Back to Keynes for ‘the good life’
There is a new play in London’s West End at the moment. It’s called The Standard of Living by James Graham.The play is about the famous British economist John Maynard Keynes. Graham is fascinated by this ‘genius economist’. Being an artist rather than an economist, Graham is more concerned with Keynes’ apparent belief in the Socratic philosophy of “What makes a good life?” Keynes’s answer, according to Graham, is that “the most valuable entities in life were not money, purchases or success, but relationships, love and“aesthetic appreciation”. In one essay, Keynes defined the human problem as “how to live wisely, agreeably, and well”.
Graham thinks that Keynes offers an alternative to our money-making profit-led society. “I’m absolutely convinced of that. You always feel that you have to fight for it but most people from my post-industrial working class community accept the intellectual argument that he (Keynes) made all those years ago; that [there should be] subsidy on something that doesn’t instantly make direct profit back, a painting, a play, a ballet, a song, that doesn’t have a value that is easily quantified on an Excel spreadsheet but adds to the value of a nation and to the meaning and happiness of it.” But unfortunately, we live in a world where ‘money, purchases and success’ dominate. Indeed, seats for Graham’s play are going for up to £298 (or nearly $400) – although there are some for the under-30s at just £25. You need a very good ‘standard of living’ to get a seat at a play about the ‘good life’.
Most people in the world and even in the so-called Global North cannot live ‘wisely, agreeably and well’. So economics cannot be ignored in the search for the ‘good life’. Graham reckons, like many others, that Keynes had an answer to this ‘economic problem’. Following Keynes, governments needed to act and do “away with convention, and instead of saving and cutting in the bad times, we spent and invested in the downturn instead, lessening the human suffering and also, potentially, saving money long term by arriving at growth earlier? What if governments worldwide finally let go of Adam Smith’s “invisible hand” of the free market and began intervening directly in their economic systems instead?” Indeed, Graham hopes that market crashes, global pandemics or foreign wars “shouldn’t be seen exclusively as crises, but also as opportunities. Indeed, perhaps the only opportunities the universe hands you for big, ambitious reforms as the dust settles, and the rebuilding begins.”
In the play, Graham brings in the ‘free market’ economist Friedrich Hayek to confront Keynes. They expound their supposedly alternative theories: from Hayek, the belief that the market should rule; from Keynes, the suggestion that governments can stimulate revival. Then they dance (a dance that Graham dramatises because Keynes had married a ballerina). “We must raise interest rates to encourage saving,” says Hayek, as he dips into a backbend. “We want to lower interest rates to discourage saving and encourage spending,” counters Keynes, as he swirls around the floor. Graham is clear who wins this ‘strictly come dancing’ competition. “Keynes is a beacon because, although his ideas were constantly rebuffed, he kept offering them as a better alternative. His thinking comes from a place of morality,” Graham says. “And while I liked writing Hayek’s speeches in defence of market forces, my heart is with Keynes and the idea that, in dark, difficult times, you intervene. You don’t let the universe pass you by without getting involved.”
Turn to Keynes and his philosophy and economics, says Graham. “I am aware that painting and poetry are not going to overturn the whole of our national malaise, solve the housing crisis and get the young back into work, but I do suggest — as proposed not by a bohemian guru but by a level-headed genius economist — that, in our disconnected communities full of isolated people whose potential for discovery, enrichment, contribution and surprise is being wasted, a big national project to rebuild better could factor in how we might live more happily together, enjoying personal growth as well as the economic kind.”
It’s a fine aim. But did Keynes really have any answer to achieving the ‘good life’ for humanity? The majority of the liberal left economists, trade union leaders and politicians think so. For example, “The theories of John Maynard Keynes provide the sound intellectual framework for the views which trade unionists had always instinctively held and known to be right” (British TUC document 1968, p. 85).
Take the views of Larry Elliott, former economics editor of the British liberal left Guardian newspaper. In the economic crisis now facing many major economies, the right wing neoliberal economists and politicians call yet again for austerity, cuts in welfare and public services to ‘balance the books’. Elliott says, instead we need to destroy these right-wing economic myths by “looking to Keynes”. “Some new economic thinking is required, and if ever there were a time for an iconoclast like Keynes, it is surely now. He would certainly have no truck with the wrong-headed economic policies of the past half-century and the seemingly commonsense phrases – such as maxing out the credit card – that have been used to disguise just how nonsensical they are.” Elliott concludes that “Today, Keynes and Hayek are still revered by their followers on the political left and right respectively. Yet, the past two decades have showed the enduring nature of Keynes’s insights, first in 2008 and then during the global pandemic of 2020.”
But did Keynes come up such enduring answers to crises in capitalism? After Keynes’ death in 1946, post-war governments followed Keynes in the belief that they could ‘manage’ a capitalist economy with a judicious mix of monetary and fiscal policy and suitable regulation of industry and finance – namely what became called a ‘mixed economy’ of a capitalist sector backed by government support. That came to be the ideal of social democratic leaders as an alternative to ‘free market’ capitalism and socialism.
The myth developed that the post-war Golden Age of economic growth and relatively full employment in the Global North was a product of successful Keynesian policies. But it was a myth. In the 1960s, Keynesian economics was all the rage and government management of the economy, with central banks and government spending, was the order of the day. Even President Nixon declared that we are ‘all Keynesians now’. But by the end of the 1970s, the strategists of capital had ditched Keynes and opted for what we now call the ‘neoliberal’ policies of Hayek as in Graham’s play, namely cutting back on the size of government, privatising, weakening the trade unions, liberalising markets (including financial markets) and imposing tight monetary and fiscal austerity (or at least in part – austerity did not apply to defence and wars!).
Why was this? It was because Keynesian policies had failed to avoid new crises, namely the biggest worldwide economic slump in capitalism since the war in 1974-75 and then a deeper and more damaging slump in 1980-2. How could there be these new crises if Keynesian economic management was in operation everywhere? Keynesian economics had no answer. Marxist economics did have. The reason was that the 1970s had seen a collapse in the profitability in the productive sectors of the major capitalist economies. This was a crisis that only Marxist economics could explain, not Keynes. Indeed, in a way, the strategists of capital recognised that too.Their aim was to raise the profitability of capital at all costs as the only way out – not to revert to Keynesian ‘demand management’. In contrast to Keynes, Marx’s analysis shows that the capitalist system is not just suffering from a ‘technical malfunction’ in its financial sector, but has inherent contradictions in the production sector, namely the barrier to growth caused by capital itself. What flows from this is that the capitalist system cannot be reformed or corrected in order to achieve sustained economic growth without booms and slumps – it must be replaced.
Even Keynes in his later years seemed to think that his policies were only to be used temporarily before reverting to traditional neoclassical economics – namely government stays away from interfering in markets and capitalist production and lets the market do its work. “I do not suppose that the (neo)classical medicine will work by itself or that we can depend on it. We need quicker and less painful aids. But in the long run (!), these expedients will work better and we shall need them less, if the classical medicine is also at work. And if we reject the medicine from our systems altogether, we may just drift on from expedient to expedient and never get really fit again.” Keynes 1946.
Contrary to the ‘good life’, the profit motive must remain: “The loss of profit may be due to all sorts of causes, but short of going over to communism there is no possibility of curing unemployment except by restoring to employers a proper margin of profit.” As Keynes argued that “Economic prosperity is…dependent on a political and social atmosphere which is congenial to the average businessman.”
In his later years, Keynes even praised the very laissez-faire ‘liberal’ capitalism of Hayek that Graham portrays in his play. In 1944, he wrote to Friedrich Hayek in praise of his book, The Road to Serfdom, which argues that economic planning inevitably leads to totalitarianism. Keynes wrote: “morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in a deeply moved agreement.”(!) As for Marx, Keynes reckoned Das Kapital was “an obsolete economic textbook which I know to be not only scientifically erroneous but without interest or application for the modern world.”
For Keynes, only the intelligentsia can recognise the value of the ‘good life’ (as Graham portrays in his play, namely that which Keynes’ rich bohemian friends in Bloomsbury and Charleston, Sussex were living). His friends’ life style was ‘the good life’, which Marxism would destroy: “How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeoisie and the intelligentsia, who with all their faults, are the quality of life and surely carry the seeds of all human achievement?
During the Great Depression of the 1930s, Keynes argued that ‘the economic problem’ of scarcity and toil could be overcome and the ‘good life’ could be achieved under the capitalist mode of production: “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.”
Well, nearly one hundred years later, the capitalist mode of production has not avoided poverty for the majority of the world. It has not ended grotesque inequalities of income or wealth. It has not avoided endless wars, including ones that have involved the whole world. Indeed, within a decade of Keynes’ comments in the 1930s, there was a world war that killed millions of armed and unarmed people and destroyed the livelihoods of millions more. And since 1945, there has not been a day where there has not been armed conflict somewhere in the world. The good life is still not with us. So, perhaps, rather than back to Keynes, it should be forward to Marx.
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