Keynes Was Wrong – Gen Z Will Have It Worse
CAPITALISM, 23 Dec 2019
Instead of never-ending progress, today’s kids face a world on the edge of collapse. What next?
16 Dec 2019 – The founder of macroeconomics predicted that capitalism would last for approximately 450 years. That’s the length of time between 1580, when Queen Elizabeth invested Spanish gold stolen by Francis Drake, and 2030, the year by which John Maynard Keynes assumed humanity would have solved the problem of our needs and moved on to higher concerns.
It’s true that today the system seems on the edge of transformation, but not in the way Keynes hoped. Gen Z’s fate was supposed to be to relax into a life of leisure and creativity. Instead it is bracing for stagnant wages and ecological crisis.
In a famous essay from the early 1930s called “Economic Possibilities for Our Grandchildren,” Keynes imagined the world 100 years in the future. He spotted phenomena like job automation (which he called “technological unemployment”) coming, but those changes, he believed, augured progress: progress toward a better society, progress toward collective liberation from work. He was worried that the transition to this world without toil might be psychologically difficult, and so he suggested that three-hour workdays could serve as a transitional program, allowing us to put off the profound question of what to do when there’s nothing left to do.
Well, we know the grandchildren in the title of Keynes’s essay: they’re the kids and younger adults of today. The prime-age workforce of 2030 was born between 1976 and 2005. And though the precise predictions he made about the rate of economic growth and accumulation were strikingly accurate, what they mean for this generation is very different from what he imagined.
Instead of progress toward a labor-free utopia, America has experienced disappearing jobs as a kind of economic climate change. Apocalyptic forecasts loom while poor and working-class communities take the brunt of the early impacts: wage stagnation, deregulated and unsafe workplaces, an epidemic of opioid addiction. The increasingly profligate wealth on the other end of society is no less disturbing.
What the hell happened? To figure out why Generation Z isn’t going to be Generation EZ, we have to ask some fundamental questions about economics, technology, and progress. After we assumed for a century that a better world would appear on top of our accumulated stuff, the assumptions appear unfounded. Things are getting worse.
As recently as the first web boom two decades ago, it was still possible to talk about technological development and economic expansion as being good for everybody. Take Webvan, the early (and subsequently much derided) grocery delivery startup. The company planned to combine the efficiencies of the internet and other advances in information and logistics to provide better-quality products at lower prices, delivered directly to consumers by higher-paid and better-trained workers. It’s a univocal, Keynesian vision of development: not only do all involved benefit individually as consumers, employees, or capitalists, but society itself steps together up the mountain toward the elimination of necessity and a higher plane of being.
When Webvan went belly-up, analysts assumed it meant the core idea was hopelessly wrong: it just doesn’t make sense to use human capacity to bring individual people their supermarket orders. Harvard Business School professor John Deighton, when asked about the future of the industry in 2001, said, “Home-delivered groceries? Never.” Yet less than 20 years later I can have one of the world’s few trillion-dollar companies (Amazon) deliver my order via its grocery brand (Whole Foods) in an hour. And if that’s not fast enough, there are various platform services (Instacart, Postmates, and others) through which I can hire someone to go pick my order up and bring it to me immediately. Buzzing clouds of freelance servants, always in motion.
For consumers, these services have made life more convenient. For owners, stock prices and corporate profits have been cruising higher and higher for decades. But as workers, we have suffered. Gone is the Webvan vision of highly trained, highly paid, upwardly mobile, stock-holding delivery drivers. Amazon’s treatment of its workers at all levels is so intensely exploitative that former employees have created their own form of writing: the “report-back,” an essay that exposes the particular, common hardships of working at the firm. It’s one part worker’s inquiry, one part trauma diary.
Here’s how one warehouse employee described the workflow:
The founder of macroeconomics predicted that capitalism would last for approximately 450 years
“The AI is your boss, your boss’s boss, and your boss’s boss’s boss: it sets the target productivity rates, the shift quotas, and the division of labor on the floor … Ultimately what this means to you is that you’ll rarely work with the same people twice, you’ll be isolated, put on random tasks from shift to shift, slog for stowing or sorting or picking or packing rates well exceeding your average—because your supervisor told you so, and the program told him before that.”
Rather than relieving workers from toil, improvements in technology grind out their efficiencies by molding laborers into unreasonable shapes. Across departments, Amazon workers report being forced by the circumstances of their jobs to urinate in bottles and trash cans. Using layers of subcontracting agreements, the largest firms insulate themselves from responsibility to and for their lowest-wage workers. Recent investigations into Amazon’s last-mile shipping reveal exhausted drivers whose required carelessness has, predictably, been known to kill people. The company remains, as far as the business community is concerned, exemplary.
Everywhere, the idea of liberation from work seems like a dream. Workers making parts for iPhones have been exposed to toxic chemicals; Taiwanese manufacturing giant Foxconn is regularly under the microscope for poor labor conditions. Instacart delivery workers went on strike to complain about changes that led to fewer tips; two days later the company cut their bonuses (Instacart says the two events are unrelated). Gig workers on the audio platform Rev.com recently discovered an overnight pay cut that meant Rev now takes 70 cents of every dollar a customer spends on getting audio transcribed, and they get a mere 30.
Young Americans are reaching prime working age in the Amazon economy, not the Webvan one. According to the Economic Policy Institute, while worker productivity increased 69.6% between 1979 and 2019, hourly pay has risen a measly 11.6%. “The income, wages, and wealth generated over the last four decades have failed to ‘trickle down’ to the vast majority largely because policy choices made on behalf of those with the most income, wealth, and power have exacerbated inequality,” the EPI says. The difference between productivity and pay is an increase in exploitation: workers doing more and getting less. That was not the plan.
Keynes and his policy vision fell out of fashion when the laissez-faire fundamentalism championed by Milton Friedman carried Reagan and Thatcher into global power. The old view of the future yielded to an era of deregulation and privatization. This was the “End of History,” with the free market as the proper—perhaps even inevitable—vehicle for human nature.
Here all pursue their individual interests, and together that adds up to the best of all possible worlds—at least as long as the government stays out of the way. We were taught as fact, for example, that rent–control policies counterintuitively increase rents, that minimum-wage laws counterintuitively hurt wages, that wealth from tax cuts trickles down to workers. (Attitudes on rent control are more nuanced today, while minimum-wage increases have raised incomes at the lowest end. The trickle–down theory has fared worst of all; the rich pocket, rather than reinvest, their tax cuts.) Most people bought the libertarian hype, and when the global financial crisis hit in 2008, many were surprised to find out markets weren’t actually self–regulating the way they had been told.
The subsequent bailouts, however, made it difficult to argue that governments could only ever get in the way of the economy’s proper functioning. And so economists dusted off Keynes. Countries that enthusiastically followed his advice and used public funds to stimulate demand came out of the recession much better off than those that hesitated. China’s decision in 2008 to inject stimulus spending worth more than 12% of GDP looks smart in retrospect. In America, Democrats and Republicans alike run for office on the promise of trillion–dollar spending proposals, not the bipartisan calls for a balanced budget and a shrinking government that we used to hear. The pendulum swung, and Keynes came back.
Switching from Friedman to Keynes means more than tinkering with the economy’s operating system, however. The two men had different ideas not just about how capitalism functions, but about what it’s for. Friedman and his ilk saw the market as maximizing individual man’s freedom to pursue his self-interest and thus, since the pursuit of self-interest is simply human nature, maximizing collective well-being. Capitalism was the means and the end.
Keynes, on the other hand, outstanding example of the English gentry that he was, couldn’t countenance money-grubbing as the highest example of virtue. There had to be something more. For Keynes the most dangerous kind of avarice was not trying to make money, but holding it in your pockets for too long. The only way to keep popular well-being high and employment up was to produce and consume more and more—not because it’s in our nature, but because that’s how the system works: it must grow to survive. But someday soon, he predicted, the race will be over, and we can all stop pretending capitalism isn’t a psychotic, Earth-destroying way to live.
In “Grandchildren,” Keynes looked forward to the day when “we shall be able to afford to dare to assess the money-motive at its true value.” He continued:
“The love of money as a possession—as distinguished from the love of money as a means to the enjoyments and realities of life—will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease.”
Capitalism, to Keynes, does not justify itself. “There will be,” he wrote, “ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed.” But he never identified the mechanism that would end the capitalist accumulation game. Even if we did produce enough stuff to pass the finish line, how would we know? And who’s going to make the rich share, or even just stop taking more? He knew that we could keep growing along these lines for only so long, but he ruled out revolution. Instead, he thought the owners would do the right thing.
Not being Milton Friedman isn’t the same as being right about how the world works. Keynes can be right about growth predictions and business cycles and fiscal policy, but if he is wrong that capitalism will simply end of its own accord, the foundational justification for his entire program crumbles. In that case, all of society is strapped in riding shotgun on the semi-criminal, semi-pathological drive to consume the future in advance, with no virtuous end on the horizon.
Much to everyone’s surprise, Keynes’s grandchildren have become Marxists.
If the spectrum of traditional economics goes from Friedman to Keynes—from capitalism as an end in itself to capitalism as a means to something beyond it—then what we need now is a critique of what the two of them share, a critique of economics itself. Most such critiques were locked in a trunk and shoved under the bed in the late 1980s and early ’90s, but they are not gone.
The most famous and influential critic of economics remains Marx. Keynes didn’t think highly of the man; in the British economist’s reflections on visiting Soviet Russia in 1925 he declined to name him, instead making pointed references to “avaricious” Jews. But the commie who is not to be named had a different vision for the future of economic development.
Marx’s “immiseration thesis” is an idea that’s pretty easy to summarize: Since capitalists make money from every hour of workers’ labor, they will get increasingly rich over time, while workers won’t because they’re too busy making money for capitalists. A rising tide lifts only big boats; everyone else has to swim for it.
If technology reduced the need for work, Marx figured, workers would simply be made to work longer, harder, more efficiently, or on other things. Technology would create a population of the desperate unemployed who could be put to work making luxury goods, for which there would be an ever growing market—though growing only in terms of money, not in terms of the number of people wealthy enough to buy. Instead of the common good increasing, it’s inequality, exploitation, and misery that accumulate. What workers have been building this whole time is their own subordination, and they’ve been doing a good job.
After decades on the outs even among self-described Marxists, the immiseration thesis is looking empirically strong—especially when compared with Keynes’s vision of increasingly large groups of people graduating from the burden of economic need into the paradise of full-time leisure, or with Friedman’s belief that greater wealth at the top turns into greater wealth for everyone.
And workers weren’t the only thing Marx saw getting used up: “All progress in capitalistic agriculture is a progress in the art, not only of robbing the labourer, but of robbing the soil,” he wrote. “All progress in increasing the fertility of the soil for a given time, is a progress towards ruining the lasting sources of that fertility.” Environmentalism was not a basic tenet of Marx’s thought, but unlike the economists, he understood intuitively that extractive production had natural limits. The only answer for this species on this planet is to scrap the whole form of production, with its workers and capitalists, its cities and rural areas, its big piles of stuff and hollowed-out globe.
As we near 2030—the year that capitalism was meant to be over, the time when we were meant to have advanced and elevated ourselves—the predictions are not rosy. In October 2018, the Intergovernmental Panel on Climate Change concluded that global warming is likely to reach 1.5 °C between 2030 and 2052 if temperatures continue to increase at the current rate. In the event we do hit that mark, experts predict a rise of between 26 and 77 centimeters (10 and 30 inches) in sea level, a rapid increase in species extinctions, hundreds of millions more people experiencing water and food shortages, and sustained extreme weather the likes of which the modern human species has never encountered. We have been stockpiling not just wealth, but disasters.
One protest sign at the youth climate strike put it succinctly: “You’ll die of old age. We’ll die of climate change.” Today’s kids never had the chance to believe in a simple progress narrative. The young movement leader Greta Thunberg took the eco–generational message to the United Nations Climate Action Summit: “People are suffering, people are dying, entire ecosystems are collapsing,” she chided. “We are in the beginning of a mass extinction and all you can talk about is money and fairy tales of eternal economic growth. How dare you!”
The younger cohort, the people around the world whom Thunberg represents, have no choice but to establish new standards for social well-being—standards beyond GDP growth. We need to get the carbon out of the atmosphere and the plastics out of the ocean, keep the oil in the ground and the undomesticated species we have left alive. Anything else is a catastrophic failure. Young people seem up to the challenge, and even if the press has occasionally overstated it, the affinity of millennials and Gen Z for socialism is real. It’s more than a decade after the 2008 crash, and in the United States we are in the longest economic expansion in history, yet poll after poll shows left-wing politics enduring within the younger cohort. A YouGov poll found that support for capitalism among Americans under 30 fell from 39% to 30% between 2015 and 2018—14 percentage points below the average and 26 points below the figure for seniors.
The kids recognize that capitalism has been using up human and natural resources rather than building a better society. Rather than a mere reaction to the housing crash and global warming, we can see a deep, emergent understanding. Much to everyone’s surprise, Keynes’s grandchildren have become Marxists.
When Keynes wrote that he looked forward to “the greatest change which has ever occurred in the material environment of life for human beings in the aggregate,” he meant us, now. And it looks as if he was right at least in one sense. The fate of our species—and many other species, for that matter—hangs in the balance.
Though Keynes’ bottom line now seems fanciful, there are ways in which his 1930 prediction wasn’t totally off. Besides getting the growth rate more or less right, Keynes thought we would be the generational cohort to end capitalism. The system was not supposed to be sustainable for even 500 years. At a certain level of technological development and capital accumulation, capitalism becomes not merely exploitative or even genocidal (achievements long registered); it becomes difficult to reconcile with humanity itself.
Like football, where the increasing size and strength of the players has made brain damage almost certain at the highest levels of the game, capitalist production has become an objective hazard for the entirety of human society.
One way or another, it’s a good bet that the workforce of 2030 is the last true cohort that market capitalism gets. It’s hard to say what comes next, but it has to happen pretty soon. The grandchildren he spoke of have been here for a while now. Whether or not we manage to understand what it means in advance, the new is here.
Download pdf file: Keynes, Economic Possibilities for our Grandchildren 1930 -Yale
Tags: Capitalism, Marxism
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