The Unbearable Lightness of Illusions – Keynesian Economic Possibilities for Our Grandchildren Revisited after a Century
In his 1930 essay, "Economic Possibilities for Our Grandchildren," John Maynard Keynes lives up to his reputation as one of the most brilliant economists in history. The short scope of his work is not an obstacle to his complex analysis of factors leading to unprecedented levels of welfare for his generation. Keynes stresses the importance of technological progress, an increase in productivity, and the accumulation of capital as three main prerequisites for economic development and growth. However, in the second part of his work, Keynes offers a rather utopian and idealistic view of a society that does not need to deal with the so-called “economic problem” and can enjoy the fruits of their labour instead of striving. His idealistic vision of a Brave New World, similar to the world-famous novel of British writer Aldous Huxley, was, however, in less than a decade, confronted with the terrible reality of the Second World War, bringing immense disaster and destruction.
The main leitmotif of Keynes´s work is the appreciation of economic development since the beginning of the nineteenth century. He argues that the time period between approximately 2000 BC and 1800 AD did not bring a significant improvement in living conditions for the average human. He further contrasts this with an observation that humans in a given time period already possessed most of the prerequisites for economic development, such as agricultural crops, precious metals, and adequate scientific knowledge. However, they were not yet able to fully and efficiently utilize them, which prevented them from economic development. Keynes thus perceives the accumulation of capital and appreciation of compound interest as a turning point in economic development, accelerating the progress in living standards for most of the population.
Two other crucial factors for economic growth, according to Keynes, are increases in productivity and technological progress. Even though Keynes wrote his essay almost a century ago, this blueprint for economic development should be followed by policymakers all around the globe, also nowadays. Robert Solow further elaborated on this in his work A Contribution to the Theory of Economic Growth, where he presented his crucial contribution to the macroeconomic theory – The Solow Growth Model. Keynes takes it into consideration when he correctly remarks that humanity might soon be able to perform the operations in manufacturing and agriculture with just a quarter of the initial effort. Thus, even though the economic world had to wait for another two and a half decades for the Solow Growth Model when Keynes published his essay, he already laid important foundations for the importance of technological progress and productivity increase.
The second part of the essay is more utopian and idealistic. Keynes presents his vision of the world where humankind has solved its “economic problem”, most probably the problem of scarcity. He describes a world where the living standards increased by eight times and society does not need to be concerned about the scarcity trade-off between unlimited wants and limited resources. On the contrary, people in this scenario would not strive and would rather be able to enjoy the fruit of their labour while occupying themselves with more pleasant activities than ordinary labour. Keynes even predicts a society with working shifts lasting for three hours and a fifteen-hour-long working week. However, this is precisely the weakest spot of Keynes´s essay since he perceives economic progress as a linear process. He states that the economic problem is solvable within a century, however he fails to acknowledge that economic growth is not inevitable since the history of humankind is not moving along a linear line to a brighter and brighter future.
Precisely 12 years after publishing his essay, Keynes found himself sitting together with Friedrich August von Hayek on the rooftop of King´s College Chapel in Cambridge, patrolling for German airplanes bombing the town. The vision of the Brave New World from his essay was violently destroyed on the battlefields of Europe. The Second World War brought immense destruction and suffering to hundreds of millions all across the globe. Thus, Keynes´s essay reminds us of two important things. Firstly, technological progress and an increase in productivity are essential prerequisites for economic growth and development. However, this progress should not be taken for granted since history is not moving along a linear line towards a better future. The history of the 20th century should thus be a memento for everyone with utopian ideas trying to bring salvation and create a perfect world.
List of References
- Keynes, John Maynard. 1963 (1930). Economic Possibilities for Our Grandchildren, In Essays in Persuasion, New York, W.W. Norton
- Solow, Robert M. “A Contribution to the Theory of Economic Growth.” The Quarterly Journal of Economics 70, no. 1 (1956): 65–94. https://doi.org/10.2307/1884513.
- Steele G.R. “Keynes Hayek: The Clash That Defined Modern Economics — Institute of Economic Affairs,” 2013, https://iea.org.uk/blog/keynes-hayek-the-clash-that-defined-modern-economics/.