John Maynard Keynes
John Maynard Keynes was born on 5th June 1883 at 6 Harvey Road, Cambridge. His father, John Neville Keynes was an economist who taught at Cambridge University. His mother, Florence Keynes had been educated at Newnham Collegeand was the city's first woman mayor.
His biographer, Alec Cairncross, has pointed out: "The family kept three servants - a cook, a parlour maid, and a nursery maid - and there was a German governess. In his first few years Maynard was a sickly child, suffering to begin with from frequent attacks of diarrhoea and thereafter from feverishness... In the summer of 1889 he had an attack of rheumatic fever and a few months later he had to give up attending his kindergarten for a time, suffering from what was diagnosed as St Vitus's dance."
In 1897 Keynes was entered for the Eton College scholarship examination and attained the tenth out of fifteen places and was first equal in mathematics. In his final year he won an Eton scholarship to King's College, in mathematics and classics. One of his tutors was Alfred Marshall. Keynes was invited to join the Apostles, a small, secret society of dons and undergraduates who met to discuss ethical and political issues. The group included Lytton Strachey, Leonard Woolf, E. M. Forster and Bertrand Russell. His friendship with Woolf and Russell brought him into contact with leaders of the Fabian Society, including Sidney Webb, Beatrice Webb and George Bernard Shaw.
When Keynes graduated in 1905 he took up a career in the Civil Service. He gained a Fellowship at King's College in 1909 and as well as teaching Keynes' began writing on economic issues. He became editor of the Economic Journal in 1911 and his first book Indian Currency and Finance was published in 1913. This was based on lectures he had delivered at the London School of Economics two years previously.
Primary Sources
(1) Kingsley Martin was a conscientious objector to conscription in the First World War. He commented on the large number of his friends who were also conscientious objectors.
Lytton Strachey had been a conscientious objector; Clive Bell and other conscientious objectors had accepted alternative service; Keynes had been a conscientious objector to conscription, though he had not appeared before a tribunal because of Treasury intervention. Bertrand Russell, who himself refused any kind of compromise, had accused Keynes of continuing to work at the Treasury, which "consisted in finding ways of killing the maximum number of Germans at the minimum expense".
The Treaty includes no provision for the economic rehabilitation of Europe - nothing to make the defeated Central Powers into good neighbours, nothing to stabilise the new States of Europe, nothing to reclaim Russia; nor does it promote in any way a compact of economic solidarity amongst the Allies themselves; no arrangement was reached at Paris for restoring the disordered finances of France and Italy, or to adjust the systems of the Old World and the New.
It is an extraordinary fact that the fundamental economic problem of a Europe starving and disintegrating before their eyes, was the one question in which it was impossible to arouse the interest of the Four. Reparation was their main excursion into the economic field, and they settled it from every point of view except that of the economic future of the States whose destiny they were handling.
(3) In his book, Father Figures, Kingsley Martin explained the influence that Maynard Keynes had on his political and religious opinions.
Maynard Keynes was to play a crucial part in my life. He had a reputation for arrogance when he was young, and I doubt if he ever learnt to suffer fools gladly. He had the most powerful and formidable mind I ever worked with; he had imagination and was constructive as well as iconoclastic. He was often unscrupulous in argument, and for years was the only person I feared, because he could so easily make me feel a fool. He was one of the few economists I've ever known who realised that statistics represented human beings.
(4) In his autobiography, Father Figures, Kingsley Martin described the amalgamation of the New Statesman and The Nation in 1930.
My appointment as editor of the New Statesman seemed to Keynes a golden opportunity for getting rid of a costly incubus. He wrote in August 1930 that in view of the Manchester Guardian's "very non-committal attitude to everything" he was not surprised that I was leaving. Later we had a long conversation, while, for some reason or other, he was changing his socks.
"Are you a Socialist or a Liberal?" I said, "A Socialist". I did not then understand fully what was in his mind. He had decided that England must break sharply with the Liberal tradition.
"Are you going to stand for the necessary interference with free trade and laissez-faire?"
Reassured on this point, he offered an amalgamation of the Nation with the New Statesman, only stipulating that it should not be a merger but a genuine union of the two newspapers.
(5) Robert Skidelsky, The Guardian (23rd November 2009)
The economic downturn has produced an explosion of popular anger against bankers' "greed" and their "obscene" bonuses. This has accompanied a wider critique of "growthmanship" – the pursuit of economic growth or the accumulation of wealth at all costs, regardless of the damage it may do to the earth's environment or to shared values.
John Maynard Keynes addressed this issue in 1930, in his little essay "Economic Possibilities for our Grandchildren". Keynes predicted that in 100 years – that is, by 2030 – growth in the developed world would, in effect, have stopped, because people would "have enough" to lead the "good life." Hours of paid work would fall to three a day – a 15-hour week. Human beings would be more like the "lilies of the field, who toil not, neither do they spin."
Keynes's prediction rested on the assumption that, with a 2% annual increase in capital, a 1% increase in productivity, and a stable population, average standards of living would rise eight times on average. This enables us to work out how much Keynes thought was "enough." GDP per head in the United Kingdom in the late 1920s (before the 1929 crash) was roughly £5,200 ($8,700) in today's value. Accordingly, he estimated that a GDP per capita of roughly £40,000 ($66,000) would be "enough" for humans to turn their attention to more agreeable things.
It is not clear why Keynes thought eight times the average British national income per head would be "enough." Most likely he took as his standard of sufficiency the bourgeois rentier income of his day, which was about 10 times that of the average worker.
Eighty years on, the developed world has approached Keynes's goal. In 2007 (ie, pre-crash), the IMF reported that average GDP per head in the United States stood at $47,000, and at $46,000 in the UK. In other words, the UK has had a five-fold increase in living standards since 1930 – despite the falsification of two of Keynes's assumptions: "no major wars" and "no population growth" (in the UK, the population is 33% higher than in 1930).
The reason we have done so well is that annual productivity growth has been higher than Keynes projected: about 1.6% for the UK, and a bit higher for the US. Countries like Germany and Japan have done even better, despite the hugely disruptive effects of war. It is likely that Keynes's "target" of $66,000 will be achieved for most western countries by 2030.
But it is equally unlikely that this achievement will end the insatiable hunt for more money. Let's assume, cautiously, that we are two-thirds of the way towards Keynes's target. We might therefore have expected hours of work to have fallen by about two-thirds. In fact they have fallen by only one-third – and have stopped falling since the 1980s.
This makes it highly improbable that we will reach the three-hour working day by 2030. It is also unlikely that growth will stop – unless nature itself calls a halt. People will continue to trade leisure for higher incomes.
Keynes minimised the obstacles to his goal. He recognised that there are two kinds of needs, absolute and relative, and that the latter may be insatiable. But he underestimated the weight of relative needs, especially as societies got richer, and, of course, the power of advertising to create new wants, and thus induce people to work in order to earn the money to satisfy them. As long as consumption is conspicuous and competitive, there will continue to be fresh reasons to work.
Keynes did not entirely ignore the social character of work. "It will remain reasonable," he wrote, "to be economically purposive for others after it has ceased to be reasonable for oneself." The wealthy had a duty to help the poor. Keynes was probably not thinking of the developing world (most of which had hardly started to develop in 1930). But the goal of global poverty reduction has imposed a burden of extra work on people in rich countries, both through the commitment to foreign aid and, more importantly, through globalisation, which increases job insecurity and, particularly for the less skilled, holds down wages.
Moreover, Keynes did not really confront the problem of what most people would do when they no longer needed to work. He writes: "It is a fearful problem for the ordinary person, with no special talents, to occupy himself, especially if he no longer has roots in the soil or in custom or in the beloved conventions of a traditional economy." But, since most of the rich – "those who have an independent income but no associations or duties or ties" have "failed disastrously" to live the "good life," why should those who are currently poor do any better?
Here I think Keynes comes closest to answering the question of why his "enough" will not, in fact, be enough. The accumulation of wealth, which should be a means to the "good life," becomes an end in itself because it destroys many of the things that make life worth living. Beyond a certain point – which most of the world is still far from having reached – the accumulation of wealth offers only substitute pleasures for the real losses to human relations that it exacts.
Finding the means to nourish the fading "associations or duties or ties" that are so essential for individuals to flourish is the unsolved problem of the developed world, and it is looming for the billions who have just stepped on to the growth ladder. George Orwell put it well: "All progress is seen to be a frantic struggle towards an objective which you hope and pray will never be reached."
