2
ECONOMIC
POSSIBILITIES
FOR
OUR
GRANDCHILDREN
This essay
was
first presented in
1928
as
a talk to sevetal small societies,
induding the Essay Soeiety ofWinehester College and the Politieal Eeonomy
Qub
at Cambridge.
In
June
1930
Keynes expanded his notes into a leeture
on 'Eeonomie Possibilities for our GrandehiIdren' whieh he gave at Madrid.
It
appeared in literary form in two instalments in the
Nation
and
Athenaeum,
11
and
18
Oetober
1930,
in the midst
of
the slump.
I
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
uso
I believe that this
is
a wildly mistaken interpretation
of
what
is
happening to
uso
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. And even
so,
the waste and
confusion which ensue relate to not more than
71
per cent
of
the national income;
we
are muddling
away
one and sixpence in
the
["
and have only
18s
6d,
when
we
might,
if
we
were more
sensible, have
[,1; yet, nevertheless, the
18s
6d
mounts up to
as
much
as
the [, I would have been
five
or
six
years
ago.
We forget
that in
1929
the physical output
of
the industry of Great Britain
3
21
THE
FUTURE
was
greater than ever before, and that the net surplus
of
our
foreign balance available for new foreign investment, after paying
for all our imports, was greater last year than that of any other
country, being indeed
50
per cent greater than the corresponding
surplus
of
the United States.
Or
again-if
it
is
to be a matter
of
comparisons-suppose that
we
were to reduce our wages
by a half, repudiate four-fifths
of
the national debt, and hoard
our surplus wealth in barren gold instead
of
lending it at 6 per
cent or more,
we
should resemble the now much-envied France.
But would it
be
an improvement?
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. 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.
My purpose in this essay, however,
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?
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
50
per cent better than
others-at
the utmost
100
per cent
better-in
the four thousand
years
wh
ich ended
(say)
in A.D.
1700.
3
22
POSSIBILITIES
FOR
OUR
GRANDCHILDREN
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.
The absence
of
important technical inventions between the
prehistoric
age
and comparatively modern times
is
truly re-
markable. 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 today, 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. There
is
no
record
of
when
we
first possessed these
things.
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 com-
parable to that in which
we
live today. But through the greater
part
of
recorded his tory there
was
no
thing
of
the kind.
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 today the power
of
accumulation
by
compound interest, which seems to have been sleeping
for
many generations,
was
reborn and renewed its strength. And
the power
of
compound interest over two hundred years
is
such
as
to stagger the imagination.
Let
me
give
in illustration of this a sum which I have worked
out. The value of Great Britain's foreign investments today
is
estimated at about
l4,oOO
million. This
yie1ds
us an income
at the rate
of
about
6t
per cent. Half
of
this
we
bring horne
3
2
3
THE
FUTURE
and enjoy; the other half, namely,
3t
per cent,
we
leave to
accumulate abroad at compound interest. Something
of
this
sort has now been going on for about
250
years.
For
I trace the beginnings
of
British foreign investment to
the treasure which Drake stole from Spain in
158o.
In
that year
he returned to England bringing with hirn the prodigious spoils
of
the
Golden
Hind.
Q!Ieen Elizabeth
was
a considerable share-
holder in the syndicate which had financed the expedition.
Out
of
her share she paid off the whole
of
England's foreign debt,
balanced her budget, and found herself with about
1:40,000
in
hand. This she invested in the Levant
Company-which
prospered.
Out
of
the profits
of
the Levant Company, the East
India Company was founded; and the profits
of
this great
enterprise were the foundation
of
England's subsequent foreign
investment. Now it happens that
1:40,000
accumulating at
3t
per cent compound interest approximately corresponds to the
actual volume ofEngland"s foreign investments at various dates,
and would actually amount today to the total
of
1:4,000
million
which I have already quoted
as
being what our foreign invest-
ments now are. Thus, every
1:1
which Drake brought horne in
1580
has now become
1:100,000.
Such
is
the power
of
compound
interest!
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 ehemieal industries, automatie
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 eatalogue.
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
ascale
which
is
far
3
2
4
POSSIBILITIES
FOR
OUR
GRANDCHILDREN
beyond a hundred-fold
of
what any previous
age
had known.
And from now on
we
need not expect
so
great an increase
of
population.
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.
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. 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.
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
un-
employment.
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 this
is
only a temporary phase
of
maladjustment.
All
this
means in the long run
that
mankind
is
solving
its
economic
problem.
I would predict that the standard
of
life in progressive countries
3
2
5
THE
FUTURE
one hundred years hence
will
be between four and eight times
as
high
as
it
is
today. 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
a
far
greater progress
still.
11
Let us,
for
the
sake
of
argument, suppose that a hundred years
hence
we
are all
of
us, on the average, eight times better off in
the economic sense than
we
are today. Assuredly there need
be
nothing here to surprise
uso
Now it
is
true that the needs
of
human beings may seem to
be insatiable. But they
fall
into two
dasses-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 dass, 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
all
of
us are aware
of,
when these needs are satisfied in the sense
that
we
prefer to devote our further energies to non-economic
purposes.
Now for my condusion, which you will find, I think, to
become more and more startling to the imagination the longer
you think about it.
I draw the condusion 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
o[
the
human
race.
Why, you may
ask,
is
this
so
startling? It
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,
3
26
POSSIBILITIES
FOR
OUR
GRANDCHILDREN
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.
Thus
we
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.
Will this be a benefit?
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 readfustment
of
the habits and
instincts
of
the ordinary man, bred into hirn for countless gen-
erations, which he may be asked to discard within a
few
decades.
To
use the language
of
today-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
amusmg.
To
those who sweat
for
their daily bread leisure
is
a longed
-for
sweet-until
they get it.
There
is
the traditional epitaph written for herself by the
old charwoman:
Don't mourn
for
me, friends, don't weep
for
me never,
For
I'm
going to
do
nothing for ever and ever.
This
was
her heaven. Like others
who
look
forward to leisure,
she conceived how nice it would be to spend her time listening-in
-for
there
was
another couplet which occurred in her poem:
With psalms and sweet music the heavens'll be ringing,
But I shall have nothing to do with the singing.
THE
FUTURE
Yet it
will
only be
for
those
who
have
to
do with the singing
that life
will
be tolerable-and
how
few
of us can sing!
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 hirn,
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
seil
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
Ion
ger
has roots
in the soil or in custom or in the beloved conventions of a tradi-
tional society.
To
judge from the behaviour and the achievements
of
the wealthy classes today 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.
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 today, and
will
map out
for
ourselves
a plan of life quite otherwise than theirs.
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 today, only too glad
to
have small duties and
3
28
POSSIBILITIES
FOR
OUR
GRANDCHILDREN
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!
There are changes
in
other spheres
too
which
we
must
expect
to
come. When the aGcumulation
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 enjoy-
ments and realities of life-will be recognised for what it
is,
a
somewhat disgusting morbidity, one
of
those semi-criminal,
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, un-
satisfied 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 today
into the true character
of
this 'purposiveness' with which in
varying degrees Nature has endowed almost
all
of
uso
For
purposiveness means that
we
are more concerned with the
remote future results
of
our actions than with their own quality
3
2
9
THE
FUTURE
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. He does not love his cat,
but
his cat's
kittens; nor, in truth, the kittens, hut only the kittens' kittens,
and
so
on forward for ever to the end
of
catdom. For hirn jam
is
not jam unless it
is
a case
of
jam tomorrow and never jam
today. Thus hy pushing his jam always forward into the future,
he strives to secure for his act
of
hoiling it an immortality.
Let
me remind you
of
the Professor in Sylvie
and
Bruno:
'Only the tailor, sir, with your little bill,' said a meek voice outside the door.
'Ah,
weIl,
1 can soon settle
his
business,' the Professor said to the children,
'ifyou'Il just wait aminute. How much
is
it, this year,
my
man?'
The
tailor
had come in while he
was
speaking.
'WeIl, it's been a-doubling
so
many years, you see,' the tailor replied,
a little gruffiy,
'and
1 think
I'd
like the money now. It's two thousand
pound, it
is!'
'Oh,
that's nothing
!'
the Professor carelessly remarked, feeling in his
pocket,
as
if
he always carried at least that amount about with hirn.
'But
wouldn't you like to wait
JUS!
another year and make it
Jour
thousand?
Just think how rich you'd bel Why, you might be a
king,
ifyou
liked!'
'I
don't know
as
I'd
care about being a king,' the man said thoughtfuIly.
'But
it
dew
sound a powerful sight
0'
money! WeIl, 1 think
1'11
wait-'
'Of
course you will!' said the Professor.
'There's
good sense in you,
1 see. Good-day to you,
my
man!'
'Will youever have to pay hirn that four thousand pounds?' Sylvie asked
as
the door closed on the departing creditor.
'Never,
my
child!' the Professor replied emphaticaIly.
'He'll
go
on
doubling it till he dies. You see, it's
a/ways
worth while waiting another
year to get twice
as
much money!'
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.
I see us free, therefore, to return to some
of
the most sure
and certain principles
of
religion and traditional
virtue-that
33°
POSSIBILITIES
FOR
OUR
GRANDCHILDREN
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
weIl,
the delightful people who are capable
of
taking direct
enjoyment in things, the lilies
of
the
field
who toil not, neither
do
they spin.
But beware!
The
time
for
all
this
is
not yet. For at least
another hundred years
we
must pretend to ourselves and to
everyone 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.
I look forward, therefore, in
days
not
so
very remote, to the
greatest change which has ever occurred in the material environ-
ment
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.
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1
THE
FUTURE
Meanwhile, there will be no harm in making mild preparations
for our destiny, in encouraging, and experimenting in, the arts
of
life
as
weIl
as
the activities
of
purpose.
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!
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2