the wonder city would, they thought, have been an act of foolish extravagance, which would, in the imbecile idiom of the financial fashion, have “mortgaged the future” — though how the construction to-day of great and glorious works can impoverish the future, no man can see until his mind is beset by false analogies from an irrelevant accountancy..

It works but blocks the vision.

Even today I spend my time — half vainly, but also, I must admit, half successfully — in trying to persuade my countrymen that the nation as a whole will assuredly be richer if unemployed men and machines are used to build much needed houses than if they are supported in idleness. For the minds of this generation are still so beclouded by bogus calculations that they distrust conclusions which should be obvious, out of a reliance on a system of financial accounting which casts doubt on whether such an operation will “pay.”

We have to remain poor because it does not “pay” to be rich. We have to live in hovels, not because we cannot build palaces but because we cannot “afford” them.

The same rule of self-destructive financial calculation governs every walk of life. We destroy the beauty of the countryside because the unappropriated splendors of nature have no economic value. We are capable of shutting off the sun and the stars because they do not pay a dividend. London is one of the richest cities in the history of civilization, but it cannot “afford” the highest standards of achievement of which its own living citizens are capable, because they do not “pay.”

If I had the power today, I should most deliberately set out to endow our capital cities with all the appurtenances of art and civilization on the highest standards of which the citizens of each were individually capable, convinced that what I could create, I could afford–and believing that money thus spent not only would be better than any dole but would make unnecessary any dole. For with what we have spent on the dole in England since the war we could have made our cities the greatest works of man in the world.

Or again, we have until recently conceived it a moral duty to ruin the tillers of the soil and destroy the age-long human traditions attendant on husbandry, if we could get a loaf of bread thereby a tenth of a penny cheaper. There was nothing which it was not our duty to sacrifice to this Moloch and Mammon in one; for we faithfully believed that the worship of these monsters would overcome the evil of poverty and lead the next generation safely and comfortably, on the back of compound interest, into economic peace.

Today we suffer disillusion, not because we are poorer than we were — on the contrary, even to-day we enjoy, in Great Britain at least, a higher standard of life than at any previous period — but because other values seem to have been sacrificed and because they seem to have been sacrificed unnecessarily, inasmuch as our economic system is not, in fact, enabling us to exploit to the utmost the possibilities for economic wealth afforded by the progress of our technique, but falls far short of this, leading us to feel that we might as well have used up the margin in more satisfying ways.

But once we allow ourselves to be disobedient to the test of an accountant’s profit, we have begun to change our civilization. And we need to do so very warily, cautiously, and self-consciously. For there is a wide field of human activity where we shall be wise to retain the usual pecuniary tests. It is the state, rather than the individual, which needs to change its criterion. It is the conception of the Secretary of the Treasury as the chairman of a sort of joint stock company which has to be discarded. Now, if the functions and purposes of the state are to be thus enlarged, the decision as to what, broadly speaking, shall be produced within the nation and what shall be exchanged with abroad, must stand high among the objects of policy.

For more information

(a) Posts about the work of John Maynard Keynes:

1. The greatness of John Maynard Keynes, our only guide in this crisis, 4 December 2008
2. About the state of economic science, and advice from a famous economist, 8 December 2008
3. Words of wisdom about the global recession, from the greatest economist of our era, 29 December 2008
4. Some thoughts about the economy of mid-21st century America, 12 January 2009
5. Economics is not a morality tale, 14 January 2009
6. Keynes comments on our new-found love of austerity, 21 June 2010

(b) Lessons and even advice from the past

1. From the 3rd century BC, Polybius warns us about demographic collapse, 11 June 2008
2. President Grant warns us about the dangers of national hubris, 1 July 2008
3. de Tocqueville warns us not to become weak and servile, 21 July 2008
4. About the state of economic science, and advice from a famous economist, 8 December 2008
5. Words of wisdom about the global recession, from the greatest economist of our era, 29 December 2008
6. Napoleon’s advice to President Obama about the financial crisis, 29 April 2009
7. A warning from Alexis De Tocqueville about our military, 7 August 2009
8. Another note from our past, helping us see our future, 16 September 2009 — by Daniel Ellsberg
9. A great philosopher and statesman comments on the Bush-Obama tweaks to the Constitution, 10 October 2010 — by Edmond Burke
10. A top businessman and banker explains our political and economic challenges, 30 April 2011
11. Advice from one of the British Empire’s greatest Foreign Ministers, 18 November 2011 — by Lord Palmerston
12. George Orwell sends us a note, giving some perspective on our situation, 22 January 2012
13. Thomas Jefferson saw our present peril. We should heed his warning., 21 April 2012