An Evaluation of Keynes's Projected Possibilities

I Introduction AT THE ONSET OF the Great Depression, John Maynard Keynes made some startlingly optimistic predictions about the economy. In his 1930 essay "Economic Possibilities for Our Grandchildren," he proclaimed: "[A]ssuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years" ([1930] 1972: 326, emphasis in original). In place of a struggle for subsistence, "man will be faced with his real, his permanent problem--how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well" ([1930] 1972: 328). The current economic slump was not the portent of a coming decline in prosperity, he asserted, but rather merely a "temporary phase of maladjustment" ([1930] 1972: 325) en route to the "destination of economic bliss" ([1930] 1972: 331). Was Keynes right? Now, over seven decades later, although Keynes's prophecies may arguably represent the natural extension of the belief held by most classical economists in the powerful palliative effects of technological progress and economic growth, the social and economic situation of contemporary America appears to indicate that none of Keynes's prophecies have been realized. II Absolute Needs Would Be Satisfied KEYNES'S FIRST PROPHECY was that the absolute needs of human beings would eventually be satisfied. According to Keynes's argument, absolute needs were those that individuals feel "whatever the situation of [their] fellow human beings may be" ([1930] 1972: 326). Throughout history, the struggle to fulfill these needs--a struggle Keynes termed the "economic problem"--had been the primary problem not only of the human race but also of all biological species. Like many classical economists, Keynes believed strongly that, by improving average living standards, technical improvements and capital accumulation initiated in the 16th century would eventually solve the economic problem. If the economy continued to grow at its current rate, Keynes predicted, this solution would occur within the next century. One major flaw with Keynes's argument is its failure to explain the continual existence of poverty. Despite the wars that have occurred since the Great Depression, the U.S. economy has grown at the 2 percent rate that Keynes predicted was needed to solve the economic problem (Barro and Sala-i-Martin 1999: 366). Yet, in 2000, approximately 31.1 million people were in poverty in the United States, representing 11.3 percent of the country's population (Dalaker 2001: 3). As official poverty statistics are based on "poverty thresholds intended to approximate the cost of basic necessities" (Short 2001: 1), people who are in poverty are those whose absolute needs are not being met. The existence and persistence of poverty suggest that, contrary to Keynes's claim, the economic problem is not in sight of a solution. There are two possible reasons why poverty still exists. First, while Keynes may have been prescient in his forecast of the growth of the average standard of living, he may have overlooked the long-term distributional effects of economic progress. Economic growth may be welfare-enhancing in the aggregate, but it may benefit some more than--or even at the expense of--others. Keynes recognized that people would suffer differentially during the transition to economic prosperity. Across countries, he observed, those countries that were not at the forefront of progress were "suffering relatively." Within countries, those people whose labor had been replaced by machines would suffer from "technological unemployment" until new uses for their labor could be found ([1930] 1972: 325). However, Keynes failed to realize that relative suffering and technological unemployment were not mere transitory manifestations of "growing-pains . …