Tuesday, July 25, 2017

When Keynes imagined capitalism in 2030

In his famous essay ' Economic possibilities for our grand-children' , Keynes projected himself a century later to imagine the society of the future. In reading it, growth would have supplanted misery. We would live in a society of abundance in which we would work few hours: " It will be time for the humanity to learn how to devote its energy to other ends than economic ones".

This text has been analysed in many ways and at length but its interest in our view resides in the rupture with capitalism that Keynes foresees. It unveils a 'radical'  vision of society than in most Keynes' writings.

Since the end of the 20s, Keynes predicted that the economic activity would be four to eight times higher after a century. Yet, today, in constant terms, the outpur of developed nations is already more than four times higher than it was in 1930. This prediction is remarkable as it was made in  troubled times with the crisis of 1929 and statistics at that time were relatively scarce. To measure the audacity, we should think about the difficulties that a contemporary economist would face today in predicting the level of development in a hundred years!

However, Keynes imagined a society of abundance, which contrasts with one of the basic principles of capitalism, the  scarcity of resources. He focuses on absolute needs (nutrition, housing, etc;) rather than relative needs (the desire to acquire a higher status), but this is rather consistent with his analysis. In an abundant society, these needs do not have any reason to exist since once materiual needs would be fully satisfied, we would be free to be human and to develop an authentic way of living.

What appears incongruent is that a  liberal economist conceives capitalism as a provisional phase of the development of mankind, where liberals think of it as the definitive and unsurmountable form of the economic order. But it is also the antagonism between true human values and the values of capitalism such as the love of money " which will be recognised for what it is, a somewhat disgusting morbidity".. In his vision, capitalism constitutes a sort of dark age during which men are constrained by the scarcity of resources. True values will only prevail when we will get out from an economy centered on work and subsistance. Keynes imagines a society where the 'old Adam' (our deep nature) would still feel the need to work three hours a day.

What makes this text debatable is the questioning of the logic of capitalism, which consists in producing continuingly more goods and serices. For Keynes, capitalism is conceivable only if we can break up with it to build a society of sobriety. Today, we face a similar  economic problem on a much larger scale because the 'productivist' model has reached its limits, due to the limitation of resources and the ecological equilibrium. This again contrasts with Keynes' traditional view on growth and innovation as palliatives to resolve our economic problems.

From an ethical perspective, he opposed the 'Benthamian' tradition which assimilates the good to the useful. Instead, 'once out of the tunnel of economic necessity (...) we shall prefer the good' as opposed to 'avarice' and 'usury'. But his conception of the good is of a different nature and identifies with 'delightful people' and  ' direct enjoyment in things',  which presumably owes to George Edward Moore, a philosophy professor at Cambridge and his 'Principia Ethica".

Interestingly, Keynes concluded that we should "not 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 of specialists - like dentistry. If economists could manage to get themselves though of as humble, competent people on a level with dentists, that would be splendid"  .

His conception of the economy is not about entrepreneurship and innovation and he identified capitalism not with the spirit of enterprise but the desire of money. In his 'General Theory', consumption plays a central role, and saving a secondary role. His rejection of accumulation of money is at the heart of his economic doctrine. His vision of capitalism is not about finance and he imagines without any hesitation 'the euthanasia of rentiers' due to the necessary fall of the rate of interest. For Keynes, the two vices of the economic world are unemployment and inequality of wealth and income. In this sense, his liberal ideas are inseparable from social justice and the search for a better world.