A film company is preparing to make a biopic of John Maynard Keynes, and I have been invited to help deepen their understanding of his economics - a great honour.
As part of my preparation I have been re-reading his great classic: The Economic Consequences of the Peace - a text that has been translated into a large number of languages, and that over the last hundred years is the only economic text never to have fallen out of print. Quite an achievement.
I am struck once again by its relevance to today’s predicament.
But also by its relevance to a theme - ‘growth’ - discussed in an article recently published by the Carnegie Endowment Fund. It is titled Global Economic Governance - what’s ‘growth’ got to do with it.
In it I wrote:
The use and evolution of “growth,” and its link to GDP, represent an important stage in the development of today’s system of global economic governance, based as it is on expectations of continuous “growth” facilitated by financial deregulation and capital mobility.
Such “growth” in the context of financialized capitalism has led to ecological, social, and economic imbalances that threaten systemic failure.
The work for Carnegie discusses the origin and popularisation of the term ‘growth’ by the Financial Times journalist, Samuel Brittan in the 1950s, and by a group of economists that defined themselves as ‘growthmen’.
It picks up on a theme first broached in The Economic Consequences of the Peace. Keynes begins his angry book by outlining economic conditions at the launch of the first world war: 1914 - conditions that closely resemble our own.
He writes that at the time it was
precisely the inequality of the distribution of wealth which made possible those vast accumulations of fixed wealth and of capital improvements which distinguished that age from all others… The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during the half century before the war, could never have come about in a society where wealth was divided equitably.
He then begins to describe the European economy as a ‘cake’
The capitalist classes were allowed to call the best part of the cake theirs and were theoretically free to consume it, on the tacit underlying condition that they consumed very little of it in practice. The duty of ‘saving’ became nine-tenths of virtue and the growth of the cake the object of true religion. (Emphasis added)
Then it gets interesting and even more pertinent to today’s conditions…
If only the cake were not cut but was allowed to grow in the geometrical proportion predicted by Malthus of population, but not less true of compound interest, perhaps a day might come when there would at last be enough to go round, and when posterity could enter into the enjoyment of our labours. (Keynes’s emphasis) One geometrical ratio might cancel another, and the nineteenth century was able to forget the fertility of the species in a contemplation of the dizzy virtues of compound interest…
But there was one big pitfall to this prospect. That
the cake be after all consumed, prematurely, in war, the consumer of all such hopes.
Before Waterloo, the French were extracting saltpetre from manure to make gunpowder. The irresistible drive to war was the discovery of Fritz Harber and the promise of infinite explosive capacity. Beyond the carnage was the infinity of population growth driven by unlimited nitrates. Growth is six billion extra souls in a hundred years. By 1900 we had discovered the finite planet and the search for infinity that followed has taken us way beyond planetary limits. Rolling back from there and towards the economic focus on human needs, to which Keynes alluded and to which Kate Raworth added planetary limits, requires a revolution of the sort that lies on the other side of destruction and chaos. Can we do better than that? Only if we impoverish the rich, before they resort to violence.
Twice Keynes was rejected in post-war treaty negotiations. At the Versailles negotiations in 1919 that were the subject of 'The Economic Consequences of the Peace', and at Bretton Woods in 1944 where his 'Bancor' proposal was rejected in favour of the Gold-backed US Dollar reserve. The consequences of the latter are playing out right now as the USA and its major debt-holders, addicted to the seignorage on bond issuance, and pay-outs of interest and redemption respectively, are terrified of the 'end of dollar-ponzi' crash, and are prepared to go to war to destroy those economies that wish to transact outside the dollar-system.
While I accept the proposition of Clara E. Matteo and others that it was austerity that let to fascism in the 1920's/30's, and that the conditions placed on Germany would not explain the rise of fascism in Italy, the sense of injustice, particularly the ridiculous 'guilt clause', would help explain the fervour of Nazism.
The close succession of revisionist texts by Tooze & Tampke in 2014 & 2019 respectively are ad-hominem attacks whose broader purpose is to discredit Keynes's economic work in its entirety, prompted by the post-GFC re-emergence of Keynesian and successor schools of thought that challenge Neoliberal orthodoxy.