The Brilliance of Keynes Again
27 June 2017 | Pago Pago, American Samoa
If Keynes had continued to live he would have written the book Piketty did, Capital in the 21st Century. In his 1930 essay, "Economic Possibilities of Our Grandchildren," he said:
"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 chemical industries, automatic 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 catalogue.
"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 a scale which is far beyond a hundredfold 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. . . .
Observe how well Keynes focused on the real economy and we don't. We spend all our time looking at finance and barely know what capital is. Note, too, how he focused on real capital accumulation per annum. He would surely have reached Piketty's conclusions had he just lived long enough.
In the same little essay, Keynes also made a forecast, as Sam Costanzo reminds us and goes on about. I quote Sam (also a serious and well trained economist):
His forecast of an eight fold increase in income and great increase in leisure time by 2030 was based on avoiding bouts of depression like the one that developing as he wrote the essay, but despite the Great Depression, a world war, and a string of recessions and financial disruption in the meantime, we are still on track to fulfill his prediction because science and technology have advanced much faster than he had imagined.
There will obviously not be enough jobs after artificial intelligence, automation and robotics become more fully developed. Driverless vehicles alone will eliminate 13,000,000 jobs (about 10% of the workforce). We have three choices:
1. Pay half the population not to work.
2. Reduce the std workweek to 3 days or less with no reduction of income.
3. Employ the bottom half of the population as domestic servants for the top half.
Number 3 will occur naturally if we do nothing, but is too akin to slavery to last, and a sure recipe for violent revolution.
Enormous societal changes are inevitable though we hear virtually no discussion of the shape it should take.
I add our political leadership fight for austerity and a balanced budget. That is how far behind and unready they are for these developments. It is a sad state for our affairs.