Essays in Persuasion

"That’s exactly right. The next three books are all about the challenges that we will face in a world with less work. This Keynes essay is one of the most famous bits of writing on the future of work. And what I think it captures so wonderfully—and this is the sense in which Keynes was correct—is that, in the 21st century, technological progress is going to solve ‘the traditional economic problem’ that has plagued our ancestors for centuries. If we think of the economy as a pie, as economists like to do, then that traditional problem has been, ‘how do we make the global economic pie large enough for everyone to live on?’ If you were to go back to the turn of the first century AD, take the global economic pie, and divide it up into equal slices for everyone in the world, most people would have got a few hundred of today’s dollars. Roll forward a thousand years, and roughly the same would have been true. Almost everyone lived on or around the poverty line. But over the last few hundred years, economic growth has soared, driven by technological progress. As a result, the global economic pie has exploded in size. Today, global GDP per head, the value of those individual slices of pie, is already approaching $11,000. As Keynes anticipated, we have come very close to solving the traditional economic problem, the struggle for subsistence that preoccupied humankind for so long. This piece of prescience is, in part, what makes his essay so engaging. “I don’t think it’s a coincidence that worries about inequality are intensifying today at exactly the same time as worries about automation are growing” But there is also an error of judgement that runs through Keynes’s essay. He was right that, in theory, we would come very close to solving that fundamental economic problem—that the economic pie would be large enough for everyone to live on. But he was wrong to think that, in practice, everyone would automatically get their slice. He assumed that, when our collective prosperity was large enough, all of us would be able to sit back and enjoy a life of leisure. But he never engaged with the distribution question: how is it that we will actually share out that economic pie? How do we make sure that everyone in society gets a fair slice? Look around today. It is true that some people have big slices. But a great many others have very little, if anything at all. Keynes neglected this issue of distribution and I expect that it will be the great economic challenge of the 21st century. In decades to come, technological progress is going to make us more collectively prosperous than ever before, but we will need to find a way to share out that prosperity when our traditional mechanism for doing so—paying people for work that they do—is far less effective than it might have been in the past. Technological progress is likely to solve one economic problem, that traditional one of how to make the pie large enough, but it will replace it with another—how do we fairly slice it up? Let me make a couple of observations. There is sometimes a tendency to dismiss the idea of technological unemployment as a sort of distant threat that’s looming out of sight, that we don’t really need to worry about it now. But I think that’s a big mistake. I don’t think it’s a coincidence that worries about inequality are intensifying today at exactly the same time as worries about automation are growing. The two problems are very closely related. Today, the labour market is the main way that we share out prosperity in society. Most people’s jobs are their only source of income. The sorts of inequalities that we see in the labour market today show that this approach is already creaking; some people get far more for their efforts than others. Technological unemployment, in my view, is just a more extreme version of that same story, but one that ends with some people receiving nothing at all. So, this distributional problem is not new; today’s inequalities already present us with it. Technological unemployment will just create a more extreme version of it. “Keynes neglected this issue of distribution and I expect that it will be the great economic challenge of the 21st century” In a world with less work, as I mentioned before, we will have to grapple with the distribution question. And in my view, the only effective way to share out income in society if we cannot rely upon the labour market is, exactly as you say, through the state taking on a larger role. I call this the Big State. But this is not the Big State of the 20th century, with teams of smart people sitting in central government offices, poring over economic blueprints, trying to command and control economic activity from afar. It’s not a big state of production that I have in mind; it’s a big state of distribution. It’s the state being far more involved in sharing prosperity in society if the labour market is unable to do it effectively. Now the question of consent. I haven’t said anything about the pandemic so far, but in thinking about the future of work, what has been so remarkable about the last few months is that we have found ourselves in a world with less work – not because the robots took all the jobs, but because this virus decimated the demand that so many of these jobs rely upon, and the interventions that have been required to contain the spread of the virus have made economic matters even worse. And we have had to confront exactly the distributional problem I mentioned before, ‘how do we share income in society when, for various reasons, we cannot rely upon the world of work to do it?’ What are we seeing in response to this problem? We’ve seen a Big State. Around the world, states have stepped forward in unprecedented ways to share prosperity in society. We’ve had the furlough scheme here in the UK, with about 10 million employees at one point having up to 80% of their wages paid by the state. And we’ve seen similar interventions elsewhere; sometimes grants and loans, sometimes other types of welfare and support. Ideas in my book which, only a few months ago, some might have dismissed as outlandish or infeasible—something like a basic income, for instance—have become completely commonplace today in thinking about how we respond to the current pandemic-induced world with less work. The last few months demonstrate that, when we face the distributional problem again in the future, a key part of the response to it will have to be through the state. And, given what we have seen over the last few months, I expect that people could be willing to support that. That’s a nice way of putting it. We have borrowed a terrific amount: the UK is on track to set a peacetime borrowing record this year; the US has already borrowed five times what it did at the height of the 2007-08 global financial crisis. But, as you say, we haven’t collected it; we’ve just borrowed it. The question of how we’re actually going to pay for this remarkable expenditure is starting to bubble to the top of contemporary political conversation. A big part of my new book is about this question. We can’t just continue to borrow indefinitely. We have to think about tax—who and what we ought to tax, and how much. That’s right, and that’s an important part of the story. One general principle is that we’ve got to tax the valuable capital wherever it is located in the economy, and then distribute the revenue to those who are without it. Part of that valuable capital is human capital, the skills and capabilities that people have. But there is also traditional capital, too; for instance, the systems and machines themselves. I’m not hugely in favour of the idea of a ‘robot tax’, but I think the spirit of the idea, that we need to tax whatever capital is becoming more valuable and important, is right. No, I think that’s a different and critical aspect of the Big State. Its role can’t simply be taxing those who own valuable capital and sharing the revenue raised with those who don’t. It’s also about distributing that capital itself more widely in society. That’s why having a sort of citizens wealth fund for instance—something analogous to a sovereign wealth fund but held on behalf of citizens—is something I explore in the book. That might also be able to give people an actual stake in these valuable types of capital. In a sense, that’s also the spirit of the Goldin and Katz book. It is about how, through education, we can share out human capital more widely in society. But, in the 21st century, if human capital is going to become less valuable relative to traditional capital, then finding ways to share out the latter is going to become more and more important. The Keynes book is there, then, because it focuses our attention on how technological unemployment, in a strange way, will be a symptom of success. The success, as Keynes noted, is that technological progress is going to be more materially prosperous than ever before. But the strangeness, which Keynes neglected, is that it is also likely to replace the traditional economic problem with another one – how do we share out that prosperity if we can’t rely on the world of work to do it?"

"Keynes was writing in 1930 or so, a time of deep depression in the UK, so it’s impressive he could have such an optimistic view of the potential for the future. He has quite a limited view of the world – a view very characteristic of a male academic, Bloomsburyite sort of person – and that comes through a lot in the essay. But the central point is that with technological progress, we’ll rapidly reach the point where the material needs of at least a male Bloomsburyite academic will be met for everybody. The number of working hours needed will be limited, which not only means extra leisure, but, more importantly, if we only need an average of 15-20 hours of work per week out of each person, we don’t need a powerful management to drive them to do that work. We can expect that people will be happy enough to do a fair bit of what we need, without the need for everybody to be driven hard by financial incentives. So we can move away from a situation where everybody is enslaved by money to one in which we do things primarily because we find value in doing them. At the time he was writing, Keynes was making the important point that it was really only in the 100 years or so since the Industrial Revolution that this idea was feasible. The living standard of the average person had barely moved in the thousands of years before that. Life has been radically transformed by the growth of technology, and there’s every reason to think that will continue. Also, Keynes only looked at the developed countries, but now we are finally in a situation where the world as a whole has the capacity to achieve the kinds of things he was talking about. A striking illustration of this is that some time around the turn of this century, the number of obese people exceeded the number of malnourished people. That says something about our capacity to feed the world. Just now I mentioned the bottom billion, the billion or so people who are still desperately poor. But at the other end of the spectrum you have a billion rich people whose income is many times that of these poor people. If we could arrange a quite modest transfer from the very rich to the very poor, we can eliminate extreme poverty very rapidly. Technological capacity is a precondition for a utopian vision, but we can’t really hope to achieve that in the context of utopia in a single country. It has to be something global. The lesson you learn is that just because something is technically feasible, doesn’t mean that it’s going to happen. Working hours in the US have generally been increasing for the last 30-40 years. That’s not because people inherently like working, it’s because we have a set of social structures where social inclusion demands that. So a characteristic feature of the market liberal economy – as it’s developed in the US – is an extreme polarisation on these things. On the one hand, you have the middle class, the top quintile of people who typically are the group most likely to be in stable marriages. You have these two income couples both on high incomes, both working long hours, at the same time as trying to raise children. At the other end of the income distribution, you have a huge number of people who have been displaced from the labour market altogether. As for the French, the 35-hour week wasn’t looking forward to a better future in total. It was a response to the macro problem of how we share out the work. The fact that Keynes’s prediction hasn’t happened, that attempts to achieve it have run into trouble, is why, I think, we need a utopian view. We need to inspire people with a view of a better society that we can achieve within our available resources. We can’t just think about it in a day-to-day managerial context. I’m not convinced by that. It’s true that if you look not at the calculations, but the idea of the good life that someone like Keynes would have advocated, the first thing is that he didn’t think about the question of who was going to clean the toilet. He certainly wasn’t going to, I’m sure! When he thinks about how easy it’s going to be he really is forgetting about the housework and all the drudgery that has to be done and still hasn’t been automated out of existence in any way. Also, there are plenty of people with much more of a focus on material goods and services than the kind of personal ideal that Keynes would have had. For example, I don’t know what his mode of transport was, but I don’t think having a big flashy car would have mattered to Keynes. And yet there are a lot of people for whom that really is a source of great joy. At the same time, I do think the US perspective tends to be a bit misleading. In Australia we had a huge increase in work intensity and the pace of work in the 1990s. That was very clearly imposed on us, because we’d had a terrible recession and people were scared of losing their jobs. In the last decade, times have been good for a number of reasons, and we’ve seen people slacking off much more. The figures of authority and the talking heads are constantly complaining about how terrible our productivity is, because essentially, we have recaptured a lot of the leisure that was taken away from us in the 1990s. I don’t think people are inherently and desperately keen to work hard to acquire more possessions. Rather, this is a complicated story about how society works, and you can’t easily opt out of it as an individual. In the Australian context the big thing that still has us trapped is our housing bubble. Unlike most places, ours hasn’t burst. People are trapped with huge mortgage payments that they have to keep working to pay, and that in turn makes them much more money-focused. This isn’t something that can be easily solved at the level of individual preferences, which is why I come back to this notion of putting forward a utopian vision where people work, they contribute to society, but ultimately they’re free. There will be some people for whom the work is so exciting and valid that that’s all they need, but there are lots of others for whom the goal in life is something quite different – whether it be restoring old cars, or running triathlons, or just reading a lot. Those kinds of goals you need a certain amount of income to support, but it is a pathology to think that the primary goal of life is to pile up more and more possessions. That’s very much the point Betty Friedan makes 40-50 years later [about the American middle-class housewife]. Keynes maybe was less aware of what was going on here than Friedan was. In both cases, what you’re talking about is an incredibly constricted set of opportunities that are open to people in that situation. Whether it’s middle-class American housewives in 1960 or British aristocrats in the 1920s, both are in a situation where although they are welcome to go along and help out at the church fête, they weren’t expected to take up kickboxing or anything like that. There was a limited set of projects that were available and approved for people, while also maintaining their social position. So I think the problem was this lack of freedom, rather than “What shall I do with all this leisure?” Maybe it’s a matter of disposition, but I certainly can’t imagine having too much leisure. There are so many projects that I look at and think that would be fun, but there’s simply no way I’ll ever get the time to do. I think that’s pretty common. If people have free time, and they have the resources to pursue their projects, I think most people will find good projects to pursue."

"Well, some of them. This business about us becoming so rich that people would stop caring about consuming even more, that turns out not to be true. About enough time has passed for that blissful state to have arrived according to him, and somehow greed always finds a way. But yes, the comments on Versailles are amazing. So this is an old Liberal, with a capital L – the Liberal Party of England, which was the old opposition to the forces of conservatism, which was then displaced by the rise of the Labour Party [which was further to the left] in the first half of the 20th century. That’s a very different kind of problem from what we have now. Keynes was not happy with the Labour Party. I suspect had I lived in his time I would have been more sympathetic to the Labour Party than he was, but he was obviously repelled by the Conservatives. They introduced some pieces of it. The full thing came from the Labour Party after World War II. And obviously Keynes supported that. We probably could say that Keynes was what we could call a liberal in America now, or a moderate social democrat in Europe. I think that’s partly because I’ve got an additional 75 years of, critically, US political economy to look back at. I’m a bit uncertain about the strictly economic role of trade unions, but the political importance of having a counterweight to big business is just overwhelming."

"I studied economics at King’s College Cambridge, where Keynes was such a towering figure. I might have chosen to recommend his General Theory, which is his most famous single book – intellectually it was absolutely decisive in demonstrating how we should get out of the 1930s slump. The lessons that have been applied to the last 18 months since the collapse of Lehman Brothers were very much the Keynesian lessons: which is why it has been an uncomfortable 18 months but not a 1930s-style disaster. But in the end I chose Essays in Persuasion because this gives a much greater span of his thought over time, from the aftermath of the First World War and his assault on the Versailles Treaty and the damage it was going to cause – as it did, because in humiliating Germany it led, arguably, to Germany choosing Adolf Hitler – right through to the 1920s and 30s and the arguments over the gold standard, through some of the essays he wrote in preparation for his General Theory, right to his writing on how to pay for the Second World War. That was a very influential essay, which helped shape the financial management of a broke Britain. And every essay is readable and compelling. He was writing about Britain and that was his experience. But I think he should be read, and could be read profitably, by people in Beijing, in Washington, in Paris or Rio de Janeiro. The underlying concepts and his assault on the narrow view of classical economics, these are important for us to learn and relearn every time the world economy wobbles. It is for a while. I studied economics in the 1960s and Keynesianism as it was taught regarded inflation as a non-problem. So when inflation took off in the 1970s, Keynesians were left with, frankly, nothing to say. That was one of the reasons why monetarism became so powerful. It was like that section in Watership Down where the rabbits become so complacent that they can’t see the danger coming. The Keynesians in the mid 1970s were like the rabbits – they didn’t see the danger coming and the monetarists swept through them. It is only really in the last few years that Keynesianism has regained some initiative. I would like to think that out of the economic dramas of the last couple of years, a more robust, 21st-century version of Keynesianism could be evolved. Because there will be future attacks from those classical economists and the monetarists. And perhaps the Keynesians could be just a tad less arrogant than they were in the mid 1970s."