economics wealth

Economic possibilities for our grandchildren

In 1930, the greatest economist of the age, J M Keynes, sat down and wrote about the future in an essay called Economic possibilities for our grandchildren. It was a pep talk for a depressed time, when people wondered if the great wave of progress of the 19th century had ended. There was no need to be down, Keynes argued. This was a time of readjustment and problem solving, and our pessimism would evaporate if we could “take wings into the future”. “What can we reasonably expect the level of our economic life to be a hundred years hence?” asks Keynes. “What are the economic possibilities for our grandchildren?”

We’re still a few years off that 100 year mark, but we’re well into the lifetimes of those grandchildren. Did Keynes get things right?

Well, he was certainly correct that there was more wealth to come. He projected capital growth of 2% a year, doubling the economy in 20 years. After 100 years, we’d be more or less eight times better off.

Here, Keynes takes an interesting turn. At eight time better off, he argues, we’d have reached a point where all our absolute needs were met. We’ll always want things that make us superior to others – on that kind of need we are apparently insatiable. But for absolute needs, “the point may soon be reached… when these needs are satisfied in  the sense that we prefer to devote our further energies to non-economic purposes.”

At that point, the struggle for survival that has characterised humankind’s history would cease. The problem of meeting our needs would essentially be solved, and the door would open to qualitative improvement. How do we live well? Keynes imagined a shorter work week and greater leisure and freedom, more participation in arts and culture. He imagined a whole new attitude to wealth.

If all our basic needs are met, we might begin to change our minds about those who continue to ‘strive’ for more and more. The desire for an endless more would be “semi-pathological”. We might come to see that “avarice is a vice, that exaction of usury is a misdemeanour, and that the love of money is detestable.”

Unfortunately, Keynes said that this projection held, “assuming no important wars and no important increase in population”. The Second World War set that first assumption on its ear, and the long boom in population growth makes it unlikely that we’re anywhere near solving the ‘economic problem’. It’s striking that Keynes makes no mention of distribution in his essay, as that’s where things have gone most obviously awry in the intervening time. Some parts of the world are still struggling with basic survival, while others have too much, dogged by obesity crises and waste.

On a national level however, we are considerably more than eight times better off and levels of absolute poverty are very low, but there’s no sign of us moving into the ‘promised land’ that Keynes saw. We appear to have mistaken growth on paper with actual productivity, and the last decade of economic growth has actually been the accumulation of debt and therefore illusory. With climate change and resource depletion, we cannot assume that the future looks more or less like today.

Did we throw away the economic possibilities that Keynes foresaw, or were they never realistic in the first place? I don’t know. If we have dropped the ball, then we’ve squandered the hard work of the generation that slogged its way out of the Great Depression for us. What a tragedy it would be if we missed the prosperity we’d already won for ourselves because we didn’t know when to stop wanting more.

Keynes kind of sees this too. “The strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance” he writes, and we certainly still idolize the ‘job creators’ of business. “But it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.”

I think Keynes gets a lot of things wrong in his essay, but it is still a profoundly important little work, because it asks the right questions – questions that modern economics is still avoiding. What is the economy for? What is the end goal of all our hard work? How much is enough?


  1. Reblogged this on and commented:
    This is a thought-provoking blog on the significance of Keynes for our times – Keynes asked many of the questions that modern economists, and politicians, seem too frightened to ask, never mind confront. Such questions include delving into the philosophical basis of what money, growth, happiness, purpose and the meaningfulness of economic activity etc. is all about. There are clear parallels with the Biblical concept of ‘shalom’ – not the narrow definition of just peace, but what fruitfulness and meaningful existence should be about. In 21st Century life, peace is key, for “if we want peace we must work for justice” (Pope Paul VI), and that most certainly includes economic justice – it seems we have strayed a long way from some of Keynes’ vision, never mind the Biblical blue-print, which seems so clear in theory, yet so hard to achieve in practice.
    Jeremy Williams has also posted a recent article considering other aspects of growth, and how we need to re-conceive economic relations in a sustainable (post-growth) context – highly recommended!

    1. Thanks Andy. It’s interesting to see how holistic Keynes’ view of economics is, it isn’t a cold business logic, but is intimately connected to ethical and social questions. Adam Smith was the same, and it’s sad the way modern economics remembers them for isolated and convenient bits of their theory and ignores the whole.

  2. His main error was in thinking that the seed of fear in those who already had enough would not also be in the majority of us; that we would be free of their disease when we were all comfortable’enough’ ourselves. All that happened, is that more wanted more, and others got less. Keynes thought that when we were comfortable we would ‘inquire more curiously than is safe to-day into the true character of this “purposiveness” with which in varying degrees Nature has endowed almost all of us. Instead, questioning ourselves has largely occurred only when mother earth appeared sick (still denied by those who want to own a large part for themselves). The ‘true character of this purposiveness’ which has endowed almost all of us, is where we still need to look much deeper and en masse.
    Could our new hope be in the evident terror that having more than our needs supplied, is straining at the leash for us all to see?

  3. This shows the fundamental weakness of Keynes’ analysis. He took no account of land or land rent and the effect of private appropriation of land rent. This was inexcusable as it had been thoroughly explored by predecessors such as Smith, Ricardo and George, amongst others. These writers explained why economic growth lead to increasing inequality and showed that growth could not prevent poverty.

    1. Surely, the reply from Henry Law is coming solely from the view of economists. In this essay, Keynes was not. He put another aspect into it. He was investing in human nature appreciating its folly. He didn’t need to see what other issues would come along meanwhile! His comment at the end about economists and dentists summed it up. He was asking the economists to see outside of their box, to see where he was coming from. It was just that his theory of how and when humans would see their folly was wrong.

      1. Keynes was first and foremost and economist and an influential one. Pity he overlooked a fundamental principle of economics. Had he not done so he would probably have been ignored, or ridiculed but all the same he had no excuse. There is, after all, such a thing as integrity.

        1. Integrity you say. His essay clearly suggests to me that he was saying that no-one is first and foremost an economist and he wished they would realise that. A dentist looks into humans and tackles the root of the problem, which Keynes dared to touch on, that is integrity. And he knew it would touch a nerve in some.

    2. It’s a shame that Keynes placed so little importance on land. If he’d spoken up about it, chances are we’d have a land tax now. But there are no perfect economists and nobody has the whole picture. I think we can value his contributions without recommending his philosophy wholesale.

      1. The cynic in me is inclined to the view that if Keynes had spoken for a land tax he would have been asked to resign from his Cambridge professorship.

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