We 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 characterized the century is over; that the rapid improvement in the standard of living is now going to slow down…that a decline in prosperity is more likely than an improvement in the decade which lies ahead of us.
No, this passage did not come directly out of a speech by Federal Reserve Chairman Ben Bernanke in the midst of the 2008–2009 recession, nor President Obama’s inaugural address. It comes from a talk given in 1928 by the not-yet globally renowned John Maynard Keynes to a group of high school students. The title of the talk, which appeared in print in 1930, was “Economic Possibilities for Our Grandchildren.”
Keynes argued that the doomsayers of his day were excessively focused on the short term. This tendency blinded them to what Keynes termed the “true interpretation of the trend of things”: The long-term movement of history driven by the miracle of capital accumulation. As Keynes—father of macroeconomics and innovator of the concept of government-led economic stimulus—saw it, by saving and investing in productive machines, each successive generation could produce more than the one before, thereby increasing the resources each person could consume and (potentially) save over time. As such a process followed its natural course, Keynes foresaw a rosy outcome for humanity: “Assuming no important wars and no important increase in population, the economic problem may be solved, or at least within sight of solution, within a hundred years.”
What Keynes meant by this was that within a century, society would reach a point where life would stop getting better—not because progress had stagnated, but because life on average was good enough that there was no point in trying to improve it further. From that point forward, human society would cruise along at constant, but elevated, level of satisfaction. In the U.S., we term such a condition “living in Oregon.” Keynes had a different term: “bliss.”
A bumpy ride along the way to bliss was to be expected, but not feared. Indeed....