Skip to content

John Maynard Keynes on the Future of Work and economic possibilities

22/12/2014

Andrew Little’s first substantive speech as Labour leader on “the future of work” touched on the relevant issue of structural shifts to the labour market.

In his recent book Average is Over, economist Tyler Cowen notes most of the gains from new technologies are accruing to those workers who best complement machines  (these tend to be the most highly skilled workers) while low skilled workers are at greatest risk of being displaced by greater automation.

Mr Little could do much worse than to read John Maynard Keynes’ classic essay: Economic Possibilities for our Grandchildren when the English economist considered a similar concern.

Written in 1930 not long before the great depression really started to bite, Keynes is overwhelmingly optimistic about the prospects of future generations.

This is despite the renowned economist’s notorious propensity for the short term when he encouraged aggressive fiscal policy to kick start a stalling economy, seen as emphasising greater importance of the short term characterised by his oft quoted remark that “in the long run we are all dead”.

Keynes noted the radical improvement in living standards for those in developed countries which was already becoming apparent in the early decades of the 20th century.

His opening paragraph could be written in response to some of the commentary surrounding the structural shifts the world of work is undertaking today:

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.

Yet Keynes’ was not convinced by such a view:

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.

For Keynes, therefore the challenge was in what he termed “technological unemployment” and the displacement which took place as new jobs were created and old jobs made obsolete.

Technological unemployment was not a new challenge when Keynes wrote. Rather it had been a constant worry as the industrial revolution kicked into gear and loom weavers were made redundant due to the arrival of the spinning jetty.

This also gave rise to the luddite movement which saw this displaced workers destroy the new technologies in hopes of staving off their redundancy.

However the evidence from the industrial revolution and the standard of living we in developed countries enjoy as a result of creative energies is clear enough reason to suggest the benefits of these technologies do significantly outweigh the costs.

The luddites were right when they saw new technologies as a threat to their incumbent positions but their narrow interest (understandably) did not allow them to see the real gains to wider society which occurs whenever new technologies reduce the cost of labour making the cost of consumables cheaper and allowing more capital to invest in new technologies which will help to enrich our lives and create the jobs of the future.

Keynes did not view this problem is insurmountable rather he viewed it as a temporary adjustment on the way to greater global prosperity:

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. 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 a far greater progress still.

The economics literature from the industrial revolution (arguably the most significant previous structural shift in the world of work) seems to support the case that the last great economic upheaval despite causing much disruption and change did herald a much improved standard of living for all.

The rise of new and exciting digital technologies bringing about a peer to peer economy that brings lower prices and new opportunities whilst also displacing or disrupting those in established professions such as taxi drivers or hoteliers.

Keynes envisioned a world of much greater leisure for all as people were able to satisfy their wants with far less exertion on their part as boosted global supply and accumulated capital led to a world of greater abundance. In a sense Keynes has been proven correct as the majority of people in developed market economies spend a decreasing share of their income on the items viewed as essential to modern life. Yet Keynes also expected this shift would mean people worked far fewer hours by choice which hasn’t eventuated as for a number of possible reasons people in the developed world still tend to work longer hours. It is also remarkably difficult to know what “solving the economic problem” would look like because there are many competing conceptions of the good life and his own view of such a life will differ greatly from the view of others, particularly considering the fulfillment and sense of joy many people derive from their work which may drive them to work longer hours.

The shifts which took place in the 1930s and earlier in the industrial revolution do not bear exact parallels to our current changes but in order to understand the present and the possible futures* we must seek to understand the past and in this light Economic Possibilities for our Grandchildren would be a good starting point for Mr Little.

Advertisements

From → Uncategorized

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: