Industrial Workers of the World

Economic Possibilities for our

Grandchildren (1930)*



I



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.



I believe that this is a wildly mistaken inter­pretation of what is
happening to us. We are suffering, not from the rheumatics of old age,
but from the growing-pains of over-rapid changes, from the
painfulness of readjustment between one economic period and another. The
increase of technical efficiency has been taking place faster than we
can deal with the problem of labour absorption; the improve­ment in
the standard of life has been a little too quick; the banking and
monetary system of the world has been preventing the rate of interest
from falling as fast as equilibrium re­quires. And even so, the
waste and confusion which ensue relate to not more than 7½ per cent
of the national income; we are muddling away one and sixpence in the
£, and have only 18s. 6d., when we might, if we were more sensible,
have £1 ; yet, nevertheless, the 18s. 6d. mounts up to as much as the
£1 would have been five or six years ago. We forget that in 1929 the
physical output of the industry of Great Britain was greater than ever
before, and that the net surplus of our foreign balance available for
new foreign investment, after paying for all our imports, was greater
last year than that of any other country, being indeed 50 per cent
greater than the corresponding surplus of the United States. Or
again-if it is to be a matter of comparisons-suppose that
we were to reduce our wages by a half, repudiate four fifths of the
national debt, and hoard our surplus wealth in barren gold instead of
lending it at 6 per cent or more, we should resemble the now
much-envied France. But would it be an improvement?



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.



My purpose in this essay, however, is not to examine the present or the
near future, but to disembarrass myself of short views and take wings
into the future. What can we reasonably expect the level of our economic
life to be a hundred years hence? What are the economic possibilities
for our grandchildren?



From the earliest times of which we have record-back, say, to two
thousand years before Christ-down to the beginning of the
eighteenth century, there was no very great change in the standard of
life of the average man living in the civilised centres of the earth.
Ups and downs certainly. Visitations of plague, famine, and war. Golden
intervals. But no progressive, violent change. Some periods perhaps So
per cent better than others­at the utmost 1 00 per cent
better-in the four thousand years which ended (say) in A. D.
1700.



This slow rate of progress, or lack of progress, was due to two
reasons-to the remarkable absence of important technical
improvements and to the failure of capital to accumulate.



The absence of important technical inventions between the prehistoric
age and comparatively modern times is truly remarkable. Almost
everything which really matters and which the world possessed at the
commencement of the modern age was already known to man at the dawn of
history. Language, fire, the same domestic animals which we have
to-day, wheat, barley, the vine and the olive, the plough, the
wheel, the oar, the sail, leather, linen and cloth, bricks and pots,
gold and silver, copper, tin, and lead-and iron was added to the
list before 1000 B.C.-banking, statecraft, mathematics,
astronomy, and religion. There is no record of when we first possessed
these things.



At some epoch before the dawn of history perhaps even in one of the
comfortable intervals before the last ice age-there must have
been an era of progress and invention comparable to that in which we
live to-day. But through the greater part of recorded history
there was nothing of the kind.



The modern age opened; I think, with the accumulation of capital which
began in the sixteenth century. I believe-for reasons with which
I must not encumber the present argument-that this was initially
due to the rise of prices, and the profits to which that led, which
resulted from the treasure of gold and silver which Spain brought from
the New World into the Old. From that time until to-day the power
of accumulation by compound interest, which seems to have been sleeping
for many generations, was re-born and renewed its strength. And
the power of compound interest over two hundred years is such as to
stagger the imagination.



Let me give in illustration of this a sum which I have worked out. The
value of Great Britain's foreign investments to-day is estimated
at about £4,000,000,000. This yields us an income at the rate of
about 6½ per cent. Half of this we bring home and enjoy; the other
half, namely, 3¼ per cent, we leave to accumulate abroad at compound
interest. Something of this sort has now been going on for about 250
years.



For I trace the beginnings of British foreign investment to the treasure
which Drake stole from Spain in 1580. In that year he returned to
England bringing with him the prodigious spoils of the Golden Hind.
Queen Elizabeth was a considerable shareholder in the syndicate which
had financed the expedition. Out of her share she paid off the whole of
England's foreign debt, balanced her Budget, and found herself with
about £40,000 in hand. This she invested in the Levant Company
--which prospered. Out of the profits of the Levant Company, the East
India Company was founded; and the profits of this great enterprise were
the foundation of England's subsequent foreign investment. Now it
happens that £40,ooo accumulating at 3f per cent compound interest
approximately corresponds to the actual volume of England's foreign
investments at various dates, and would actually amount to-day to
the total of £4,000,000,000 which I have already quoted as being what
our foreign investments now are. Thus, every £1 which Drake brought
home in 1580 has now become £100,000. Such is the power of compound
interest!



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.



At the same time technical improvements in manufacture and transport
have been proceed­ing at a greater rate in the last ten years than
ever before in history. In the United States factory output per head was
40 per cent greater in 1925 than in 1919. In Europe we are held back by
temporary obstacles, but even so it is safe to say that technical
efficiency is increasing by more than 1 per cent per annum compound.
There is evidence that the revolutionary technical changes, which have
so far chiefly affected industry, may soon be attacking agriculture. We
may be on the eve of improvements in the efficiency of food production
as great as those which have already taken place in mining, manufacture,
and transport. 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.



For the moment the very rapidity of these changes is hurting us and
bringing difficult problems to solve. Those countries are suffering
relatively which are not in the vanguard of progress. We are being
afflicted with a new disease of which some readers may not yet have
heard the name, but of which they will hear a great deal in the years to
come--namely, technological unemployment. This means unemployment
due to our discovery of means of economising the use of labour
outrunning the pace at which we can find new uses for labour.



But this is only a temporary phase of maladjustment. All this means in
the long run that mankind is solving its economic problem. I would
predict that the standard of life in progressive countries one hundred
years hence will be between four and eight times as high as it is
to-day. There would be nothing surprising in this even in the
light of our present knowledge. It would not be foolish to contemplate
the possibility of afar greater progress still.


II


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.



Now it is true that the needs of human beings may seem to be insatiable.
But they fall into two classes --­those needs which are absolute in
the sense that we feel them whatever the situation of our fellow human
beings may be, and those which are relative in the sense that we feel
them only if their satisfaction lifts us above, makes us feel superior
to, our fellows. Needs of the second class, those which satisfy the
desire for superiority, may indeed be insatiable; for the higher the
general level, the higher still are they. But this is not so true of the
absolute needs-a point may soon be reached, much sooner perhaps
than we are all of us aware of, when these needs are satisfied in the
sense that we prefer to devote our further energies to non­-economic
purposes.



Now for my conclusion, which you will find, I think, to become more and
more startling to the imagination the longer you think about it.



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.



Why, you may ask, is this so startling? It is startling
because-if, instead of looking into the future, we look into the
past-we find that the economic problem, the struggle for
subsistence, always has been hitherto the primary, most pressing problem
of the human race-not only of the human race, but of the whole of
the biological kingdom from the beginnings of life in its most primitive
forms.



Thus we have been expressly evolved by nature-with all our
impulses and deepest instincts-for the purpose of solving the
economic problem. If the economic problem is solved, mankind will be
deprived of its traditional purpose.



Will this be a benefit? If one believes at all in the real values of
life, the prospect at least opens up the possibility of benefit. Yet I
think with dread of the readjustment of the habits and instincts of the
ordinary man, bred into him for countless generations, which he may be
asked to discard within a few decades.



To use the language of to-day-must we not expect a general
"nervous breakdown"? We already have a little experience of what I mean
-a nervous breakdown of the sort which is already common enough
in England and the United States amongst the wives of the
well-­to-do classes, unfortunate women, many of them, who
have been deprived by their wealth of their traditional tasks and
occupations--who cannot find it sufficiently amusing, when
de­prived of the spur of economic necessity, to cook and clean and
mend, yet are quite unable to find anything more amusing.



To those who sweat for their daily bread leisure is a longed--for
sweet-until they get it.



There is the traditional epitaph written for herself by the old
charwoman:--



Don't mourn for me, friends, don't weep for me never,

For I'm going to do nothing for ever and ever.



This was her heaven. Like others who look forward to leisure, she
conceived how nice it would be to spend her time
listening-in-for there was another couplet which occurred
in her poem:-



With psalms and sweet music the heavens'll be ringing,

But I shall have nothing to do with the singing.



Yet it will only be for those who have to do with the singing that life
will be tolerable­and how few of us can sing!



Thus 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.



The strenuous purposeful money-makers may carry all of us along
with them into the lap of economic abundance. 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.



Yet there is no country and no people, I think, who can look forward to
the age of leisure and of abundance without a dread. For we have been
trained too long to strive and not to enjoy. 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 society. To judge from the
be­haviour and the achievements of the wealthy classes to-day
in any quarter of the world, the outlook is very depressing! For these
are, so to speak, our advance guard-those who are spying out the
promised land for the rest of us and pitching their camp there. For they
have most of them failed disastrously, so it seems to me-those
who have an independent income but no associations or duties or
ties-to solve the problem which has been set them.



I feel sure that with a little more experience we shall use the
new-found bounty of nature quite differently from the way in
which the rich use it to-day, and will map out for ourselves a
plan of life quite otherwise than theirs.

For many ages to come the old Adam will be so strong in us that
everybody will need to do some work if he is to be contented. We shall
do more things for ourselves than is usual with the rich to-day,
only too glad to have small duties and tasks and routines. But beyond
this, we shall endeavour to spread the bread thin on the
butter-to make what work there is still to be done to be as
widely shared as possible. Three-hour shifts or a
fifteen-hour week may put off the problem for a great while. For
three hours a day is quite enough to satisfy the old Adam in most of us!



There are changes in other spheres too which we must expect to come.
When the accumula­tion of wealth is no longer of high social
im­portance, there will be great changes in the code of morals. We
shall be able to rid our­selves of many of the pseudo-moral
principles which have hag-ridden us for two hundred years, by
which we have exalted some of the most distasteful of human qualities
into the position of the highest virtues. We shall be able to afford to
dare to assess the money-motive at its true value. 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 semi­criminal, 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.



Of course there will still be many people with intense, unsatisfied
purposiveness who will blindly pursue wealth-unless they can find
some plausible substitute. But the rest of us will no longer be under
any obligation to applaud and encourage them. For we shall 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. For purposiveness means that we are more concerned with the
remote future results of our actions than with their own quality or
their immediate effects on our own environment. The "purposive" man is
always trying to secure a spurious and delusive immortality for his acts
by pushing his interest in them forward into time. He does not love his
cat, but his cat's kittens; nor, in truth, the kittens, but only the
kittens' kittens, and so on forward forever to the end of
cat-dom. For him jam is not jam unless it is a case of jam
to-morrow and never jam to-day. Thus by pushing his jam
always forward into the future, he strives to secure for his act of
boiling it an immortality.



Let me remind you of the Professor in Sylvie and Bruno :



"Only the tailor, sir, with your little bill," said a meek voce outside
the door.



"Ah, well, I can soon settle his business," the Professor said to the
children, "if you'll just wait a minute. How much is it, this year, my
man?" The tailor had come in while he was speaking.



"Well, it's been a-doubling so many years, you see," the tailor
replied, a little grufy, "and I think I'd like the money now. It's two
thousand pound, it is!"



"Oh, that's nothing!" the Professor carelessly remarked, feeling in his
pocket, as if he always carried at least that amount about with him.
"But wouldn't you like to wait just another year and make it four
thousand? Just think how rich you'd be! Why, you might be a king, if you
liked!"



"I don't know as I'd care about being a king," the man said
thoughtfully. "But it dew sound a powerful sight o' money! Well, I think
I'll wait-"



"Of course you will!" said the Professor. "There's good sense in you, I
see. Good-day to you, my man!"



"Will you ever have to pay him that four thousand pounds?" Sylvie asked
as the door closed on the departing creditor.



"Never, my child!" the Professor replied emphatically. "He'll go on
doubling it till he dies. You see, it's always worth while waiting
another year to get twice as much money!"



Perhaps it is not an accident that the race which did most to bring the
promise of immortality into the heart and essence of our religions has
also done most for the principle of compound interest and particularly
loves this most purposive of human institutions.



I see us free, therefore, to return to some of the most sure and certain
principles of religion and traditional virtue-that avarice is a
vice, that the exaction of usury is a misdemeanour, and the love of
money is detestable, that those walk most truly in the paths of virtue
and sane wisdom who take least thought for the morrow. We shall once
more value ends above means and prefer the good to the useful. We shall
honour those who can teach us how to pluck the hour and the day
virtuously and well, the delightful people who are capable of taking
direct enjoyment in things, the lilies of the field who toil not,
neither do they spin.



But beware! The time for all this is not yet. For at least another
hundred years we must pre­tend to ourselves and to every one that
fair is foul and foul is fair; for foul is useful and fair is not.
Avarice and usury and precaution must be our gods for a little longer
still. For only they can lead us out of the tunnel of economic necessity
into daylight.



I look forward, therefore, in days not so very remote, to the greatest
change which has ever occurred in the material environment of life for
human beings in the aggregate. But, of course, it will all happen
gradually, not as a catastrophe. Indeed, it has already begun. The
course of affairs will simply be that there will be ever larger and
larger classes and groups of people from whom problems of economic
necessity have been practically removed. The critical difference will be
realised when this condition has become so general that the nature of
one's duty to one's neighbour is changed. For it will remain reasonable
to be economically pur­posive for others after it has ceased to be
reasonable for oneself.



The pace at which we can reach our destination of economic bliss will be
governed by four things-our power to control population, our
determination to avoid wars and civil dissensions, our willingness to
entrust to science the direction of those matters which are properly the
concern of science, and the rate of accumulation as fixed by the margin
between our production and our consumption; of which the last will
easily look after itself, given the first three.



Meanwhile there will be no harm in making mild preparations for our
destiny, in encouraging, and experimenting in, the arts of life as well
as the activities of purpose.



But, chiefly, do not let us overestimate the importance of the economic
problem, or sacrifice to its supposed necessities other matters of
greater and more permanent significance. It 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!



* Scanned from John Maynard Keynes, Essays in Persuasion, New York:
W.W.Norton & Co., 1963, pp. 358-373.