Apparently, right-wing Harvard Professor and author Niall Ferguson says John Maynard Keynes didn’t care about future generations because he was gay and didn’t have children. Speaking at the Tenth Annual Altegris Conference in Carlsbad, Calif., in front of a group of more than 500 financial advisors and investors, Ferguson responded to a question about Keynes’ famous philosophy of self-interest versus the economic philosophy of Edmund Burke, who believed there was a social contract among the living, as well as the dead. Ferguson asked the audience how many children Keynes had. He explained that Keynes had none because he was a homosexual and was married to a ballerina, with whom he likely talked of “poetry” rather than procreated. The audience went quiet at the remark. Ferguson, who is the Laurence A. Tisch Professor of History at Harvard University, and author of The Great Degeneration: How Institutions Decay and Economies Die, says it’s only logical that Keynes would take this selfish worldview because he was an “effete” member of society. Apparently, in Ferguson’s world, if you are gay or childless, you cannot care about future generations nor society.
Ferguson’s remarks not only reveal a level of puerile homophobia but even more a complete ignorance about Keynes’s ideas and interests. Anybody who reads this blog knows that Keynesian ideas come in for a bashing at regular intervals. But to argue that Keynes was not interested in the prospects for future generations (let alone whether being gay is relevant) has not read Keynes. Back in 1930 at the depth of the Great Depression, John Maynard Keynes made a short lecture to students at Cambridge University. Later in 1931, this lecture was revised and published as a short essay, Economic Possibilities for Our Grandchildren, in his Essays in Persuasion.
When formulating the final draft of his essay, Keynes commented “The fact is — a fact not yet recognized by the great public — that we are now in the depth of very severe international slump, a slump which will take its place in history amongst the most acute ever experienced” (Harrod 1972, p. 469, quoted on p. 2). But even so, JMK wanted to convince his student audience, many of whom were under the influence of Marxist ideas at the time, that they should be optimistic about the future potential of the capitalist mode of production. In his view, as argued in the essay/lecture, capitalism would have progressed so that by 2030 the standard of living would be dramatically higher; people would be liberated from want and would work no more than fifteen hours a week, devoting the rest of their time to leisure and culture. So, contrary to Ferguson, Keynes did look ahead beyond ‘the long run when we are all dead’ for his generation to the interests of ‘our grandchildren’, despite being gay, effete and only interested in poetry, according to Niall Ferguson, who probably considers himself a red-blooded male who plays rugby and never goes to the ballet.
JMK started his lecture by saying that the words: “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 us. 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. 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.” Thus Keynes wanted to convince his students that the terrible depression of capitalism in the 1930s would be rectified and capitalism would prove to be greatest show on earth. But he also wanted to refute the pessimism of the right-wing (like Ferguson now) who attacked Keynes for his ‘unorthodox’ experiments in economic theory and policy.
Well, as we head towards 2030, was JMK right? Has capitalism taken human civilisation forward economically since 1930? JMK reckoned that GDP would quadruple in the lifetime of the Cambridge students he was talking to and would rise eight times by 2030. Well, that prediction may have been close for some advanced capitalist economies. But it was too optimistic for the world economy as a whole.
Anyway, it’s not GDP that matters, it is GDP per head. So if we assume that a Cambridge student of 20 years in 1930 lived another 60 years (relatively generous for life expectancy then), did real GDP per head quadruple by 1990? Well, according to the invaluable Angus Maddison studies, in 1930 real GDP per head in the JMK’s Britain was $5441 (PPP basis). It reached $8240 in 1960 and then $16430 per head in 1990. So there was a tripling of per capita GDP in the UK’s real GDP. Not bad – but by no means four times higher. And if we look at the world economy as a whole (something JMK does not explicitly distinguish from the advanced economies), then world per capita GDP rose only about 2.5 times by 1990. JMK was far too optimistic.
Keynes’s second prediction was for a rise of real GDP by eight times from 1930 to 2030. “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 to-day. Assuredly there need be nothing here to surprise us.” Again JMK seems to consider that the advanced economies constitute the whole world’s population. But was he right anyway? Were the British or American people eight times better off in 2030? Well, world real GDP rose from $4.5trn in 1940 to about $50trn now. But per capita real GDP was $1958 in 1940 and reached $7614 in 2008. That’s much less than four times. As for the population, there has been an explosion. In 1940, there were 2.2bn people in the world. It looks as though it will reach 8.4bn in 2030. Assuming a generous 3% growth in real world GDP from now until 2030, something that many reckon will not be achieved, world GDP will be about $97trn then. That gives a per capita level of $11770 compared to $1958 in 1940, or a rise of six times.
You might argue this is quibbling. After all, a six-fold rise in per capita GDP from 1940 to 2030 is still amazing in the history of human social organisation. But capitalism will not meet the targets expected by Keynes. And can we assume that we will not experience major wars or depressions in the next 20 years that could bring the outcome even lower?
Like Marx, Keynes looked to solve the ‘economic problem’ of scarcity and toil. The difference was that Keynes reckoned it could be done under the capitalist mode of production, as the only possible way: “I draw the conclusion 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 of the human race.” But the capitalist mode of production, like other class societies, cannot avoid wars and it has not avoided famine and poverty for the majority of the world. Within a decade, Britain was engaged in a world war that killed millions of armed and unarmed people and destroyed the livelihoods of millions of others. And since 1945, there has not been a day where there has not been armed conflict somewhere in the world, even in this period of relative ‘world peace’ between the major powers both during and after the so-called cold war.
Moreover, in his address, Keynes totally ignores inequalities of income and wealth. Per capita income for a country is merely an average. The majority do not reach that average (if it is a mean average). Although average living standards have continued to rise, the living standards at the bottom of twenty percent of the income distribution have stagnated or declined for the last 30 years. Inequality of income and wealth was at a high in 1930 after the 1920s credit and stock market bubbles, back to levels not seen since Victorian times. The post-war recovery and the welfare state with its higher tax rates did reduce inequalities in the major capitalist economies for a while. But the neo-liberal period of reaction from the mid-1970s onwards, discussed much in this blog, pushed inequalities back to new heights, especially in the US and the UK right up to the point of the Great Recession. Now we are in a very similar state economically and socially, in terms of equality, as we were when Keynes made his speech. So no change at all there.
Then there is the issue of work and leisure. Keynes argued that “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 him, to live wisely and agreeably and well.” Keynes predicted superabundance and a three-hour day – the socialist dream, but under capitalism. Well, the average working week in the US in 1930 – if you had a job – was about 50 hours. It is still above 40 hours (including overtime) now for full-time permanent employment. Indeed, in 1980, the average hours worked in a year was about 1800 for the the advanced economies. Currently, it is about 1800 hours – so again, no change there.
Keynes reckoned that once the economic problem had been solved the terrible morality of money-making (the root of all evil) could be dispelled. “The love of money as a possession – as distinguished from the love of money as a means to the enjoyments 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.” Here Keynes believed that the flaw in capitalism, the instability and inefficiency of finance capital, would gradually disappear. There would be the euthanasia of the rentier (the coupon-clipping money capitalist) and thus no need for the replacement of the capitalist mode of production itself. Once there was control of population growth, an end to wars and a trust in science and technology, then the rate of accumulation would balance between production and consumption and there would be no more recessions and depressions. It was a sort of utopianism that Marxism is usually accused of.
For Keynes, no major revolution in the social mode of production was necessary, as long as economic specialists like himself could be taken seriously: “the economic problem.. 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!” This ‘humble’ plea for the role of economics and economists was necessary in 1930 because in the depth of the depression, so many were disillusioned with economists who had failed to predict the crash and the slump, could not explain how it had happened afterwards, and had no policies to solve it, except to accept the punishment (the Ferguson solution). Again no change there! Maybe Niall Ferguson should try dentistry rather than economics or history to learn some humility.
Addendum: Niall Ferguson eats humble pie and apologises:
During a recent question-and-answer session at a conference in California, I made comments about John Maynard Keynes that were as stupid as they were insensitive. I had been asked to comment on Keynes’s famous observation “In the long run we are all dead.” The point I had made in my presentation was that in the long run our children, grandchildren and great-grandchildren are alive, and will have to deal with the consequences of our economic actions. But I should not have suggested – in an off-the-cuff response that was not part of my presentation – that Keynes was indifferent to the long run because he had no children, nor that he had no children because he was gay. This was doubly stupid. First, it is obvious that people who do not have children also care about future generations. Second, I had forgotten that Keynes’s wife Lydia miscarried. My disagreements with Keynes’s economic philosophy have never had anything to do with his sexual orientation. It is simply false to suggest, as I did, that his approach to economic policy was inspired by any aspect of his personal life. As those who know me and my work are well aware, I detest all prejudice, sexual or otherwise. My colleagues, students, and friends – straight and gay – have every right to be disappointed in me, as I am in myself. To them, and to everyone who heard my remarks at the conference or has read them since, I deeply and unreservedly apologize. Niall Ferguson.