JOHN MAYNARD Robert Skidel­sky on KEYNES.

Bulletin - - Contents - Photo: Scherl / Süd­deutsche Zeitung Photo / Key­stone

The Frank­furter All­ge­meine Zeitung once called Keynes “the most in­flu­en­tial econ­o­mist of the 20th cen­tury.” Ac­tu­ally, how­ever, he wasn’t re­ally an econ­o­mist at all; he had very lit­tle train­ing in that dis­ci­pline…

That’s true. Tech­ni­cally speak­ing, Keynes would hardly be re­garded as an econ­o­mist to­day. But at the same time, he was “more than an econ­o­mist,” as his wife once so aptly put it. His back­ground was in phi­los­o­phy, ethics and math­e­mat­ics, and he took a keen in­ter­est in art and lit­er­a­ture through­out his life. He was a mem­ber of the well-known lit­er­ary cir­cle known as the Blooms­bury Group and a close friend of the writer Vir­ginia Woolf.

Was it the breadth of his in­tel­lec­tual in­ter­ests that made Keynes such a vi­sion­ary econ­o­mist?

Keynes’s per­spec­tive on eco­nomic is­sues was very dif­fer­ent from that of tra­di­tional econ­o­mists. He thought more in so­cial and psy­cho­log­i­cal terms, and rec­og­nized that in­stinct, emo­tions and herd be­hav­ior had a strong im­pact on eco­nomic life and pol­i­tics. That he viewed re­al­ity dif­fer­ently was ev­i­dent at the peace ne­go­ti­a­tions in Ver­sailles af­ter the end of the First World War. Keynes left the ne­go­ti­a­tions in anger af­ter his warn­ing not to plunge Ger­many into eco­nomic dis­as­ter by de­mand­ing that it pay huge sums of money in repa­ra­tions went un­heeded.

So Keynes re­al­ized that an eco­nomic dis­as­ter would in­evitably lead to a po­lit­i­cal dis­as­ter?

That’s right. If the politi­cians rep­re­sent­ing the vic­to­ri­ous pow­ers had lis­tened to Keynes, who knows whether Hitler would ever have gained power, and whether there would even have been a Sec­ond World War …

Keynes was un­able to pre­vail at Ver­sailles. But it is as­tound­ing how much po­lit­i­cal in­flu­ence he had, as an out­sider and un­con­ven­tional thinker.

Keynes was an “out­sider-in­sider.” As a mem­ber of the Bri­tish es­tab­lish­ment and the son of a lec­turer at Cam­bridge Uni­ver­sity, he was any­thing but an out­sider. Keynes at­tended the elite Eton board­ing school and sub­se­quently stud­ied at Cam­bridge. He also worked as a civil ser­vant – first in the In­dia Of­fice, later in the Trea­sury. This is a cru­cial point, since while he thought dif­fer­ently, he was never in­ter­ested in be­ing ex­ces­sively rad­i­cal. He re­frained from of­fer­ing pro­pos­als that had no chance of be­ing im­ple­mented. He was not a rev­o­lu­tion­ary.

Would it be ac­cu­rate to say that he was a vi­sion­ary grounded in re­al­ity?

He was an ex­tremely in­de­pen­dent thinker who ad­vo­cated a mid­dle course. He viewed eco­nomic is­sues dif­fer­ently from his col­leagues – but not com­pletely dif­fer­ently.

Over­all, the in­ter­war pe­riod was a time of con­sid­er­able in­tel­lec­tual up­heaval. Eco­nomics, too, was filled with new ideas.

Yes, and Keynes was very much in­volved in the dis­ci­pline’s process of self-dis­cov­ery. We mustn’t for­get that the Great De­pres­sion was the big­gest eco­nomic col­lapse in modern times. The world was con­fronting enor­mous eco­nomic

prob­lems and equally huge po­lit­i­cal prob­lems: the rise of fas­cism and the chal­lenge posed by com­mu­nism. If the lib­eral demo­cratic sys­tem was to sur­vive, it was nec­es­sary to do more than merely ac­knowl­edge the ex­is­tence of mass un­em­ploy­ment and trust the mar­ket to set things right.

So John Maynard Keynes, to­day re­garded as lean­ing to the left, res­cued cap­i­tal­ism?

You could cer­tainly make that ar­gu­ment. Tra­di­tional eco­nomics of­fered no for­mula for pre­vent­ing mass un­em­ploy­ment, or for deal­ing with it af­ter it had be­come a re­al­ity.

Keynes once wryly re­marked that econ­o­mists should be like den­tists, not like lead­ers of a re­li­gious move­ment. In other words, they should be prag­matic and prac­ti­cal rather than ide­o­logues. How would you de­scribe them to­day?

I would say that they are more like lead­ers of a re­li­gious move­ment. They have much more in­flu­ence now than they had in the past. Pol­i­cy­mak­ers do more or less what­ever econ­o­mists tell them to do. I’m think­ing of the power of the cen­tral banks and fi­nance min­istries, for ex­am­ple, but also of in­ter­na­tional in­sti­tu­tions like the IMF and the World Bank, which were con­ceived by the “den­tist” Keynes. I think many econ­o­mists are re­ally evan­ge­lists who dis­guise them­selves as sci­en­tists by cre­at­ing such com­pli­cated math­e­mat­i­cal mod­els that it is al­most im­pos­si­ble to rec­og­nize the as­sump­tions be­hind them.

In 1930, in the midst of the global eco­nomic cri­sis, Keynes made a pre­dic­tion that wasn’t taken se­ri­ously at the time, but that seems much more re­al­is­tic to­day. In his es­say “Eco­nomic Pos­si­bil­i­ties for Our Grand­chil­dren,” he pre­dicted that in a hun­dred years (by 2030, a year that no longer seems so dis­tant) the stan­dard of liv­ing would be four to eight times as high as it was then, and peo­ple would be work­ing only 15 hours per week. The first pre­dic­tion was on tar­get, but the sec­ond was quite wrong. How do you ex­plain this?

Keynes un­der­es­ti­mated the in­sa­tiable hu­man de­sire for con­sump­tion and the level of com­pe­ti­tion to con­sume. Peo­ple don’t just want to have enough; they of­ten want to have more than other peo­ple do. And he no doubt un­der­es­ti­mated the power of ad­ver­tis­ing, which makes peo­ple want even more. We are liv­ing in a cul­ture of re­lent­less con­sumerism – this is at the heart of the Western economies.

But even in wealthy Western coun­tries, many peo­ple have to work very long hours just to get by.

Yes, that was some­thing Keynes failed to fore­see. He was look­ing at av­er­ages and giv­ing lit­tle thought to in­come dis­tri­bu­tion. And, of course, he didn’t fore­see that real in­comes would re­main as flat as they have over the past 20 or 30 years. Keynes as­sumed that real wages would rise as pro­duc­tiv­ity in­creased, which was in­deed true un­til into the 1970s. Since that time, how­ever, wages have not in­creased to the same de­gree. As a re­sult, many peo­ple are not as free to choose how many hours to work as Keynes would have ex­pected.

So does the old say­ing that “pre­dic­tions are dif­fi­cult, es­pe­cially about the fu­ture” ap­ply even to a vi­sion­ary like Keynes?

Well, his pre­dic­tion of the 15-hour week wasn’t so ter­ri­bly off the mark. There has in fact been a sig­nif­i­cant de­cline in the av­er­age num­ber of hours peo­ple work each week, at least in the wealth­ier coun­tries. To­day that num­ber is prob­a­bly around 30, if cal­cu­lated prop­erly – that is, tak­ing into ac­count va­ca­tions, hol­i­days and, most im­por­tant, a much longer pe­riod of re­tire­ment. In any event, peo­ple are work­ing far less, on av­er­age, than in the 1930s.

Twelve years from now – by 2030 – we may be closer to Keynes’s 15-hour work week than we are to­day. In a highly dig­i­tal­ized econ­omy, a kind of “leisure class” might well emerge; highly skilled in­di­vid­u­als, at least, might then have the op­por­tu­nity for a life­style with the free­dom to pur­sue their own in­ter­ests. But what about the many oth­ers?

That’s the ob­vi­ous ques­tion: Does Keynes’s vi­sion ap­ply only to the “happy few”? Of course, the mem­bers of the Blooms­bury Group be­longed to that seg­ment of so­ci­ety; they were eco­nom­i­cally priv­i­leged mem­bers of the ed­u­cated classes who used their time for cre­ative and in­tel­lec­tual pur­suits. Keynes was talk­ing about free­dom to pur­sue one’s own in­ter­ests, not sim­ply about time off work. How­ever, many peo­ple would prob­a­bly find it over­whelm­ing to be with­out a struc­tured work­day. Nat­u­rally, it de­pends on one’s level of ed­u­ca­tion. When we be­come wealth­ier, more money is spent on ed­u­ca­tion, and that pro­vides more op­por­tu­ni­ties for peo­ple to en­gage in cre­ative pur­suits.

In the long run, will we all be­come a bit more like Keynes and the Blooms­bury Group – wealthy, ed­u­cated, cre­ative?

Keynes dis­cusses this in his es­say on “Eco­nomic Pos­si­bil­i­ties for Our Grand­chil­dren.” For that to hap­pen, he writes, it will take noth­ing less than a “gen­eral ner­vous break­down.” In other words, this will be pos­si­ble only if we dra­mat­i­cally trans­form work­ing life and the ed­u­ca­tional sys­tem – and that would be far from easy.

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