The Financial Crisis and recession: insight from Keynes circa 1933
It’s all change and rather quickly. The Financial Times describes Keynes as a “man in the news” and the Chancellor says that “much of what Keynes wrote still makes sense” as justification for a decision, just announced, to bring forward a range of building projects to boost the economy. Not bad for someone who’s been dead for sixty-two years – Keynes that is, not the Chancellor.
Of course, much of the sudden interest relates to the outpouring of money from national treasuries to keep financial systems alive. Keynes, though, was more than just an intellectual spendthrift. He was also the economist who, more than any other, helped shape the global shift from one economic paradigm to another. Reading his famous article which was part of that shaping process – National Self-Sufficiency written in 1933 in the depths of The Depression – I was struck by three points which seemed to sum up so much of current debate about the contemporary crisis. I present them here without comment because they speak for themselves.
I was brought up, like most Englishmen, to respect free trade not only as an economic doctrine which a rational and instructed person could not doubt, but almost as a part of the moral law. I regarded ordinary departures from it as being at the same time an imbecility and an outrage. I thought England’s unshakable free trade convictions, maintained for nearly a hundred years, to be both the explanation before man and the justification before Heaven of her economic supremacy. As lately as 1923 I was writing that free trade was based on fundamental “truths” which, stated with their due qualifications, no one can dispute who is capable of understanding the meaning of the words. Looking again to-day at the statements of these fundamental truths which I then gave, I do not find myself disputing them. Yet the orientation of my mind is changed; and I share this change of mind with many others. … (M)ainly I attribute my change of outlook to my hopes and fears and preoccupations, along with those of many or most, I believe, of this generation throughout the world, being different from what they were.
The decadent international but individualistic capitalism, in the hands of which we found ourselves after the war, is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous–and it doesn’t deliver the goods. In short, we dislike it, and we are beginning to despise it. But when we wonder what to put in its place, we are extremely perplexed.
To-day we suffer disillusion, not because we are poorer than we were–on the contrary, even to-day we enjoy, in Great Britain at least, a higher standard of life than at any previous period–but because other values seem to have been sacrificed and because they seem to have been sacrificed unnecessarily, inasmuch as our economic system is not, in fact, enabling us to exploit to the utmost the possibilities for economic wealth afforded by the progress of our technique, but falls far short of this, leading us to feel that we might as well have used up the margin in more satisfying ways.