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How much money is enough for a "good life"?

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By Robert Skidelsky

The slump in the economy has caused an explosion of popular anger against the "greed" of the bankers and their "obscene" incentives. This has been accompanied by a broader critique of "growthmanship" - the pursuit of economic growth at all costs, regardless of how much damage it may cause to the Earth's environment or to our shared values.


In 1930, Keynes predicted that by 2030, we would work 15 hours a week. But it underestimated our appetite for opulence.

The slump in the economy has caused an explosion of popular anger against the "greed" of the bankers and their "obscene" incentives. This has been accompanied by a broader critique of "growthmanship" - the pursuit of economic growth at all costs, regardless of how much damage it may cause to the Earth's environment or to our shared values.

John Maynard Keynes addressed this question in 1930, in a short essay entitled "The Economic Possibilities of Our Grandchildren". [1] Keynes predicted that in a hundred years - that is, around 2030 - the growth of the developed world would have actually stopped, because people would already "have enough" to lead "a good life." Paid work hours would be reduced to three hours a day, a fifteen-hour workweek. Human beings would be like "the lilies of the field, that neither toil nor spin". [2]

Keynes's prediction rested on the assumption that with a 2% annual increase in capital, a 1% increase in productivity, and a stable population, the average standard of living would multiply by eight on average. This allows us to find out how much Keynes thought was "enough." GDP per capita in the UK in the late 1920s (before the crash of 29) was roughly 5,200 pounds (about $ 8,700) valued today. Accordingly, he estimated that a per capita GDP of about 40,000 pounds ($ 66,000) would be "enough" for human beings to turn their attention to more pleasant things.

It is not clear why Keynes thought that eight times the British national per capita income would be "sufficient". Most likely, he took as a measure of sufficiency the income of a bourgeois rentier of his time, which was about ten times that of the average worker.


Eighty years later, the developed world has come close to Keynes's goal. In 2007 (that is, before the crash), the IMF reported that the average GDP per capita in the United States stood at $ 47,000 and in the United Kingdom at $ 46,000. In other words, the UK has seen a fivefold growth in living standards since 1930, despite the falsification of two of Keynes's assumptions: "no major wars" and "no population growth" (in the UK, the population is 33% larger than in 1930).

The reason for such a brilliant performance is that annual productivity growth has been higher than Keynes had projected: about 1.6% for the UK and slightly higher for the US. Countries like Germany and Japan have fared even better, despite the tremendously negative effects of the war. Keynes's "target" of $ 66,000 is likely to be reached by most Western countries by 2030.

But it is equally unlikely that this achievement will end the insatiable search for more money. Let us assume, cautiously, that we have covered two-thirds of the distance to Keynes's goal. We could have expected working hours to be cut by two-thirds. In fact, they have been reduced by only a third, with the reduction halted in the 1980s.

This makes it highly unlikely that we will reach the three-hour workday by 2030. It is also unlikely that growth will stop, unless nature itself imposes a halt. People will continue to trade leisure for higher income.

Keynes downplayed the obstacles to this goal. He recognized that there are two types of needs, absolute and relative, and that the latter can be insatiable. But he underestimated the weight of relative needs, especially as societies got richer, and of course the power of advertising to create new needs, and thus induce people to work in order to earn money to satisfy them. . As long as consumption is conspicuous and competitive, there will continue to be renewed reasons to work.

Keynes was not entirely unaware of the social character of work. "It will remain reasonable," he wrote, "to seek the economic ends of others after it has ceased to be reasonable to oneself." The rich had an obligation to help the poor. Keynes was probably not thinking of the developing world (most of which had only just begun to develop in the 1930s). But the goal of reducing global poverty has imposed an extra workload on people in rich countries, through both the commitment to foreign aid and, more importantly, globalization, which increases insecurity in the world. employment and, especially in the case of the less qualified, contains wages.

Furthermore, Keynes did not really face the problem of what most people would do when they no longer needed to work. "It is a fearsome problem for an ordinary person, without particular talents, to take care of himself, especially if he does not have roots in the place, in the customs or in the beloved conventions of a traditional economy." But since the majority of the rich - "those who enjoy an independent income, but lack ties or obligations or ties" have "failed disastrously," why would those who are poor today do better?

I believe that in this Keynes comes as close as possible to answering the question why his "enough" will not, in fact, be enough. The accumulation of wealth, which should be a means to "the good life", becomes an end in itself, destroying many of the things that make life worth living. Beyond a certain point - which most of the world is far from having reached - the accumulation of wealth offers only substitute pleasures for the losses of truth that it demands in relation to human relationships.

Finding the means to nurture the muted "bonds or obligations or ties" that are so essential for individuals to flourish is the problem to be solved in the developed world, and it is beginning to emerge for the billions who have just climbed the ladder of education. increase. George Orwelll said it well: "All progress is seen as a frantic struggle directed at a goal that we hope and pray that it will never be achieved."

Robert Skidelsky Emeritus Professor of Political Economy at the University of Warwick, best known for his monumental three-volume biography of Lord Keynes. His latest book, published in September this year under the title Keynes: The Return of the Master, deals with the current economic crisis.

The Guardian, November 2009 - Translation for www.sinpermiso.info: Lucas Antón

Notes:

[1] In Papeles de Economía Española, nº 6, 1981, pages 353-361.

[2] The evangelical quotation is found both in Luke, 12, 27 and in Matthew 6, 28.


Video: Heres Why Youre So Paralyzed, and What to Do About It (June 2022).


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