The end (or the beginning) of economic history: reflection upon Keynes

germoglio-pietra.jpgWe 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.

These words are by John Maynard Keynes, the debated and brilliant economist in the years of the Great Depression, addressing the audience in Madrid in 1930, in a speech become famous under the title “Economic possibilities for our grandchildren”.

This essay, in which Keynes forecasted that at the rate of growth of 2% any figure will be multiplied by 7.5 in a century, seems timely still today. Then, the GDP per capita of human beings living in the civilised world thanks to capital accumulation and technical progress would be higher by a multiplicator that Keynes sets, prudently enough, in between 4 and 8.

This is the thought deriving from the reading of the brilliant essay by professor Jean-Paul Fitoussi, professor of Economics at the Institute of Political Studies in Paris and of European Economics in LUISS, “The end of (economic) history”, in which he comments Keynes’ theory of economic opportunities for our grandchildren.

In his General Theory, Keynes considers income distribution and unemployment as the two flaws of our system.

How far are we from Keynes’ forecast? Of course, the main factors leading economy increased, and so did inequalities. Of course, unemployment was a problem as it is nowadays. But the perception of values, even in economic terms, changed accordingly, maybe even beyond Keynes’ expectations.

As for Keynes, capitalism should not be an end in itself, and so the accumulation of capital and the constant increase of productivity should produce a revenue in terms of satisfaction of needs, as in Keynes’ theory, explained by prof. Fitoussi.

Our days witness an increasing depleting of resources, therefore it is mandatory to reinvent our economy on the basis of the generated value. If that parameter increases, then fulfilment of needs and individual (and collective) economy will increase accordingly.

This is the right way to overcome the “bad attack of economic pessimism”, helping the survival of future generations as a consequence.

Saving our planet, lifting people out of poverty, advancing economic growth… these are one and the same fight. We must connect the dots between climate change, water scarcity, energy shortages, global health, food security and women’s empowerment. Solutions to one problem must be solutions for all. (Ban Ki-moon)


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