Robert Skidelsky
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How Much Is Enough?
Robert Skidelsky
Project Syndicate | Friday, November 20, 2009

 
The economic downturn has produced an explosion of popular anger against bankers’ “greed” and their “obscene” bonuses. This has accompanied a wider critique of “growthmanship” – the pursuit of economic growth or the accumulation of wealth at all costs, regardless of the damage it may do to the earth’s environment or to shared values.
 
John Maynard Keynes addressed this issue in 1930, in his little essay “Economic Possibilities for our Grandchildren.” Keynes predicted that in 100 years – that is, by 2030 – growth in the developed world would, in effect, have stopped, because people would “have enough” to lead the “good life.” Hours of paid work would fall to three a day – a 15-hour week. Human beings would be more like the “lilies of the field, who toil not, neither do they spin.”
 
Keynes’s prediction rested on the assumption that, with a 2% annual increase in capital, a 1% increase in productivity, and a stable population, average standards of living would rise eight times on average. This enables us to work out how much Keynes thought was “enough.” GDP per head in the United Kingdom in the late 1920’s (before the 1929 crash) was roughly £5,200 ($8,700) in today’s value. Accordingly, he estimated that a GDP per capita of roughly £40,000 ($66,000) would be “enough” for humans to turn their attention to more agreeable things.
 
It is not clear why Keynes thought eight times the average British national income per head would be “enough.” Most likely he took as his standard of sufficiency the bourgeois rentier income of his day, which was about ten times that of the average worker.
 
Eighty years on, the developed world has approached Keynes’s goal. In 2007 (i.e., pre-crash), the IMF reported that average GDP per head in the United States stood at $47,000, and at $46,000 in the UK. In other words, the UK has had a five-fold increase 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% higher than in 1930).
 
The reason we have done so well is that annual productivity growth has been higher than Keynes projected: about 1.6% for the UK, and a bit higher for the US. Countries like Germany and Japan have done even better, despite the hugely disruptive effects of war. It is likely that Keynes’s “target” of $66,000 will be achieved for most western countries by 2030.
 
But it is equally unlikely that this achievement will end the insatiable hunt for more money. Let’s assume, cautiously, that we are two-thirds of the way towards Keynes’s target. We might therefore have expected hours of work to have fallen by about two-thirds. In fact they have fallen by only one-third – and have stopped falling since the 1980’s.
 
This makes it highly improbable that we will reach the three-hour working day by 2030. It is also unlikely that growth will stop – unless nature itself calls a halt. People will continue to trade leisure for higher incomes.
 
Keynes minimized the obstacles to his goal. He recognized that there are two kinds of needs, absolute and relative, and that the latter may 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 wants, and thus induce people to work in order to earn the money to satisfy them. As long as consumption is conspicuous and competitive, there will continue to be fresh reasons to work.
 
Keynes did not entirely ignore the social character of work. “It will remain reasonable,” he wrote, “to be economically purposive for others after it has ceased to be reasonable for oneself.” The wealthy had a duty to help the poor. Keynes was probably not thinking of the developing world (most of which had hardly started to develop in 1930). But the goal of global poverty reduction has imposed a burden of extra work on people in rich countries, both through the commitment to foreign aid and, more importantly, through globalization, which increases job insecurity and, particularly for the less skilled, holds down wages.
 
Moreover, Keynes did not really confront the problem of what most people would do when they no longer needed to work. He writes: “It is a fearful problem for the ordinary person, with no special talents, to occupy himself, especially if he no longer has roots in the soil or in custom or in the beloved conventions of a traditional economy.” But, since most of the rich – “those who have an independent income but no associations or duties or ties” have “failed disastrously” to live the “good life,” why should those who are currently poor do any better?
 
Here I think Keynes comes closest to answering the question of 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 because it destroys many of the things that make life worth living. Beyond a certain point – which most of the world is still far from having reached – the accumulation of wealth offers only substitute pleasures for the real losses to human relations that it exacts.
 
Finding the means to nourish the fading “associations or duties or ties” that are so essential for individuals to flourish is the unsolved problem of the developed world, and it is looming for the billions who have just stepped on to the growth ladder. George Orwell put it well: “All progress is seen to be a frantic struggle towards an objective which you hope and pray will never be reached.”
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Comments:

By Jerry Neumann (New York, NY) on Sun 29 Nov 2009 - 11:34

Sir,

Perhaps the answer to your question “how much is enough?” is that we are well on our way to having enough to live a good life by the standards of Keynes’ day.  Since then, though, we have used our surplus income on things that Keynes did not consider, like artificial hips, state-subsidized higher education and trips to the moon.

At the very least, as we Americans debate the affordability of more widespread healthcare--or even just our ability to pay for our current commitments as they come due--it seems premature to suppose that we continue to work simply because we can not find our way to enjoying what we have.

By Tim Rose on Mon 23 Nov 2009 - 10:13

Spot on. The distraction of things is overwhelming.

By Tom Crowl (Los Angeles, CA) on Sat 21 Nov 2009 - 6:11

Thank you for this informative piece. I believe you’re correct that the “enough” point is unlikely to be reached, at least for most.

Some value may be seen also in taking an anthropological approach!

In my recent brief post on this issue, “Compensation & the Social Network” http://culturalengineer.blogspot.com/2009/10/compensation-social-network.html , I point out that the competition for status and wealth takes place WITHIN the individual’s social network and NOT WITHIN the social organism as a whole. (plumbers compare themselves to other tradesmen while CEO’s compare themselves to other CEO’s).

The import of this for the social contract resides in the stresses created where social networks become isolated over time (oligarchy) creating an “Ultimatum Game” situation for those individuals and especially social networks that perceive themselves as no longer a party to that social contract (with consequences ranging from regime changes to revolutions and/or civil decay).

This is why there is a point at which wealth division becomes a direct threat to the social contract. This “point” will vary depending on many factors… but at our current stage in cultural evolution there is nothing more important here than the role of ICT (Information and Communication Technology) and what David Brin calls a “Moore’s Law of Cultural Change”.

This tension between the social network and the social organism extends back to the birth of agriculture… but things are moving quite rapidly now.

For a few thoughts on this (and at least what may be a framework for an approach to solutions) I hope you’ll see my post “How would hunter-gatherers rule the world? (Pssst… They do!)” http://culturalengineer.blogspot.com/2009/11/how-would-hunter-gatherers-run-world.html

 
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